Among the first steps taken by the new president, Douglas Daft, was to bring back Don Keough as a special advisor. Alas, even this did not help, and in the downsizing and management turmoil that followed, Coke’s share price slipped steadily. Today it is in the mid-40s, the level it passed nearly 10 years ago on its way up. Perhaps the appearance of management incompetence today in Coca-Cola is as exaggerated and as misleading as were the illusions of management genius during the mid-1990s. Hays has done the field of management a true service in revealing the raw but real dynamics behind the corporate façade.
Fixing the Known
Corporate train wrecks like Coca-Cola’s in the late 1990s may be unforeseeable (even the sagacious Buffett failed to bail out of Coke stock before the fall), but many corporate and societal debacles are preceded by clear warnings, according to Predictable Surprises: The Disasters You Should Have Seen Coming, and How to Prevent Them (Harvard Business School Press, 2004), by Harvard Business School professor Max H. Bazerman and Michael D. Watkins, a consultant, author, and former associate professor at the Harvard Business School.
In their highly readable book, the authors define predictable surprises as the result of problems that are known to exist and that are getting worse over time. Fixing them, however, involves three challenges: First, it will incur a significant cost in the present to avoid a large, uncertain cost in the future; second, people in general want to maintain the status quo; and finally, a small but vocal minority benefits personally from inaction and works to subvert efforts for change. The authors look at the causes of inaction at three levels — human cognitive biases; organizational failures to scan, integrate, and learn; and political gridlock as a result of actions of special interest groups.
They argue that both the September 11, 2001, catastrophe and the Enron collapse could, and should, have been averted because in each case it was widely known that key processes — aviation security in the former and auditor independence in the latter — had been seriously compromised. Yet in the absence of “vivid data” about the actual events, actions to fix these processes were not taken in time, largely because vocal minorities — the airlines in the case of aviation security and the accounting profession in the case of auditor independence — lobbied effectively against change.
Bazerman and Watkins’s program for preventing surprises from happening consists of better recognition of threats, prioritization of issues, and the mobilization of people to action. Unfortunately, their recommendations come across more compellingly as a framework for classifying failures in hindsight than they do as tools to avoid surprises in prospect. The value in Predictable Surprises is the description of the contexts that inhibit our responses to known threats, rather than the gathering and prioritization of information that might help us predict new ones. Over time, for example, regulated institutions display an amazing capacity to undercut their regulators and turn the policy-making approach to their advantage. In the authors’ expert view, the auditing profession remains compromised, despite recent reforms such as the Sarbanes-Oxley Act, and thus may still be sowing the seeds of future corporate calamities. The authors list several other disasters looming on the horizon: global warming, the collapse of the U.S. Social Security system, and, more trivially, the continued devaluation of frequent flyer miles.
One predictable surprise missing from Bazerman and Watkins’s book is the possible decline of traditional business schools. Although one senses that the authors might not agree, if Henry Mintzberg, in Managers Not MBAs, and other commentators, such as Harvard Business School’s Clayton Christensen, are right, the MBA educational model as we have known it is well past its zenith. It will gradually be replaced by a combination of other approaches, including in-house corporate programs and shorter nondegree courses. Some courses will use conventional methods to teach conventional skills; others will make use of the wide range of types of learning and managerial approaches evidenced in the seven books we’ve reviewed. Still others will immerse the learner in problem situations and combine action and reflection in new and different ways. The emphasis will be on selecting the right people with a demonstrated “will to manage” at the right time, and on placing them in the right contexts.