Management Lesson Of Containership From Approaching Hurricane

Captain Michael Davidson of the container ship SS El Faro was determined to make his planned shipping trip on time—but a hurricane was approaching his intended path. To succeed, Davidson and his fellow officers had to plot a course to avoid the storm in the face of conflicting weather reports from multiple sources and differing opinions among the officers about what to do.

Over the 36-hour voyage, tensions rose as the ship got closer and closer to the storm. And there were other factors compounding the challenge. The El Faro was an old ship, about to be scrapped. Its owner, TOTE Maritime, was in the process of selecting officers to crew its new ships. Davidson and some of his officers knew the company measured a ship’s on-time arrival and factored that into performance reviews and hiring decisions. When the ship ultimately sunk on October 1, 2015, it was the deadliest American shipping disaster in decades.

But who was to blame for the tragedy and what can we learn from it? Professor Joe Fuller discusses the culpability of the captain, as well as his subordinates, and what it reveals about how leaders and their teams communicate under pressure in his case, “Into the Raging Sea: Final Voyage of the SS El Faro.”

 

Brian Kenny:

In the early morning hours of September 30th, 2015, tropical storm Joaquin building strength in the warm Atlantic water south of Bermuda was upgraded to hurricane status. It was an unexpected and troubling turn of events for a storm that many predicted would fizzle out. Over the next two days, Joaquin would batter the Bahamas, trapping hundreds in their homes. The storm surge reached as far as Turks and Caicos, flooding whole communities and washing away bridges and roadways. And at the height of the storm on the morning of October 1st, a distress call came from the captain of a maritime vessel on a direct collision course with Joaquin. Within the hour, oceanographic microphones picked up a piercing sound that was later determined to be a ship hitting the ocean floor. All 33 souls on board were lost. Today on Cold Call, we’ve invited Professor Joe Fuller to discuss his case entitled, Into the Raging Sea: Final Voyage of the SS El Faro. I’m your host, Brian Kenny, and you’re listening to Cold Call on the HBR Presents Network.

Joe Fuller is the co-leader of the School’s initiative on Managing the Future of Work. And prior to teaching at HBS, he founded and led Monitor Group, a global management consultancy, and he is a fellow podcaster who is the co-host of the podcast entitled, Managing the Future of Work. Joe, thanks for joining me.

Joe Fuller:

I’m delighted to be here, Brian, and always fun to be on the other side of the podcasting table.

Brian Kenny:

We’ll try not to make it too hard for you today. This case was really very dramatic. It almost read like a tragic screenplay, and I think that people were cognizant of what happened at the time, but I think bringing it back up in this context and looking at it as an example of leadership stresses, the stresses of being a leader in a situation like this are really going to be interesting to people. Let me ask you to start by describing the opening of the case and telling us what your cold call is to start this case in the classroom.

Joe Fuller:

Well, I think the students very much have the same reaction that you had, Brian, to the case that this is dramatic and they’re keen to understand why things happened to a certain extent. We cultivate in our students the notion that something’s gone wrong and somebody’s to blame. So, I actually start by asking why they think the captain, a guy called Davidson, didn’t change his mind because throughout the case, what you can see is Davidson made early decisions about the course he was going to take, the physical course of the vessel from Jacksonville to San Juan, Puerto Rico, which was its destination that was its standard route. And despite getting more and more data that he was steering the ship into danger, he was unwilling to respond to that data and that as he got more feedback from other officers on the vessel, he seemed to ignore it. So, the first thing we want to get out is we want to get the students to start focusing on Davidson and frankly, to vent a little bit of their negative feelings about Davidson, how he managed this and how, well, he should have seen this and he should have seen that. And that sets up the rest of the discussion, which is that there’s a lot going on here. It’s a very complex system at work. And that it’s a little bit simpleminded to say, bad captain, bad thinking, bad decisions. It’s more complicated than that. And that’s really what we want the students to come out of the classroom thinking about.

