Presentation on theme: "To Race Or Not To Race? John Carter was not sure, but his brother and partner, Fred Carter, was on the phone and needed a decision. Should they run in."— Presentation transcript:
1 To Race Or Not To Race?John Carter was not sure, but his brother and partner, Fred Carter, was on the phone and needed a decision.Should they run in the race or not?It had been a successful season so far, but the Pocono race was important because of the prize money and TV exposure it promised.This first year had been hard because the team was trying to make a name for itself. They had run a lot of small races to get this shot at the bigtime.A successful outing could mean more sponsors, a chance to start making some profits for a change, and the luxury of racing only the major events. But if they suffered another engine failure on national television…Mike Cox, Newcastle University, me fecit 08/12/2014Saturday, 15 April :06 AM
3 To Race Or Not To Race?Top five finish would mean a big-time sponsorship.But another blown engine could mean disaster.Team engines have failed 7 times in 24 outings for mysterious reasons.The team engine mechanic believes that cooler temperatures are related to engine failure and it’s unusually cold at post time.Based on Brittain, J. and Sitkin, S. (1998).Carter Racing Parts A, B and C.Dispute Resolution Research Centre,Northwestern University.
5 Technical Input1. Engine mechanic Paul Edwards recommends withdrawal because he feels that past engine failures are related to the ambient air temperature.2. Team engineer Tom Burns believes strongly that the rewards are worth the risks. He reviews the temperature data, but they indicate no relationship with gasket failure.
6 Historical Failure Data Burns finds that the data indicate engine failures have occurred at all temperatures.
8 Previous Experience Most (75-90%) say “Go” because: gasket failures occur at all temperatures (previous slide),Burns' Law: "Nobody ever won a race sitting in the pits.“,we accept that racing is a risky business.Some (10-25%) say “No” because:need to understand what’s going wrong,don’t take a risk that could abort the project.
9 How Are Decisions Made? 1. Get the Relevant Data. 2. Rationally Compare Alternatives qualitatively and quantitatively.It’s an iterative process; often you realise what data you need as you begin the comparison.
10 What May Happen? 1. A successful race ⇒ Desired outcomes (How desirable? How likely?).2. A blown engine ⇒ Disastrous outcomes(How bad? How likely?).3. Withdrawal ⇒ Bad, but maybe not disastrous (How bad?).
11 Finance Possible Outcomes of Racing Finish in top 5: $150K purse. Likely Goodstone tyre sponsorship worth $2M (+ incentives);Finish race not in top 5: No change;Race and Blow Engine: Lose engine + $1M oil sponsorship; Possible bankruptcy!Withdraw from Race:Get back $15K entry, but return $50K to Goodstone; lose sponsorship.
12 Finance Alternatives Decision Outcome Probability Expenses Revenues Value of OutcomeExpected ValueRaceFinish in top five0.004Entry$15,000Goodstone$1,040,000$1,525,000$6,100Oil$500,000Finish lower than fifth0.001$40,000$525,000$525Do not finish - blown engine0.994$5,000$4,970Engine$20,000Do not finish - other reasonNot Race1$507,500$25,000$7,500Net expected value if racing-$45,380Net expected value if not racing$450,000Alternatives
14 What If We Consider All Races? Temperature does predict engine failure. The engine failed in every race where the temperature was below 65o. Above 65o it failed only twice in 20 races. Given these data, the three gasket failures at 53o (see slide) are particularly noteworthy.
15 Inherent Reasons1. Sometimes you do have to take a risk. Without a Goodstone sponsorship, has the race ever been run?2. Just because you don’t know everything, doesn’t mean you should not act. We never know everything. Often, a bias for action is advantageous.3. If, in fact, temperature were not related to engine failure, by almost any measure the potential rewards of racing that day would have far outweighed the risk.
16 Why Can Things Go Wrong?1. The Engineer’s inability to communicate his argument and evidence.2. The Managements inability to listen.3. Poor group decision-making processes.4. Experienced managers and technical experts can make poor choices and commit fundamental decision-making errors. Especially under pressure.
17 Errors And Biases1. Failure to get complete data – “Confirmation trap”.2. “Wants and needs” can bias decisions.3. Anchor and Adjust (Initial choices influence next decisions).4. Framing a problem influences decision.5. Confirmation bias - evaluate hypotheses by trying to confirm them.6. Omission neglect - fail to consider missing information, acts of omission, or absent knowledge.
