Everybody has one. Just like height, weight, intelligence, and blood type, we all have a reputation.
But reputation can’t be quantified like those physical measurements. It’s very elusive, almost like a wisp of smoke.
As Abraham Lincoln once observed, "Character is like a tree and reputation like a shadow. The shadow is what we think of it; the tree is the real thing.” So reputation resides in the “eye of the beholder” – one and all.
And reputations aren’t just personal. Organizations, businesses, and communities have them, too. A long-standing reputation can seem fixed and stable – but be destroyed in an instant . . . by a single unexpected act or occurrence!
What about BP -- the third-largest energy company and fourth-largest in the world measured by 2011 revenues as well as one of the six oil and gas "super majors"?
In one moment on 20 April 2010, an explosion catapulted BP into world view – but not one of its choosing. Immediately judged -- without a jury -- as irresponsible and unconcerned about its oil surging forth to pollute the beaches of four states, it struggled to recover its equilibrium. Its stock plummeted. Its CEO was mocked, ultimately having to be replaced. And the entire oil industry reeled in its wake – judged to be equally at fault with BP.
Reputation, though seemingly obscure, has two phases. The first one is formative – the second, restorative. Both require skillful and systematic management of risk.
To the extent that risk is systematically managed womb-to-tomb with foresight, good reputation is not only established but maintained. Positive examples abound – in both industry and business. Otherwise, commerce would come to a screeching halt.
Recovering reputation – after it is lost – is a different ballgame. As much as Enron Corporation attempted to recover a shattered reputation by emerging from bankruptcy, changing its name, reorganizing, and liquidating some assets, the combined effort could not enable it to emerge from the failed reputation shadow.
Once a good reputation collapses, of course, crisis managers rush in like emergency physicians to resuscitate and restore it. But reputation recovery takes more than apologies, explanations, and panicked reaction. It can be done, but it requires professional application of fundamental, systematic methodology.
Bottom line: Both maintaining and recovering reputation require systematic management of risk.
Why not build and sustain reputation instead of being forced to recover it after it is ruined?
When can defense suddenly turn into offense? When armed airline pilots go berserk!
The incredible cockpit breakdown in JetBlue Flight 191 on 27 March 2012 was a first. Never has an airline captain essentially become a source of airborne terror! The 141 passengers and crew aboard that A320 faced a scene very similar to those on ill-fated United Flight 93 on September 11, 2001.
Remember when Congress overwhelmingly passed a law in 2002 creating the Federal Flight Deck Officer program (FFDO) to arm airline pilots? It was to be a “last line of defense” against inadequate security that allowed four airliners to be hijacked on 9/11.
After giving over 400 TV interviews on aviation-related disasters, I have concluded that both government and airlines are far too reactive – always attempting to correct past error but often asleep about what yet has to happen.
The JetBlue captain could well have been armed under FFDO, even though fortunately he wasn’t. Both FAA and airlines should have foreseen that possibility and instituted proper countermeasures based on what might take place if he had been.
Every law -- regardless of its intended consequence -- always produces associated unintended consequences. Some are good, some bad. But those effects are seldom foreseen. They only show up randomly. And they can be more devastating than the situation they were intended to preclude.
The captain had an impeccable record for many years. He was a skillful and trusted pilot. Everyone who knows him testifies to his excellent character.
But, he -- like every human being – is subject to frailty. We all are vulnerable to stress, chemical reactions, unpredictable health factors, mental pressures. None of those characteristics can be accurately measured or determined ahead of time.
The successful outcome of subduing him, isolating him outside the cockpit, and replacing him with another captain who happened to be aboard as a passenger might well have been a tragic one if he had used an authorized weapon.
Of course, the FAA has recognized this reality, too. It has long considered use of antidepressants as cause for grounding a commercial pilot, for example. But what is missing is a link between pilots authorized since April 2010 to take medication for mild to moderate depression and those armed under FFDO.
Of course, it is too early to know why the JetBlue captain acted as he did. And it is not necessary to know those details to learn a vital lesson -- foreseeing risk is essential. Difficult, yes, but possible.
The best known technique for this? Creating risk scenarios for unintended but possible outcomes.
