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Jun 16

Bad Management Week 2016 - How Organizations Fail

Back in 2005, I presented a “Framework for Analyzing Organizational Failure” after my dissertation adviser doubted that I could find a general explanation for how government organizations fail. After an extensive review of the literature and an in-depth study of four major government failures (the Oakland Development Authority, the Navy’s A-12 project, the Challenger accident, and the Columbia accident), I created this three-level model. Much of the model is based on Roberto’s (2000) analysis of a failed Everest expedition (the “Into Thin Air” expedition).

Seven years later, I find that the framework is still useful in understanding how organizations fail. In part one of this three part series, I will explain the framework. For part two, I will talk more about the effects of complexity on organization failure and how organizations will drift into failure even if they are performing their mission effectively. Part three will conclude with a strategy to avoid having the organization drift into failure.

The first concept to understand is the difference between “latent conditions” and “active failures.” Active failures are the triggers for the actual failure. For example, it was the blast of rocket exhaust through the O-ring that caused the eventual explosion and breakup of the Challenger shuttle. But, years before the accident, latent conditions such as the use of solid rocket boosters (SRB) on a manned spacecraft and the continuing acceptance of even more destructive O-ring damage from the SRBs that set the stage for the eventual failure.

Throughout the framework, you can see how each level contributes latent conditions that make the destructive impact of an active failure more probable. On level one or the “Leaders” level, the management of the organization makes decisions based on their perceptions of the organization. Because of the complexity of the organization and inherent cognitive biases, leadership decisions tend to be flawed and these latent conditions accumulate. Leaders also have a direct effect on the second level (“Teams”) if the leaders impose their ideas onto the Teams without allowing feedback from the second level.

The two major problems that lead to the creation of more latent conditions and active failures are “deindividuation” and “group think.” Deindividuation occurs when the team member no longer feels engaged with the organization and begins to emotionally and intellectually divest themselves from their work. Put a group of deindividuated employees together and you will have groupthink. Warning signals are ignored out of fear of upsetting the leaders or because the team members just don’t care anymore about what happens to the organization.

The third level is the organizational level. Imagine the assets of the organization behind a wall of defenses. The assets could be a space shuttle, the creation of a new development agency, or a successful acquisition contract. If you view an active failure as an arrow shot toward the defensive walls, then you can understand how latent conditions allow a sharp failure to penetrate all of the defenses and damage the assets. Thanks to latent conditions, holes develop in the defense walls and, if the holes line up just right, the sharp failure flies through the holes right into the assets. You can patch the walls but latent conditions still rain down from the upper two levels. Even regular maintenance can introduce new holes in the defenses.

It is organizational complexity that prevents Leaders and Teams from fully understanding the impact of their decisions and to see the accumulation of latent conditions until it proves too late. In the second posting of this series on organizational failure, we will examine how complexity causes us to misunderstand how organizations work and how organizations inevitably drift into failure.Failure Model

One Response for "Bad Management Week 2016 - How Organizations Fail"

  1. […] Yesterday, I wrote about my research that lead to the Framework for Analyzing Organizational Failure. Since I created the Framework back in 2005, I have seen it validated in a number of organizational failures. So, in 2010, I started work on expanding the paper into a book. During the course of my research, one of the leading thinkers in the field of failure analysis published a book updating many of his theories that I used in creating the Framework. The basic components of the Framework still hold but his concept of drift have led me to envisioning a Framework 2.0. […]

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