It was April 2010, and a Fortune 500 CEO would utter one of the most ill advised yet memorable lines in corporate history. The world’s largest man-made environmental disaster had taken place one week earlier when BP’s Gulfwater Horizon rig exploded, killing 11 workers and spilling millions of gallons of oil into the Gulf of Mexico. BP’s CEO at the time, Tony Hayward, stood on the beach in Louisiana, clearly unprepared for the disaster that had occurred and trying to fend off multiple questions from authorities and the media, when he said “I’d like my life back.”
For the employees who worked on the rig, their families and friends; they wanted those 11 lives back. The citizens and businesses along the Gulf shore, the environment – they wanted their old lives back too. Clearly, Hayward’s declaration was stupid, thoughtless, and it rightfully cast him as arrogant and insensitive. Oddly however, the picture of Hayward prior to the oil spill was decidedly different. Before the 2010 disaster, Hayward was described as “unassuming and modest.” He had succeeded John Browne in 2007 as CEO following Browne’s prostitution and perjury scandal, along with leaving BP with a checkered safety record. Hayward promised an improved culture and safety record for BP, yet here he was less than three years later with a horrific disaster on his watch, and ending up departing BP under a cloud of controversy; worse than the departure of his predecessor John Browne.
How many leaders and managers of large corporations watched Hayward implode on television and thought to themselves, “I never want that to be me”! I’m guessing that many senior executives felt that way as they watched, since it is every business leader’s nightmare to have a disaster such as the BP Oil rig explosion occur on their watch. Their hard work over years climbing the corporate ladder comes undone by a single event. But what makes the event even more tragic is that it was avoidable. There were multiple fair warnings provided to BP by oilrig employees that were ignored. Multiple BP documents, e-mail messages, engineering studies and other company records shed light on the extent of problems long before the explosion, including an internal report from a senior drilling engineer that warned of a loss of “well control” and collapse of the well casing and blowout preventer. At some point, Hayward must have regretted that his company didn’t act on those warnings, save 11 lives and avoid the unprecedented environmental damage.
What can business leaders do to act on fair and credible warnings provided by their employees to avoid this type of disaster? The first step is understanding the aspects of human nature that prevent individuals from listening to warnings; the normalization of deviance (“We’ve done it this way before and nothing bad happened”), effects of hierarchy (“They’re senior management – they must know what they’re doing”), and over-focusing on one goal at the expense of others – as a few examples. The second step is to set up a “culture of listening” that includes systems and policies to facilitate the intake and proper escalation of credible warnings. In this way, business leaders can avoid “losing their lives” in the first place.
But how do we implement and maintain a culture of listening? Here are seven critical elements of an effective program to both identify and act on warning signs:
1. High-level oversight – does your company have an organizational structure led by senior management that oversees issues such as compliance, quality and safety, while being able to respond quickly and appropriately to credible warnings?
2. Training and education – How do you train employees to identify and report concerns?
3. Auditing/monitoring and risk assessment – risk assessment is the “radar screen” of threats to your company. How are risk assessment, and more specifically – enterprise risk management (“ERM”) implemented in your organization? How and when are audits performed that “kick the tires” on key activities?
4. Open lines of communication – Does your company have a hotline that operates 24/7/365 and is staffed by competent individuals who know how to properly intake and triage emergency reports or concerns? Yes, in these many reports will be false alarms and non-emergencies; one CFO told me that someone actually ordered a pizza on his company’s hotline. But somewhere within these hotline reports will be a pearl of information that just may save the company from disaster.
5. Written policies and procedures – Does your company have written guidelines that make reporting concerns a job requirement, as well as non-retaliation for doing so?
6. Investigating reports of concerns – Does your company thoroughly escalate and investigate reported concerns?
7. Enforcing standards – is your company prepared, culturally and otherwise, to both set and enforce standards related to issues such as safety, quality and compliance? I’ve often used a phrase with clients that I refer to as a “stop the presses” issue. Is your company prepared to “stop the presses” if and when a credible warning comes in?
About the Author
Dave Yarin is a compliance and risk management consultant to senior management and directors of large and mid-size companies, and author of the soon to be published book Fair Warning – The Information Within. Dave follows and researches news stories regarding ignored warnings that lead to bad business outcomes, along with the social psychology theories that explain why these warnings were ignored. Dave lives near Boston, Massachusetts with his fiancée and two children. Follow Dave on Twitter at @DaveYarin, or subscribe to his FlipBoard magazine – Fair Warning.