This chapter focuses on the three ‘passive’ warning signs: namely, ignorance, certainty and complacency.

Ignorance

I have frequently found, in failing organisations I have managed and when I have been into organisations in trouble, that no one knows what’s actually going on. People may complain about it or they may simply put up with it, but it is amazing that they take so few steps to remedy it. There’s almost always an opportunity to get some information, and if you have got bad information, to get better information. Once you start using it, as I show later in the book, things start to improve and you get into a virtuous circle. And it’s almost as bad when information is available but is not used, is not valued, and so doesn’t make a difference.

One organisation I worked with was having enormous trouble in delivering the volume and type of surgery it needed to deliver, in orthopaedics. But it hadn’t worked out what its real capacity was, where it had bottlenecks (shoulders, hips, knees, backs, feet or hands), and so whether this was a single problem or a series of parallel but different ones. It had a lot of good data, enough to work out its inherent capacity. This clearly showed there were plenty of areas where it was performing satisfactorily, but one or two key bottlenecks which could be remedied simply and cheaply.

There are two factors linking information and its proper use. As the above example shows, one is performance management. But there is an even simpler one – communication. Very often, information is there but lies dormant in an organisation. Simply to broadcast it, to spread it, to let people know about it, would make an enormous difference, but so often this is not done. Rogue trader Jérôme Kerviel lost the huge French bank Société Générale $6.3 billion in a few days in early 2008. By not monitoring Kerviel properly, by not obtaining and using information it could have used, the organisation didn’t know it was at risk. As a result it was unable to take the necessary steps to protect itself. It emerged in July 2012 that JPMorgan made losses of $6 billion on massive bets made by Bruno Iksil, known as ‘the London Whale’ and ‘Voldemort’ in the London markets (and hence highly visible). These bets were supposed to protect the bank but actually put it more at risk and were not properly scrutinised or monitored. The CEO, Jamie Dimon, said that the episode had ‘shaken our company to the core’.

If an organisation is ignorant of what is intrinsically important, nothing is prioritised and you get either the sheer number of demands on staff leading to despair and inaction, or frantic attempts being made to satisfy each demand by running a little way in one direction, and then turning and running in another. This activity is typically fruitless and destroys morale. It happens when people feel overwhelmed: too many things are coming at them, too fast. It creates ‘rabbits in the headlights’ paralysis.

It is vital to distinguish priorities and to focus on some more than others. An organisation’s true priorities will be apparent from what it does and what it focuses on. This is how you can test this:

• Itemise the organisation’s current priorities and see how strongly scaled they are, i.e. are there big differences between them or not?
• Does one in particular stand out above all others: for example, getting a new capital investment, flotation, winning more business, expanding the workforce?
• Set out what you think a typical organisation in this position should have as its priorities, given the general environment in which it operates, its general constraints and requirements, plus the local variance upon that which makes every organisation different from any other.
• Once the two lists (yours and the typical organisation’s) have been compiled and restricted to a maximum of six items, see if there is a substantial divergence between them, especially at the top of the list.
• If there is, then you have your first warning sign: ignorance.
• A more thorough-going process of reviewing your organisation’s current priorities should begin urgently on the basis that something may indeed be amiss.

When I arrived at West Hertfordshire Hospitals, many people were working desperately hard to deal with a lot of problems bearing down on the organisation. They hadn’t given up on any of them, but they would run at one problem for a while and then realise that another one was becoming more urgent and so devote their attention to that, then another, and so on. Not surprisingly, few if any of the problems were sorted out and things got worse and worse.

A secondary symptom of ignorance is that managers will have a sense of overburdened agendas. They will be expected to do everything when the only way of sensibly attacking issues is to focus on the most important ones first of all.

What this example shows is a lack of follow-through and the absence of an execution culture. In this situation people are passive, not proactive. Passivity is based on a belief that things happen to people and organisations, that everyone and everything is driven by events. This engenders reactive rather than learning behaviours, and what one sees in these situations is repetitive behaviour. People go on and on with the same tactics, even as again and again they fail to produce results. They have stopped believing that they have an alternative, so what else can they do?

Some questions:

• What are the key measures of achievement? In many cases, the answers will be measures that are countable on the fingers of two hands, with even the biggest aggregate figures often being less than 100. So no excuse here.
• Are the board of directors or managers unaware of such simple facts and figures?
• Irrespective of the figures, do they know what is happening, or where?
• Do they know why or is it seen as inexplicable?
• Is basic information passed around, especially to those people and those services that need to perform better?

If the answer to all or even some of these straightforward questions is no, people won’t realise what is happening. Ignorance of and lack of insight into basic information will mean inaction on simple, solvable but major concerns. Performance will inevitably stagnate and then deteriorate, leading to major performance failures.

