Major Breakdowns and the Alignment of Errors

Who is responsible for the housing crisis? Some candidates are borrowers, lenders, rating agencies, and securities investors.  However, attempts to blame one party or another fail, because the crisis is the result of a combination of errors by different parties which all aligned. Think of a wedge of Swiss cheese; to see through it, all the holes must line up. This approach is explained in James Reason’s Human Error, and illustrated in a diagram from that book:

In the housing crisis, here are some errors which had to align to get to where we are today:

1) Borrowers took out loans they couldn’t afford

2) Lenders made loans to borrowers which the borrowers couldn’t afford

3) Ratings agencies rated securities comprised of these loans as safe

4) Security purchasers relied on the erroneous ratings and bought the securities

Any of these parties could have averted the crisis had they avoided their respective error.

In any complex system, it’s often more likely that a major breakdown is the result of an alignment of errors, rather than the failure of a single component.

People Remember Your Worst Moments

I’ve previously posted on why people tend to remember your worst reasons for your decisions (see here). This is true of all kinds of behavior – Tom Cruise spends a lot of time in the public eye, but what most people remember is his bizarre behavior in this video of an interview with Oprah.

Via Newmark’s Door, here are two entertaining collections of famous worst moments:

Seven Great Talk Show Train Wrecks

The Twenty Weirdest TV Interviews of All Time

It’s obvious, but if you want to be an effective manager, don’t say or do stupid things.

Management Stress and Meetingitis

Via Newmark's Door, Secretgeek on "The Deadly Cycle of Meetingitis." Here’s an excerpt:

1. Q:What do managers do when they're stressed?
   • A:They call a meeting.
2. Q:What gets managers stressed out?
   • A:When projects are not making progress.
3. Q:When do projects fail to make progress?
   • A:When people spend too much time in meetings.

Secretgeek is talking about programming code crises, but the cycle applies to any situation which creates manager stress. The important part of this cycle is the root cause – it’s not the status of the project, it’s the manager’s stress.

Secretgeek’s solution:

Communicate more, in order to meet less. Be proactive in your communication. Don't wait for them to call a meeting. Tell them what's going on. Produce regular reports. Don't "promise" to produce regular reports -- just produce them. Let them listen in on some of your day to day chatter. If you have daily standups, bring the manager in. Stop baffling them with technical mumbo jumbo. Feed them edible slices of information. Walk them through it in bite-sized chunks. Give them documentation tasks to keep them feeling important. Give them communication tasks. Draw pictures for them to stick on the wall of their office.

Keeping manager’s in the loop obviously helps, but in my experience managers only calm down when they develop confidence their people are on top of the issues and elevate them when necessary. It takes time and positive experience for people to develop that kind of credibility with their management (more on that here). Unfortunately, that level of confidence may never develop if the manager believes progress is a result of their involvement and not their staff’s work.

The Inevitability of Errors

Errors are inevitable – no matter what the stakes, no matter how much you practice, things are going to go wrong a certain percentage of the time in any complex task or decision. The New York Times has an article with an excellent example: basketball free throws.

There is nothing in sports as straightforward as a free throw; the equipment is always the same, the geometry is constant, and there is no defense interfering. The only variables are the player’s concentration and control over his or her body. And yet, at the highest level of the game, it goes wrong 25% of the time, year after year after year:

In the National Basketball Association, the average has been roughly 75 percent for more than 50 years. Players in college women’s basketball and the W.N.B.A. reached similar plateaus — about equal to the men — and stuck there.

The general expectation in sports is that performance improves over time. Future athletes will surely be faster, throw farther, jump higher. But free-throw shooting represents a stubbornly peculiar athletic endeavor. As a group, players have not gotten better. Nor have they become worse.

“It’s unbelievable,” Larry Wright, an adjunct professor of statistics at Columbia, said as he studied the year-by-year averages. “There’s almost no difference. Fifty years. This is mind-boggling.”

And it’s not like the stakes aren’t high:

Last season, Memphis was 38-2 despite making only 61 percent of its free throws, missing an average of nearly 10 a game. The Tigers lost the national championship game after missing 4 of 5 free throws in the final 72 seconds against Kansas, which had made a late 3-point shot to tie the game and won in overtime…About two-thirds of a winning team’s points in the final minute typically come from the free-throw line…

Obviously, we need to work to eliminate mistakes and design systems to minimize the chance of them occurring. But, a certain percentage of the time errors will happen. Learn what you can from them and move on.

Keep the Bonuses, Change the Criteria

Thomas Gehrig and Lukas Menkhoff at VOX survey the research on bonuses and suggest we keep them, with some changes. An excerpt:

In fact, banks themselves are trying to correct their internal incentive schemes in order to re-adjust incentives on longer horizons. They seem to largely agree that, prior to the crisis, their systems may have been excessively short-sighted, and they are now trying to base rewards on more sustainable performance criteria such as average growth rates and volumes across longer sampling periods.

My suggestion (posted here) is measuring shareholder equity over a five year period.

Management, Feedback, and US Air Flight 1549

Via The Big Picture, an amazing animation with audio of the US Air Flight 1549 takeoff and landing.

It’s striking how the flight controllers’ understanding of the situation lags actual conditions. I think there’s a parallel with management and regulator understanding of what’s happening on the ground (or in the air, in this case) during rapidly changing conditions.

Do You Work for a Hopscotch Organization?

You probably remember the playground game hopscotch. I think there are some parallels between the game and working in many organizations.

Let’s say you have a simple task to do – you need to get from one side of a room to the other. In a hopscotch organization, you don’t simply walk across the room; you have to hop in a series of boxes in the proper sequence. For example:

Here’s a link to a video which shows the game in action.

Obviously, this is more complicated than simply doing the task. If you can, it makes sense to work on process improvements to simplify hopscotch procedures whenever you encounter them. But what if you can’t?

If my job was nothing but one hopscotch task after another, I think I would probably end up feeling the company was too stupid to be associated with, and would leave.

But, it’s more likely that hopscotch tasks are occasional irritants. If that’s the case, view them like hopscotch - a game you can excel at. Kids, after all, play hopscotch for fun, and a good hopscotch player can cross the course faster than most people can walk it. By all means work to change the game, but in the meantime learn to play, and take pleasure in the challenge.