Brian Kenny:

Yeah. And we’ll dive into some of those pressures that he was facing, because it is very complicated as you said. I normally ask my guests how the cases they write connect to the research they do and the questions they think about as scholars. It wasn’t obvious to me on this one, because this doesn’t necessarily seem to be directly in your wheelhouse and the kinds of things that you research as a scholar. So, tell me why you were interested in writing this one.

Joe Fuller:

Well, this is a case that’s really designed for the elective I teach in the second year of the MBA program, Becoming a General Manager, which is actually also an HBS Online course under the name, Management Essentials. And what that course is designed to do is to try to get our students to think about the differences between being a manager and being a leader. And that being an effective manager requires understanding how processes work, how incentives affect people’s behavior, that in organizations, what you’re going to be dealing with there’s a lot of imperfect, opinionated, biased assets called human assets. And you have to understand people at an individual level and a group level, and you also have to be effective in what I’m going to call the currency of management, which is communications. So, we spend a lot of time on things like dialogue and forming groups and how you resource groups and how you task groups. I draw, for example, on some of the scholarship of our departed colleague, the great Chris Argyris, and this case gives us a platform to have a really excellent discussion of what happened for two reasons. One is we have verbatim transcripts of what people said to each other over a two-day period because of the tape recorder.

Brian Kenny:

Those are amazing. Yeah.

Joe Fuller:

Yeah. And you don’t usually have that. And of course, if you’re talking about a normal managerial situation, a product launch, or merger process, post-merger integration process, those play out over months or quarters or years, and there aren’t tape recorders in most boardrooms. So, here, because it’s a compressed time cycle, very much aided by the US Coast Guard investigation of the loss of the El Faro, we really can provide end to end story enlightened by what individual people were doing, what they were thinking, what they were saying to each other.

Brian Kenny:

I’m sure many of our managers who are listening are glad there’s not a tape recorder in the boardroom as they make all their decisions day to day. So, the maritime sector is an interesting one. I think people aren’t really aware of how large and how important it is in the ecosystem of the economy. Can you describe it a little bit for our listeners?

Joe Fuller:

Well, most people will think of it now informed by all the supply chain disruptions of COVID and it shows you how complicated and how important that system is to the world. The biggest aspect of the oceangoing maritime business is, of course, to power globalization. And that’s done on very large tankers and particular containerships that come back and forth bringing cargo. And we’ve all read about the Port of Long Beach and traffic jams of big cargo vessels. There’s a small subset of that industry, which is the, what I’ll call the intra-US business.

In the immediate post-World War II era, the United States was a huge maritime superpower, and here I’m talking about merchant marine, not the Navy. And over time, that became encroached upon by other countries. And laws were set up under something called the Jones Act that said if a vessel is originating and terminating in a US port, it’s got to be US-owned, US-staffed, and US-flagged. It’s called registered in the United States.

Well, the cost structure of American mariners, the tax system in the United States meant that our US-flagged merchant marine shrank almost to nothing, basically just two vessels that transit between US ports. So, California to Hawaii, Seattle to Alaska, and in this case, Florida to Puerto Rico. And the El Faro was owned by US-owned company TOTE flagged in the United States. All the crew are American citizens. And that’s a very small part, tiny fraction of the industry.

Brian Kenny:

What products did the El Faro carry?

Joe Fuller:

Originally, she carried vehicles. The El Faro was built in 1975 and was a first generation, what we call roll-on roll-off ship. And it’s literally what you think. You can drive a truck, an 18-wheeler or you can drive an automobile straight onto the thing, almost like a ferry. And roll-on roll-off was called RORO if I use that abbreviation. ROROs were designed basically, initially by Japanese auto companies to export cars for the United States. And the El Faro was built as that over her very long service life, 40 years before she was lost. She was modified a couple of times.

So, she was lengthened. In her final form, she was almost 800 feet long. She had added storage tanks for petroleum products that could just be pumped into the tank and pumped off into tank farms at the dock of San Juan. And she also had added capacity to have containers loaded on her deck, which she didn’t have originally. So, basically, she would be like a big shopping cart going to San Juan where she’d be taking produce. A lot of the trucks that would roll on are refrigerated. They stay refrigerated for the whole two-day voyage. Containers of goods not made in Puerto Rico and anything that would be subject to things like customs inspection or regulation in the United States.