18 Errors And Biases 7. Overconfidence. 8. Sunk Costs. 9. Information gathering: inadequate data, seeking only confirming data.10. Status and power differences.11. Public commitment.12. Racing is our business.13. Risk taking culture at NASA. Recall the Challenger data.
19 Where Now?Ten Years after A Major Malfunction...: Reflections on “The Challenger Syndrome”Mark MaierJournal of Management Inquiry, Vol. 11 No. 3, September
20 Demonstrate Excessive (Blind) Faith in Existing Systems, Protocols, and PoliciesThou shalt strictly follow proper procedures.Middle managers involved in the final decision to launch said that “no launch commit criteria were violated” and that “this was clearly a ‘Level III issue’ that had been resolved” (to justify why they reportedly did not bring O-ring/temperature concerns to higher level launch officials). Concerns about cold temperature would in essence create new policy for NASA “after we have successfully flown with the existing launch commit criteria 24 previous times” .
21 Demonstrate Excessive (Blind) Faith in Existing Systems, Protocols, and PoliciesThou shalt strictly observe thy chain of command.When the director of NASA’s Marshall Space Flight Centre, was questioned about why he did not relay concerns about the temperature to top shuttle officials the morning of the launch, even though he had been informed of those reservations and even though he sat right next to the top shuttle officials for several hours as a ranking member of the Mission Management Team himself, he retorted curtly, “I have never — on any occasion — reported to Mr. Aldrich. That is not my reporting channel”.
22 Demonstrate Excessive (Blind) Faith in Existing Systems, Protocols, and PoliciesThou shalt not violate thy horizontal division of labour.When Allan McDonald (the director of the SolidRocket Motor Project for Thiokol, the Utah-based rocket booster manufacturer) — subsequent to his company’s reversal of its no-launch decision — continued (from his location at the Kennedy Space Centre) to express reservations to NASA officials about the launch due to additional concerns (e.g., ice on the launch pad and a storm in the booster-recovery area of the Atlantic), he was bluntly reminded that “those weren’t my business” .
23 Demonstrate Excessive (Blind) Faith in Existing Systems, Protocols, and PoliciesThou shalt blindly obey thy manager.A common feature of organizations is the establishment of a vertical hierarchy where managers hold the final decision-making prerogative. Thiokol’s general manager framed the parameters for participation in the caucus by announcing, “We have to make a management decision,” and ultimately issued a flat-out directive to his vice president of engineering, to “take off your engineering hat and put on your management hat” when he was supporting the no-launch recommendation.
24 Preoccupation With Short-Range Results and Myopic Self-Interest at the Expense of Strategic/Long-Term and Systemic OrientationShort-term results drive everything.6 days before they gave Challenger the “A-OK” to launch, Thiokol management was informed that its exclusive contract with NASA was in jeopardy and that NASA was seeking bids from “a second source” on the lucrative ($1 billion) Solid Rocket Motor contract. The director of NASA’s Marshall Centre, had made it known, that “under no circumstances, is the Marshall Centre to be the cause for delaying a launch”. “The only criteria for advancement,”, “is total loyalty to this man. Loyalty to country, NASA, the space program mean nothing.”
25 Preoccupation With Short-Range Results and Myopic Self-Interest at the Expense of Strategic/Long-Term and Systemic OrientationThou shalt obsess on meeting projected goals.In 25 Flight Readiness Reviews conducted up to and including Challenger, never had there been a “single negative vote from a Marshall board member or contractor that we are not ready. This amounts to hundreds of yes’s and not a single no”.This process is an exercise in self- disillusionment and illustrates the tremendous gap between Marshall and NASA management decision making and what happens in the real world. The contractors understand that they could be fired, hence they tell NASA what they know NASA and Marshall Centre wants to hear: “We are ready.”
26 Preoccupation With Short-Range Results and Myopic Self-Interest at the Expense of Strategic/Long-Term and Systemic OrientationThou shalt distort/suppress any bad news.NASA middle-level managers knew of the severe problems with the O-ring rocket seals for years. Yet whenever they made presentations to their superiors at NASA headquarters, they would filter out the worst news and present the data with conclusions they presumed their bosses wanted to hear: “It is safe to continue flying.” “This is an acceptable flight risk.” “We can move ahead with the accelerated flight plan.”