Harold Macmillan famously answered a question about what was important in his UK premiership with the phrase ‘Events, my dear boy, events’. In his words lies an important truth for the manager. If we let events determine what we do, we will run around in circles. If we master our response to events, we will be able to manage successfully.

To identify if this warning signal applies, check whether any issues that would be seen as relatively minor elsewhere, capable of being contained or put on the back burner, are taking up a lot of time and energy. If they are, it is almost certain that really big issues will not be receiving the priority they need.

Lack of any performance management is a related problem. An organisation may have the right objectives but no implementation drive. People do what they can, and if it doesn’t work they think they have done their best. They don’t work to agreed goals and targets, so there isn’t regular feedback within the organisation that things are going wrong, and that something needs to be done.

The purpose of monitoring performance is to check whether performance is going in the right direction. Where performance is not monitored, failures are not noted and nothing is done to correct them. The shortfall in performance turns from marginal to serious, to dramatic, to catastrophic. If it is monitored, small adjustments can put things back on track. The penny will drop. It will be evident which tactics are not working and where new ones – and new skills – are needed. Ask: how does an organisation know whether its performance or the performance of those whom it buys services from is meeting its needs? What indicates that its performance is diverging in a worrying or unacceptable way?

Even if the information needed for monitoring performance is good and widely available, key questions and problems remain:

• Is there agreement about it and a system for using it? If not, it risks being published and then ignored.
• Is the assumption (wrongly) made by everyone that those whom the information directly affects will act on it as needed? If so, no one will act until performance has unequivocally gone wrong.
• At this point several people with different but interrelated and interlocking responsibilities will become alarmed and start to use the information to attempt to manage performance. This will prove to be a confusing duplication.
• It will overburden those who have to effect change, and set in hand contradictory corrective measures.

So performance monitoring alone is not enough. It can tell you what is wrong but you still have to do something about it and for that you need a system of performance management. So ask:

• What is the system of performance management and how does it work?
• Who is responsible for taking action?
• Who is responsible for monitoring it?
• Who ultimately requires the actions to be taken?
• Are there the means to ensure these actions are taken via a single line of accountability?

If these questions cannot be answered simply and convincingly, there is fog and foghorns should be sounding.

Certainty

In this case, management is so sure that it already knows the answer that it doesn’t bother to find out the truth – and so often doesn’t even recognise that there is a problem to start with. The managers have an untested self-belief that is strong enough to give them a sense of invulnerability.

Believing that they are better than everyone else, particularly those who serve them, such managers ignore any unwelcome explanations of what is going on. So things are left as they are – and they don’t get better, they tend to get worse because what could be done isn’t being done and staff aren’t being alerted to what they could do. As the counter-evidence of reality builds up, they discount it and seek alternative explanations until finally, too late, it becomes impossible to deny. Worse still, if the conviction about being right is strong enough, they may immunise themselves against alternative and, in many cases, unwelcome explanations of what is going on and attack those who challenge them as disloyal. This is a clear warning signal. It was reported of Fred ‘the Shred’ Goodwin, the now disgraced CEO of RBS in the time leading up to its crash, that he sacked the risk manager who warned of what was to come.

Because in such cases managers assume they are right, and because in other areas they have a track record of doing well, they don’t look for other solutions – and so the problem isn’t tackled. People will have risen towards the top of organisations because they have been, or have been perceived to be, good in more junior jobs and this inevitably has the effect of persuading those people that they have capability and judgement. But it does not mean they are necessarily right or will always make the right judgements. If they forget that, they can develop a very dangerous sense that they automatically know best. Others, typically practitioner staff or more junior staff in the organisation, or customers outside it, will be brushed aside.

The Titanic could not sink. But it did. IBM, a company that once dwarfed every other in its field with three-quarters of the computer market, was certain that the future of computers lay in large mainframe computing, not in individualised personal computers. So it left Microsoft to write the software for the operating systems for these machines (Windows), only to find that the PC revolution created a market much bigger than the mainframe one. IBM thought it knew the answer already but it didn’t.

When you encounter a unit, service or organisation with a major but unresolved problem:

• Be very suspicious when you are told ‘we are already doing everything we can’.
• Test the explanations. They will describe the difficulty, the causes, the unimpeachable action and behaviours already in place, and the key means of resolution which circumstances deny them.
• These explanations will be flawed at best, and typically will be wrong.
• Even when they are right, they will normally be missing the point.
• Don’t accept them.
• Satisfy yourself.

Money is important, but it is a mistake to see money as everything. In the crisis that gripped the NHS in 2006, when a number of organisations were overspending but the system itself was in balance, there was a panic reaction nationally, which forced component organisations to take short-term draconian measures. I knew one such organisation very well. It certainly saved some money in the short term, but in doing so it disempowered staff, corroded systems and damaged services. And it didn’t achieve the objective because, at the time when I got to know it, it was deemed to be fundamentally failing – all because it had been trying to achieve one apparently overriding objective. The lesson here is that the immediate bottom line is not the ultimate determinant of long-term failure or success – and worse, it may act as a veil that conceals impending failure.