Brian Kenny:

Yeah. And there were some interesting aspects to the design of El Faro that may have played a role in what ultimately, in its demise ultimately. Can you describe those?

Joe Fuller:

Roll-on roll-off ships, as you might guess, it’s like a big parking deck, and just like a parking deck, you don’t have a lot of obstructions. So, the decks, the below deck, a couple of them are basically just wide open. They’re not compartmentalized. They don’t have watertight doors or anything like that. So, if the ship starts to flood, the water is sloshing around which means a couple of things. First of all, it adds the instability of the ship. And secondly, as we know, water will find any aperture that’s available to it. So, if there is a passageway or there is an opening of the deck to allow electrical conduit to come up from below, the water will pour down that aperture and start flooding lower decks. Now ROROs have safety records that are essentially equivalent to other vessels. And so, the loss of the El Faro in these very extreme weather conditions was contributed to by her design and also by her age, but it was an avoidable error. It wasn’t fore-ordained simply because of the ship’s design.

Brian Kenny:

Yeah. And I also want to talk a little bit about the pressures that captains face in the maritime industry as they’re delivering shipments to port. What happens if they’re late? What are the consequences of that?

Joe Fuller:

Well, these are vessels, of course, that are in a very competitive industry. So, margin counts for a lot, and like all transportation assets, there are two big drivers of profitability. How fully loaded is your RORO or your 747? And then, how long is it operating? And so, there’s a real urgency to try to do these vessels, do these voyages as time efficiently as possible. Because if you spend a day idling, avoiding a storm, you’re spending $50,000, $60,000 of what’s called bunker oil, the fuel that the El Faro would’ve operated on. Because you’re just running the engines, not getting anywhere. And, of course, you’re paying the crew. So, the economics of this very much favor, very efficient movement in transit and very efficient loading and unloading of the vessel. So, you’re maximizing utilization of the asset and minimizing the variable cost, especially the fuel.

Brian Kenny:

Which is great if the weather’s good.

Joe Fuller:

Which is great if the weather’s good. And TOTE, the owner of El Faro, and Davidson’s employer incented captains to be on time. And so, they measured a captain’s on-time performance, which factored into their performance review. And at TOTE at the time of the case, if you did not get to the destination within two hours of your scheduled time, you basically got a zero for that voyage. Unfortunately for Davidson and the crew, when the vessel was originally loaded in Jacksonville, it was loaded incorrectly that would’ve been the responsibility of the second in command of the ship, the chief mate a guy called Steve Shultz. So, the vessel was listing after they’ve finished loading her. So, they had to redo the loading. So, actually, the El Faro left Jacksonville more than two hours late.

Brian Kenny:

They were already behind the eight ball.

Joe Fuller:

They were already behind the eight ball.

Brian Kenny:

The case does a wonderful job of stacking these little factors one after the other to lead you up to what ultimately happens. It also does a great job of describing Captain Davidson a little bit. What’s his background? What do you think his superiors and the people that report to him would say about him?

Joe Fuller:

Well, it’s a mixed bag. He was 50 at the time of the accident. He was experienced mariner. He was a graduate of the Maine Maritime Academy, which is one of the prestigious places to get a license as a ship’s officer. He had been officer for ConocoPhillips on tankers. He had been an officer at TOTE really moving his way up the chain of command on vessels. He had a lot of experience on TOTE’s Alaska business, out of Bremerton, Washington, to Anchorage, appropriately named Anchorage.

Obviously, after the tragedy, there was finger-pointing at Davidson and there also real desire not to speak ill of the dead. Davidson’s reputation was he was a bit of an argumentative person. He was very status conscious. He had had several disputes with other officers. He left the employment of ConocoPhillips after a very visible and contentious relationship with another officer on one of the ships he was serving on. He also was viewed by many of his compatriots as what they call a stateroom captain, which is, he didn’t spend a lot of time on the bridge or the ship. He didn’t spend a lot of time overseeing the responsibility of his subordinates. And while interestingly, some of the other officers were after the fact repeatedly thought he was a pretty good seaman. He wasn’t very well-liked. You get a sense of, someone who was a bit arrogant, probably a bit insecure, for example, the pilots in the Jacksonville Harbor, who would come on board to help a ship navigate its way out of the Harbor, into the Harbor disliked him. And when he went to things like the cruise commissary, the place cleared out. So, he wasn’t what we’d say was a servant leader or the type of inspirational leader that we all like to work under.