27 Challenger As Man-made Disaster - Insights For Organizational Leadership1. Man-MadeRecognition of the power of gender to shape organizational and managerial practice. Powerfully embedded norms of corporate masculinity within NASA and Thiokol. The decision to launch was literally “manmade.” Consider each of the following: the rejection of the engineers’ position as “hand-wringing emotion”; the rejection of emotional pleas to managers because of their “intensity”; the “no wimps - here!” bravado evidenced by Thiokol’s general manager, (“Am I the only one who wants to launch?”), and Marshall’s (“We get a little cold nip and they want to shut the shuttle system down?”).
28 Challenger As Man-made Disaster - Insights For Organizational Leadership2. Not Out Of The BlueIn noting NASA’s slide down the proverbial slippery slope, the Presidential Commission expressed that this was “an accident rooted in history.” Even earlier during its final 24 hours, NASA middle managers received a cue from Thiokol that they would not support flying the next morning: during a prior afternoon. They chose not to alert their higher level superiors of the probable delay, opting for a fuller discussion in an evening conference.
29 Not Groupthink (video) Challenger As Man-made Disaster -Insights For Organizational LeadershipNot Groupthink (video)Many have accepted as dogma the popular characterization of Challenger as a classical example of groupthink. Two of its defining features are conspicuously absent, namely, the conviction of invulnerability and the illusion of unanimity. Thiokol managers reversed their conservative (don’t launch) position not because they had a sense of their infallibility but the opposite.
30 Challenger As Man-made Disaster - Insights For Organizational Leadership4. Not RiskyMuch has been written of Challenger as an example of steadily escalating risk. That depends on one’s frame of reference. From the standpoint of the astronauts, clearly the decision makers did increasingly and recklessly put their lives at risk, and they paid the ultimate price. But this is only a risky decision on the surface.How risky is it when others, not you, assume responsibility for the consequences of your actions? Who is assuming the risk? Who pays? Challenger was an exercise in risk avoidance.
31 Challenger As Man-made Disaster - Insights For Organizational Leadership5. Not RightOne prominent issue that comes up in discussions of Challenger is the tendency to evaluate management in instrumental terms or to judge the “correctness” of managerial decisions by their outcome. The criterion may be framed in different ways, but typical representations include, “What are the consequences of doing A versus B?” “How will decision X impact our effectiveness?” or simply, “What works?” “What’s the right decision in this situation?” The problem with all these questions is, we do not really know the answer until we have made the decision and taken action.
32 Ten Simple (not Easy) Leadership Lessons From Challenger Stay true to your organization’s central mission and purpose.Rely on this mission/purpose when faced with important decisions. Incorporate your mission into the more mundane activities of work that have the potential to become deeper expressions of purpose to colleagues, subordinates, and stakeholders.
33 Ten Simple (not Easy) Leadership Lessons From Challenger Allow values to direct your decision making, not outcomes (creed before greed).You must first be clear about what your guiding values are. Manage first by means then by results. The ends don’t justify the means; the means determine the ends.
34 Ten Simple (not Easy) Leadership Lessons From Challenger The culture of your organization will trump its structure.Employees will learn how to behave in the organization by your “walk” (what you do) more than your talk (what you say).
35 Ten Simple (not Easy) Leadership Lessons From Challenger 4. Examine your contribution to creating the organizational system.Evaluate your motives and intent. Embody the qualities you wish to see in the organization. Use the organization’s mission and your values as guiding principles for your own behaviour.
36 Ten Simple (not Easy) Leadership Lessons From Challenger 5. Act from a position of ethical courage, not cowardice and fear.Strive to “take the hard right instead of the easy wrong” when confronted with difficult situations.
37 Ten Simple (not Easy) Leadership Lessons From Challenger Understand that organizational crises rarely develop overnight.Cultivate your discernment and foresight abilities. Whenever possible, address small problems while they are still small.
38 Ten Simple (not Easy) Leadership Lessons From Challenger Involve your stakeholders.If it is not possible to always involve stakeholders, assume a position of empathy for their situation.
39 Ten Simple (not Easy) Leadership Lessons From Challenger Understand that all knowledge is incomplete.The “facts” that reach you will be limited by cost, comprehension, and time and will be a function of the filters at work in the organization. The leader must discern whether he or she is obtaining vital — and untainted! — information: Is it accurate and sufficient?
40 Ten Simple (not Easy) Leadership Lessons From Challenger Be open to bad news Especially bad news!The worst news is the bad news you don’t hear. Encourage colleagues and subordinates to communicate directly and openly. Set the example yourself.
41 Ten Simple (not Easy) Leadership Lessons From Challenger Trust your experts.Those closest to the problem will also be closest to the best course of action and the ultimate solution. Listen to them!