Everyone has heard that old adage, "Anything that can go wrong will go wrong." Often called Murphy’s Law, this perceived perversity of the universe is often invoked as though it is the cause of unavoidable loss.
But can Murphy’s Law be managed? Does it really prevail outside rational control? Is it probabilistic – thereby subject to mathematical prediction? Could it even be universally inevitable?
Pretend for a moment that all undesirable happenings are unavoidable – that nothing can ever be done to stop bad things from occurring . . . that prevention is an illusion.
Then, ipso facto, however you define risk – whether as “The chance of an event combined with its consequences, the possibility of deviation from the expected, or the potential magnitude of a loss combined with its likelihood,” it simply could not be managed!
Risk management would be a non-sequitur, a joke, a fallacy – a waste of time and resources. Just let laissez-faire prevail!
Where would you start – if Murphy’s Law is inevitable? Do executives just play Russian roulette – with Murphy’s gun constantly at their temple?
Not really. Successful decision-makers are smarter than that. They work constantly to bring order out of chaos – the seemingly inevitable outcome of Murphy’s Law. They are convinced that opportunity and risk are linked. And both must be managed with the same skill, foresight, and energy.
In fact, Murphy’s Law can be used like jiu-jitsu – that martial art of self-defense where a weaker person successfully uses leverage and technique to defend against a stronger opponent. But it must be utilized with intent and foresight.
In several ways, Murphy can actually be the executive’s partner, not an opponent. First, his law is a great stimulator for identifying subtle risks with foresight. Second, it helps to prepare effective countermeasures. Third, it provokes creative insight for efficient resource allocation.
However, if it is ignored, disaster awaits – as it sneaks up incognito. The 1912 Titanic disaster has revealed Murphy’s Law at work in new, quite different ways than commonly believed for many years. When the 900-foot liner went down on its first voyage, the most widely-held theory was that the ship hit an iceberg, which opened a huge gash in its side.
But an international team of divers and scientists recently used audio soundings to probe through the wreckage, now buried in mud two and a half miles deep. They found six relatively narrow slits across six watertight holds -- not a giant gash -- that sank the Titanic. The damage was surprisingly small. But “everything that could go wrong, did,” said naval architect William H. Garzke Jr.
Even a recent theory proposed by Texas State University forensic astronomers that the Moon came closest to the earth in 1400 years in January 1912 -- producing such high tides that far more icebergs floated into the shipping lane – does not excuse the captain’s decision to proceed and ignore iceberg warnings.
Murphy’s Law sank the Titanic in at least four ways:
1. The crew believed they were immune to a collision.
2. The crew failed to heed five different warnings.
3. Six small cuts – not a huge gash – sank the ship.
4. Rupture was hidden beneath the water line, out of sight.
Premise: Risk is not guaranteed by Murphy’s Law – instead, it can be managed more effectively by employing that famous canon!
Every organization has a reputation . . . some good, some bad.
Executives rise or fall with those reputations, too.
What about reputation itself? People worry about it. They defend it – even in court. But how does an organization’s reputation really get started?
Reputation is created! Who are its creators? Decision-makers whose values and priorities about managing risk build a framework that creates a reputation. Like love and marriage, risk and reputation go together.
Though it seems obscure – even mysterious, reputation develops in one of two ways. Either it is consistently formed – or it has to be restored after it’s lost. Both involve risk. The key to both is successful management of risk.
A long-standing excellent reputation can seem fixed and stable – but be destroyed in a moment . . . by a single unexpected act or occurrence!
Consider the luxury cruise liner Costa Concordia now lying capsized off the Tuscan island of Giglio. Only a small deviation from its programmed route caused it to slam into a reef and roll over! Instantly wiped out was not only the reputation of its owner Carnival Corporation but the entire popular cruise ship vacation industry’s reputation was impacted as well!
With that evaporated reputation went depressed stock value, major financial loss, immediate lawsuits, cancelled cruises and embarrassing news media coverage.
In contrast, the now-famous but nearly disastrous Tylenol product tampering case proved resilient against impact. Its reputation was in sudden jeopardy. But by excellent foresight about risk – realizing a criminal act could destroy its reputation, Tylenol was able to rapidly implement pre-planned re-packaging that preserved the company’s reputation.
