Like fire departments

Risk control. To protect against new dangers, companies need to do some rethinking – brains and intuition are required instead of checklists.


Christoph Oschwald used to be an air force officer. Today, he has his own business. He rented two air-raid shelters in the Bernese Oberland. That's where he sells security and reliability together with his partner Hanspeter Baumann. Worried customers can store their data in the tunnel shelters under the mountains. Oschwald put server farms into the air-raid shelters for thousands upon thousands of dossiers, buyer files and strategy papers. The valuable material is protected by doors weighing many tons. »Enemy attacks, earthquakes, major storms, electromagnetic radiation» – customers of company Mount tu no longer have to worry about that sort of thing.

Today, entrepreneurs and managers can perhaps similarly check off the agenda item »IT Security». But they continue to be threatened by a great number of other everyday risks. For example, the industry still has not got over the Japan shock of early May. »Supply chains thought to be safe were jeopardized virtually over night», as described by management consultant Gerd Kerkhoff who teaches supply chain management at the University of St. Gallen.

State of emergency every day

Other risks also have a threatening effect. The mere mention of the letter combination «Ehec» makes more than a few food industry managers break out in sweat. Because that's the type of adversity where the data shelters near Gstaad in Switzerland won't help with their protective shells weighing many tons.

Help is in sight for company owners and managers who are anguished because of subjectively felt uncertainties. High reliability organization or HRO for short is a new management concept which is to protect against threats. With that system, two professors at the University of Michigan developed recommendations for a world staggering from shock to shock since the collapse of the Lehman Brothers bank.

Central idea by Kathleen Sutcliffe and Karl Weick: Companies can learn from organizations which have states of emergency every single day. »Fire departments, a hospital's emergency room, or the crews on aircraft carriers – they all must work dependably and reliably despite stress and extreme insecurity», that's the message of the two scientists. For many years, they examined how these high reliability organizations achieve error-free results even under maximum turbulences. The most important insight: Any crisis, any shock has its prelude or harbinger; every quake has its foreshock. However, most companies simply overlook such small, sometimes hardly noticeable signals. But businesses using the rules of the HRO system can learn to detect the small crises so early that the major crisis will not even occur or at least can be better handled and controlled. «Look closely, listen closely, ask the right questions», that's how Annette Gebauer, owner of the consultancy Interventions for Corporate Learning and HRO practitioner in Berlin, describes the core of this new way of thinking..

This recommendation actually is easy to implement – if it weren't for an obstacle having taken hold of many organizations: The checklist. That instrument is good for routine crises. But it's not good enough for the unexpected. No checklist can manage things when the Lehman crisis shakes around banks, when the burning BP oil platform in the Gulf of Mexico drives oil prices sky-high within days, when volcanic ash clouds in the sky partly paralyzes globalization, or when the unexpected strength of the Swiss franc is crippling exports abroad. «A checklist will fix one's sight too much on what had been expected yesterday», criticizes Elvira Porroni, Managing Director of the Zurich-based X-Challenge Consulting, the narrow margins of this tool, «the checklist provides pseudo-security.» The reason is that everybody relies on everything being managed already and nobody makes any effort when looking at what is really happening.

The vote of the HRO practitioner Porroni is accordingly clear: True enough that a foreseeable event – such as a product recall – can be handled and controlled with a list of ten rules. But the check-off agenda is useless for new, unknown risks. A checklist is an obstacle in the way of any solution because it will block the freedom of thinking.«

To realize the objective of «reliability« even in turbulent times, something else will be needed – namely something truly unspectacular, something so logical and so obvious that it is constantly overlooked. «Be attentive, train vigilance, never slacken up in that«, that's how Professor Sutcliffe formulates the central HRO rule in one of her video seminars.

Seeing, hearing, feeling, smelling

Like a rabbit constantly on guard because of the hungry fox, managers should also be sensitive for any threatening things from their environment. This will require a discipline which is important but unfamiliar for many of those sitting in offices: «It's not only a matter of reading reports and tables, but also of using own perception. Seeing, hearing, feeling, smelling«, says consultant Gebauer. Because small personal observations will allow early conclusions to be drawn regarding future risks. That, of course, will require circumspection instead of the usual big rush in management. That's why the HRO system explicitly demands to throttle the speed a little. «Don't allow any quick simplifications; draw prudent and well thought-out conclusions from facts« – that's the advice given by consultants like Evita Porroni to their clients. One should definitely not rely on the popular «That's what we have always done». Because that attitude often enough is not at all suitable for a new situation that just came about.
The practitioner Hans Albert Byston confirms this recommendation. «Making proper conclusions is one of the most important elements of the high reliability organization«, says the production manager at the chemicals manufacturer Sabic Polyolefine. Rash interpretations of facts would not be allowed. «Any minor deviation may have major consequences«, says the production man. That's why nothing should be dressed up or made to fit in the sense of a plan. Nobody should be content with «oh well, that'll be running okay«.

It's much more important to take precautionary measures for those days where nothing is going right. That's when it will help to have, quite trivially, a second machine as a backup or a second source of supply if the first one suddenly fails. «Creating specific redundancies«, that's the recommendation by the HRO concept to practitioners – and thus, another item of standard management wisdom is turned upside down. Because for many years, redundancy was the favorite enemy of top managers and consultants. They had endeavored to eliminate any buffers in processes. »But when you think only of efficiency, you'll risk reliability«, warns consultant Porroni. The HRO concept shows that a reserve or backup is no lost investment which only costs money but much rather a precaution for safety and security tomorrow.