Brian Kenny:

And how does the management structure on the bridge work in a situation like this?

Joe Fuller:

Well, it’s derivative of Navies. And of course, many of the people in this business are, if they’re not… their earlier history could be in the Navy or in the Coast Guard. The structure is there as a captain. And captain goes down with a ship, in this case, tragically, literally, but they are in charge of the safety of the vessel. They are the last voice of authority. And the buck stops with them. Then there are four, what in the merchant marine, are called mates, a chief mate, second, third, and fourth mate. And they’re the other deck officers. They’re qualified to operate the vessel. They usually have two responsibilities, a focused responsibility. And then, they’re also, they will periodically in rotation serve as the officer of the deck. So, the person in charge unless the captain is present. And of course, since this is a 7/24 operation, they’re working shifts usually about seven-hour shifts. And the captain is very seldom actually the officer of the deck. He or she will be there when the ship is putting out, when it’s coming in, in times of distress will be supervising those mates, but not actually serving as the minute-by-minute operator of the vessel.

The first mate, Steve Shultz, was called the deck officer, not the officer of the deck, but the person responsible for cargo loading unfortunately did not do it very effectively the first time around. He was new to the El Faro. The second officer who figures prominently in the case, Danielle Randolph, her additional responsibility was the navigation officer. And then, the third officer, a guy called Jeremy Riehm was the mechanical systems officer who would be an adjunct to the chief engineer of the vessel, who is primarily interested in the propulsion of the vessel.

Brian Kenny:

And those are the voices that we’re hearing and reading about in the transcripts throughout the case. And it’s very interesting back and forth the discussion that they have with each other and not directly with the captains. We’ll talk a little bit about that too. So, here they are. They’re in port, they’re getting ready to head out. They’re behind the eight ball already and there’s weather coming. How do they keep on top of the weather? What’s the source of information for that?

Joe Fuller:

Well, as you imagine, weather is a constant topic for mariners. So, even as soon as the evening before the departure of the El Faro from Jacksonville, a mate that had sailed with Davidson who wasn’t scheduled to work this trip, contacted him, said, “Hey, you keep your head up. It sounds like the tropical storm gets serious.” At the time, the principal source of data for anybody is the people you see on your local news, broadcaster on CNN. It’s the National Hurricane Center down in Florida. And they are gathering data from buoys the Coast Guard operates in the Caribbean, from the storm hunter planes there the Coast Guard flies, from other meteorological services. So, that is a principal source of data for everybody. In that data, we have exhibits that show what the data actually looks like in the case, is pretty user-unfriendly. But, of course, these are expert people are used to getting it.

The El Faro and TOTE generally had a license with a commercial company, BonVoyage Systems, BVS for short, which augmented the National Hurricane Center data and the National Weather Service data for fair weather sailing and would calculate scenarios and make active recommendations if sought for course corrections by a captain.

So, there were two sources of information, but something that’s important to understand about this, Brian, is the time lag. The National Hurricane Center will put out data roughly 15 to 18 hours after it started getting it. So, that storm and hurricanes move 15, 20 miles an hour. So, a hurricane can move 15, 20 miles in the time.

Brian Kenny:

Yeah. That’s a huge gap.