Recovering reputation – after it is lost – is a different ballgame. Will Penn State football ever regain the reputation Coach Joe Paterno took a half-century to create?
Once a good reputation collapses, crisis managers typically rush in like emergency physicians to resuscitate and restore it. But reputation recovery takes more than apologies, explanations, and panicked reaction. Inherent but overlooked risk must be systematically identified, evaluated, ranked, and controlled.
So a good reputation emerges as one more advantage of systematically keeping on top of all risks! And every CEO and Board Member will enjoy the benefits. Fight on -- risk managers everywhere!
Presidential campaigns are interesting, intriguing -- but enigmatic. They dominate TV, radio, written news and the Internet. You can’t avoid them. But why this wild hoopla? Because getting elected is risky!
If there ever was a “make or break” business, seeking public office – especially the Presidency -- involves high risk. The stakes are enormous. Mud-slinging fills the air – all in the name of clarification. Sudden-death for one is sudden-glory for the other. No one gets “a little bit” elected.
Looking down from Mars, you would be perplexed at these gladiators. Hundreds, millions – if not billions of dollars are spent to make political opponents look risky, unworthy of investment.
If Risk Management is effective, politicians should be its prime user. Yet, the insurance industry doesn’t dare enter that field. Though it invented the phrase “Risk Management,” it’s a well-kept secret that it never actually manages risk – it only finances it! So insurance isn’t a solution for political risk.
Vetting – originally a horse-racing term for a veterinarian to confirm a horse was healthy enough to race -- is a frantic two-sided search to protect a candidate while inflicting major damage on all its opponents. It is likely the nearest primitive cousin to political risk management.
But political risk is not limited to politicians!
There’s the electorate – those mythical folks that seem to hold the keys of success – the power to either empower or destroy candidates. Ironically, it simultaneously creates and inherits its own high risk. Whether it elects a “no previous experience” contender or a “fully experienced” one, risk of disappointment abounds.
Dead people voting? Live folks prevented from voting? Some voters voting twice? These unanswered questions plague the purity of plebiscite – raising the risk of deceit, deception, and delusion.
Is it time for Risk Management’s traditional “identify, analyze, rank and control” methodology to be adopted for political risks?
After many years of dilly-dallying, conducting hearings, and being pressured by a concerned public – the FAA has finally and officially recognized something that even a child understands.
Tired pilots are a risk when flying aircraft.
Was that a surprise? Who could really argue with that obvious verdict? Why did it take so long to decide it? What should be done about it? How can that risk be avoided?
The root of this seemingly clumsy, slow, and maddening process of managing risk is conflict – not about the risk itself but what to do about it. The FAA has the nasty job of resolving that conflict.
Society is complex. It consists of folks with many differing interests. So airlines, pilots, passengers, aircraft controllers, medical experts, airport managers, aircraft manufacturers, and trade unions among many others potentially have “an ox to gore” in reducing the risk.
Pilots suffer three types of fatigue – transient, cumulative, and circadian. The first is acute fatigue resulting from extreme sleep restriction or extended hours awake within 1 or 2 days. Cumulative fatigue is produced by repeated mild sleep restriction or many hours awake for a series of days. Circadian fatigue is reduced performance during nighttime – especially between 2 and 6 AM.
So how tired should a pilot allowed to be—before the risk is too high? How will we know the pilot is that tired? What has to be done to prevent tired pilots from flying? Who will enforce prevention of tired pilots being required to fly?
The FAA issued a 314-page rule to answer those questions. But don’t relax yet.
It only governs pilots of passenger airliners! Those flying cargo aircraft are exempt!
So . . . more “bits and pieces” management of aircraft risk . . .
“What God hath wrought,” the first telegraph message ever sent by its inventorSamuel F.B. Morse, needs to be re-phrased – “What Steve Jobs hath wrought,” Dr. Vernon L. Grose said in an interview yesterday on CTV’s flagship show, Canada AM.
Job’s iPad has revolutionized communication. Everyone seems to be captured by the ubiquitous iPad – to the point that they cannot stop using it. “I wonder if they even take it into the shower with them,” Grose, a former NTSB Member, mused.
The latest iPad fuss occurred when American Airlines announced that they are going to use iPads instead of paper flight manuals in the cockpit -- even during takeoff and landing. But passengers still must shut down everything electronic from the moment a plane leaves the gate until it reaches an altitude of 10,000 feet.
That revelation blew the fuse of many iPad users who feel they must never be told to stop using those magic devices. They act like children who’ve been denied candy before dinner.
“We are in a three-way collision between technology, personal liberty, and risk,” said Grose—author of best-selling MANAGING RISK: Systematic Loss Prevention for Executives.
Airliners may look like nothing more than great big metal machines, but they are quite electronic – even being described as “fly-by-wire.” iPads definitely emit signals that can unintentionally affect aircraft communications, navigation, flight control and electronic equipment. Why would passengers deliberately risk their – and everyone else’s – lives so selfishly?
As technology continues to produce communication marvels, iPad entrancement may give way to even more devices with potential interference with aircraft performance. Enforcing a ban on their use aboard flights is virtually impossible today anyhow – given that people are very clever at hiding them.
This battle between personal liberty and community safety goes well beyond airline travel, as demonstrated by this week’s call by the NTSB for banning cell phones and texting devices in all automobiles.
By Dr. Vernon L Grose
Dr. Vernon L. Grose is the author of Managing Risk: Systematic Loss Prevention for Executives, and the founder and chairman of Omega Systems Group Incorporated, which helps organizations manage risk.
Executives face unprecedented uncertainty today, and much of it is unthinkable: an oil spill of unprecedented magnitude in the Gulf, a deadly crash on Metro when an automatic train-control system goes haywire, a lightning strike of a business in a summer thunderstorm that seemed to come out of nowhere.
All of us are ill-equipped to handle the unthinkable because all of us are experts at suppressing the negative. When the unthinkable is woven into the fabric of daily living, it easily loses its identity. Yet decisions must be made in a milieu that includes the unthinkable.
How can an executive navigate successfully through a range of risks? What can be done when those risks threaten to negate obvious opportunity? Why do we erect an "Unthinkable Barrier?"
I see at least three reasons:
- We believe that we lack the financial or psychic resources to face the unthinkable. Should we take time to address the potential of disaster, we fear that we would become dysfunctional in our existing work.
- We think that by concentrating on maximizing opportunity, we can outweigh or offset the unthinkable loss. We think, "I can stay ahead of the accountability curve by running fast! The impact of ignoring the unthinkable won't hit for years."
- We believe that by acknowledging the unthinkable, we bring it into existence. So, it is better to just let it happen, even if it devastates us.
We penetrate the Unthinkable Barrier in five ways:
- We suffer a major loss. However we have managed to shut its possibility out of our mind, it bursts into full reality. An example is the death of a spouse, child, parent, or friend.
- We accept the reality of the unthinkable through someone else's encounter with it. For example, we buy disaster insurance after an uninsured competitor is wiped out.
- We experience gradual erosion. If enough implausible events occur enough times, these break down what we had always believed to be unthinkable.
- We engage in contemplation, perhaps during retreats in a remote location. However, unless action follows such mental exercise, the Unthinkable Barrier is not pierced.
- We adopt a mindset that regularly faces the consequences of the unthinkable. This destroys rather than punctures the Unthinkable Barrier. Using this approach during Project Apollo contributed to the success of those six manned missions to the Moon.
Mature executives examine all factors that influence success. Everyone's "bottom line" is the sum of opportunity's benefits minus risk's losses. To ignore even a portion of the latter because they are unthinkable is to contribute to the uncertainty.
Alarmists often use risk to intimidate, frighten, and incite. In deploring this misuse, we must not overlook the true reality of risk, that which executives ignore to their peril. Prudence suggests watching for three clues:
- Delegating all evaluation of corporate risk to subordinates, staff, or agency.
- Being so busy with opportunities that no time is spent on associated risks.
- Delaying any consideration of risk until all resources are allocated.
At the outset, we must identify every conceivable risk ahead of time, using a systematic method that is global in perspective.By applying systems methodology to risk termination, you can remove your Unthinkable Barrier and take charge!
Instead of letting disaster sneak up, you can "think the unthinkable." Risk examined isn't nearly as bad as risk repressed.
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