Joe Fuller:

Big gap. And then, BVS systems get to that report. So, 15, 18 hours late and then takes four or five hours to do its analysis. So, it’s close to a day behind. There is something here that Joaquin… it has been widely studied because it behaved in ways or completely contrary to the normal way hurricanes behave. And by the way, this strongly influenced Davidson’s analysis that it’s virtually unheard of for a hurricane in that part of the Caribbean to move to its southwest. They always hook around and go north and come sometimes up the sea coast and sometimes affect our school. But in this case, Joaquin just kept coming southwest, which was very unusual. As she did that, she was moving actually from cooler water to warmer water. So, she’s picking up strength and she went from a tropical storm to a force three hurricane in about a day and a half, which is very fast. And that combination violated so many rules that it actually confused the National Hurricane Center. And it’s been widely studied how they reacted to it because they kept essentially stonewalling the data a little bit. One thing the National Hurricane Center had done by policy is make it a little bit vague what’s going on, on location, both because they can’t be hyper-accurate. But also, they basically want everyone just get out of the way. And so, they don’t want, in some ways, the tragedy of the El Faro is a testimony to what they most worried about that someone will say, “We’ve got this data. We can just get by this thing. We’re going to cut it close. But we’re going to do it because we’ve got this data.” If there’s some ambiguity all of a sudden, you’ll steer a wider berth as they say in sailing.

Brian Kenny:

And the case mentions also that some of the BVS data was latent. Right. It was inaccurate when they read it.

Joe Fuller:

Yes. Well, it’s both that, but something that came out later in the investigation was, it’s likely that Davidson simultaneously over-relied on the BVS data, but also didn’t really know how to operate the system so that there’s no evidence on the BVS servers that he ever looked at any of the scenarios. In fact, reassuringly to people like me, it turns out it’s a pretty user-unfriendly system. And you had to check an obscure box on an obscure screen to get that automatically. There’s no evidence he’d ever used that capability. When we started talking about the case prior, we said, there’s a lot going on here, and one of the actual causes of this is overreliance on a technology that’s being underutilized. And you can look, did TOTE provide enough training? Did BVS have, was it design for 50-year-old males who were not as technically literate as young deck officers? Contributing factor for sure.

Brian Kenny:

There’s a lot of conversation about the weather between the deck officers and with the captain. And it does certainly seem like the deck officers are aware that the situation is not, it’s getting worse rather than better. What can we glean from any of the back and forth that we hear between those guys?

Joe Fuller:

In some ways, this is the epicenter of the discussion because we have these transcripts. And what you see is that different deck officers at different times particularly Shultz and Randolph have pretty direct conversations with Davidson about the storm. But at no time, do any of them say to Davidson, “Captain, I’m really concerned, this course is taking us right on a collision with the way the storm is unfolding. I want to register with you that I have real reservations about this. And I think we should adopt a different course of action.”

Brian Kenny:

Yeah. That was remarkable I thought in its absence. I kept looking for it and they said it to each other pretty much, but they didn’t say it to him.

Joe Fuller:

And that’s one of the real teaching points here that the other people on the deck are called the helmsman. They’re not officers, but they’re physically steering the ship. And there’s dialogue between the different officers and between the helmsmen and the officers, some of which, particularly dialogue involving the Chief Mate Shultz, who may have already felt a bit chastened because he’d blown the loading of the vessel. And he was new. He did not know many of these other officers very well, that Shultz is essentially being aloof from the others when they are saying, “This doesn’t seem right to us.” But particularly, the conversation surrounding Randolph who, remember, the navigation officer as well is very explicit that they think this is crazy. And over time, that gets heightened and heightened. But when they start engaging Davidson in conversation about it, they’re using euphemisms. They’re being sarcastic, they’re making jokes. And one thing we teach in the class is that there are certain stylized conversations that take place inside companies or organizations particularly under pressure. And they’re very seldom direct. And there’s a rich literature in this, not only on the bridges of ships, but in cockpits of aircraft. So, if you look at aircraft that crash because of such phenomena as running out of fuel which has happened on a number of occasions, it’s very, there are invariably some on the cockpit that knows that we’re running out fuel. And often the pilot as opposed to co-pilot or flight engineer is saying, “I got this.” Or the Korean airlines had a big problem with this because all the flight officers are former Korean military. Off the chart hierarchical organization, subordinates do not correct superiors up to and including flying into a mountain in Guam or running out of fuel on the way to Hawaii.

Brian Kenny:

Obviously, it happens not just in those situations, but in any boardroom anywhere where people don’t want to tell the boss something-

Joe Fuller:

Absolutely.

Brian Kenny:

… that they don’t want to hear.

Joe Fuller:

Absolutely.

Brian Kenny:

How do we inculcate a different approach to that in managers as they’re coming up? Do you think that’s changing at all?

Joe Fuller:

Well, I think it’s changing to a degree and obviously, there’s a real focus certainly in our program and actually, in our course, which I teach with Professor Amy Edmondson, who is the person that really popularized the concept of Psychological Safety in organizations. This is not a psychologically safe space on the bridge of the El Faro. It’s partially because of Davidson. It’s partially because this is a hierarchical organization where the captain is given a lot of discretion. It’s in part because it’s very hard to look at your boss and say, “I think what you’re doing is crazy.” Another one of the episodes that’s in the background is that earlier in that hurricane season, Davidson had made a decision to change course, added about 18 hours to the journey to avoid a storm that didn’t show up. So, he’s very much, I fell for this last time, fool me once, not fool me twice. Is it getting better? Yes. I think that as younger managers come into organizations, they have a greater expectation than maybe their parents or their grandparents have that they deserve to be heard. I think that more and more managers are sensitive to the need to solicit opinions from different points of view, from diverse points of view.

Brian Kenny:

Davidson has superiors that he’s reporting to back on shore. They’re seeing the weather. They’ve got to all be thinking about the fact that these cargo containers could hit the water and then they lose the value of the shipment that they’re bringing in. So, why do none of them say to Davidson, you got to turn around, you got to change course?

Joe Fuller:

There’s a phenomenon that we talked about in our course called social loafing. And basically, the more people they are who are responsible for something, the less likely any individual is to assert themselves to exercise that authority. It’s been observed in lots of different settings. It’s the reason why, for example, in the US military, there are things like theater commanders that are responsible for all the military assets in the Middle East or in the Western Hemisphere because you have to have somebody who says, “I am in charge.” The management of TOTE, we would have said at trial and in the investigation, Davidson was a qualified master. Davidson had the data to make judgments about this. Davidson never contacted us to say, “I’m worried about this. I’m thinking about that.” The only time Davidson asked us for anything was permission to take a longer route back because he anticipated that the storm would go northeast, not southwest. And by the time he was coming back, there would be rough seas as he went north, because they’d be, while he’d be not running parallel to the hurricane, he’d be catching up with it. And it’d be further and further to his starboard as he headed north but he was still caught up. And they immediately approve that. So, they’re like… where, Davidson didn’t do his job. And had Davidson come to us, then we would’ve said, sure, you’re the captain if you’re worried. We don’t want to lose the vessel to save $35,000 of fuel.”

Brian Kenny:

And he didn’t seem worried even in his last exchange. I don’t know if he was being Pollyanna-ish. I think he really believed that he was making the right decision.

Joe Fuller:

And one of the hard lessons that we’re trying to convey to our students is that, yes, Davidson is ultimately responsible and Davidson made the critical misjudgment that led to this loss of the vessel and the loss of life, including these subordinates. But there is culpability among the subordinates. They did not make it apparent and tragically, the vessel was still, probably would’ve survived around 1:00 a.m. on the day she sank. Randolph reached the conclusion that they are really in danger. And she basically plots an escape route and calls up Davidson who obviously was asleep when she called. I’m impressed that anybody could be asleep given those conditions because that would’ve been like sleeping while on top of the bucking bronco. Asks permission to make a dramatic change in course, basically starting sailing as fast as they can away from the storm, which would’ve added at least a day, if not more to the passage time. And there’s an exchange and Davidson allows a modest course correction, but nothing as radical as she’s proposing. And that is the final moment of truth. We only have her side of that conversation. We have no data that Davidson blew up at her, started shouting or anything, but from her reaction. But she is not saying to him anything other than, “We’re on intercept course with the storm, it’s now classified by Fox News,” she says, as a category three hurricane. “It’s an emergency. We have to turn away,” she says. She just says that and said, “So, I’ve plotted a different course. Would you allow me to do that?” And he says, “No.”

And so, there are moments of truth. And in this case, you have a highly qualified deck officer in Danielle Randolph who… there’s something about that culture. She interestingly came from military family and was tragically was becoming ambivalent about being an officer because she thought it was wrecking her personal life because you disappear for 18 weeks at a time. Hard to build relationships.

But the combination of factors that caused people to be more willing to tell their peers about their concerns than their superior in a situation like this is one of the things we really want the students to reflect on.

Brian Kenny:

Yeah. And I thought the ultimate tragedy in the case was that what ultimately caused the ship’s demise wasn’t directly the hurricane. It was a mechanical problem.

Joe Fuller:

She sank for a couple of reasons. She sank because she was flooding. Water was getting in somehow. It could have been that a hatch had broken away or was not adequately tied down, but she started taking on water, which caused the vessel to start lifting. What’s happening below deck is a complicated system. The lubrication for the engines cannot continue to be achieved if the ship is constantly off, more too far off center. So, what’s happening over time is the engines are risking shutting down, which is an immediate death knell because the helmsman can’t try to navigate around or through the waves in a way that the ship will remain stable. And when she loses power, she’s basically, like a cork on the water. And that increases the extent to which seawater is breaking over her which increases the flooding, which causes her to go down.

Brian Kenny:

Joe, this has been a fabulous conversation with so many interesting insights. And I think people can relate it to whatever situation they’re in, even though it may not be quite as dramatic. I’m wondering if you can answer one last question for us.

Joe Fuller:

Sure.

Brian Kenny:

Which is for those who are listening to the podcast, what’s one thing you want them to take away from this case?

Joe Fuller:

Can I have two?

Brian Kenny:

Sure.

Joe Fuller:

One is that the structure of dialogue matters and you can make your point by making the data you’re relying on clear and inquiring of the other person, how they see it and do they see it differently from you? But if you’ve either got data or concern, you think of a way to air it constructively and it’s much easier said than done because people want to avoid conflict. The second thing is that, in the early ’80s, a sociologist called Charles Perrow came up with an explanation for why there were growing number of problems in things like nuclear power stations. And he came up with a two-variable model that I think it’s very important for people to think about, which is you get catastrophic failures when you have a complex system. And elements of the system are what he called tightly coupled, which is an engineering term. Tight coupling means that there really isn’t a lot of slack in the system. And that’s what sank the El Faro. There’s a highly complex system. And, remember the complex system of not just the El Faro is a complicated, if aging machine, the system includes the weather. So, there’s high system of complexity here. And when you start putting a hurricane, a force three hurricane with a 1970 vintage vessel that’s being handled ultimately in a catastrophic way, that tight coupling kicks in. The flooding leads to rolling. The rolling leads to the lubrication of the engines failing. The engines failing leads to more flooding. The complexity around companies and institutions is getting greater. And the coupling is getting greater.

And just to illustrate that, something that I’m about to launch some research on is the impact of social media. That greatly, that is coupling actions by companies or individual actions by managers to their brand positioning to their credibility with regulators and legislators, to their relationship with their employees, their customers, the community they serve. Companies and industries generally because of globalization, social media, all factors are getting more complex and more tightly coupled.

Tight coupling is what we saw in the supply chain collapse in COVID. There’s no slack in that system. And once you put a perturbation, once you put volatility into a system with no slack, it breaks and more companies and more institutions are going to be at risk of that. And my cautionary note is not: don’t go to sea in hurricanes. It’s: be aware that as your organization gets more close, complex, and as you take steps to purposely to make it more efficient, to create more tight coupling, you are incurring risk. You have to be cognizant of it.

Brian Kenny:

Yeah. Yeah. Great insight. And it’s a great case. And it’s another example of an unexpected business case that has real management insights for people. So, thanks for writing it, and thanks for coming on to talk about it.

Joe Fuller:

Brian, I’m delighted to have been with you and it was fun to go back to all the original detail and make sure that I had all the facts right.

Brian Kenny:

You did all your homework. It was good.

Joe Fuller:

Yes, sir.

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Source: Harvard  Business School