Beware of managers – beware of becoming a manager – with a fixation on what they must achieve, and of pouring money into black holes. These may be one’s own creations and obsessions, such as getting a new hospital, or saving essential services for the community, or they may be the requirements or obsessions of others. Not infrequently these obsessions can be what is seen as precious by staff. While this is a vitally important requirement, it is not the be-all and end-all. An organisation which fails to understand this will run into trouble and end up throwing good money after bad. As the losses pile up, because the losses are seen as inevitable and necessary, nothing is done to stem the flow, and the organisation is precipitated towards failure. So:

• Ask what the driving assumptions and beliefs underpinning the organisation’s actions and behaviour are.
• Are they well evidenced? Are they evidenced at all?
• If they are not, then be warned! But don’t stop there – that’s too negative.
• Seek other explanations yourself. Ask others for them.
• Move the organisation from a confidence that it knows to a determination to find out.

Complacency

The literature of management shows clearly that most organisations have a limited lifespan of success and that practically none can be successful in an unchanging, enduring way. Even IBM and Marks & Spencer, at the height of their success, saw the world change around them and the source of that success diminish or disappear. The same can be said of politicians. Gordon Brown once said, ‘There are two types of politicians: those who get out in time and those who fail.’ What would he say about himself?

The requirements in any organisation, for any management, will change from time to time, and the trick is to see that happening. It simply isn’t possible to ensure one has the skills in advance to deal with the problem, but if one sees the problem then it is possible to go and look for the necessary skills. The alarm signal is when money is used to compensate for lack of skills, potentially creating a bottomless pit.

I’ve been involved in helping organisations reduce waiting times and infection from the ‘killer’ MRSA bug, two completely different tasks. But in both cases, I’ve seen puzzlement in organisations that don’t really know what to do, prompting them finally to respond by throwing money at the problem, in the (partially correct) belief that if enough money is thrown at it, the problem will recede or go away. So patients can be sent to private hospitals for treatment that the NHS hospitals can’t deliver in time and many hospitals have isolation facilities and different, more expensive kit and drugs to help combat infection. But the truth is that the practices and habits of relevant staff are actually the key to putting these and so many other issues right. If these practices are not changed, then money will keep being needed and the underlying problem will not be resolved. If they are changed as needed, then less or no extra money will be needed and the problems will be permanently resolved.

So when scanning an organisation that may be running into serious trouble:

• Ask whether some of the long-standing, enduring aspects of the organisation’s original vision and approach have the validity they once had. There is no magic rule for how to spot the things that are past their sell-by date.
• Ask what the principal drivers of the organisation’s approach and behaviour are.
• Break them down into different parts and understand them on their own terms.
• Is the vision itself still valid? If it is, is the means of achieving it that was chosen still valid?

And what of managers? They typically run into trouble when they think that the skills or ways of working that they have used effectively in the past for different problems will do for a new set of problems. They don’t recognise that new skills or ways of doing things are always needed, so they don’t learn them and they don’t practise them. The result is that problems remain stubbornly unresolved, typically with symptoms of organisational overload – people are working very hard but to little effect and without understanding why.

Ask yourself: do the people in the organisation who need to be skilled and using accepted, state-of-the-art techniques understand them and employ them? If you can’t answer this question directly, an indirect indication that this is not happening is the number of ‘patch and mend’, ad hoc solutions the organisation has adopted, typically involving external assistance.

Managerial grip can disappear without anyone realising. I have seen numerous examples where one or two individuals are playing a crucial part in ensuring that key goals, targets or measures are being met. They act as the performance managers, whether or not they are officially designated so to do. They know what needs to be done to make things happen, the skills they need their staff to have and where they are lacking, and they usually have high personal levels of energy. But the down side is that these are individual efforts rather than system successes, and individuals can leave or move.

Many organisations do reasonably well on key aspects of performance over a sustained period and then, in an equally consistent way, do progressively less well. The deterioration often starts with the disappearance of a key individual from a key position who was buttressing an effort but whose crucial role was not recognised. When he or she goes and is not replaced, the organisation suffers.

The opposite problem is that of a key individual who stays and becomes indispensable. In my experience, many organisations that have got into trouble have become massively over-reliant on one or two Mr or Mrs Fix-Its. These people continue to cope, whatever the situation, providing reassurance and comfort that things are being dealt with properly, but they will probably be creatures of a defective system, which they won’t recognise. It is easy to see them as part of the solution when in fact they are much more frequently part of the problem. And it is particularly hard to spot them because they are typically competent and well-motivated people, but often competent in the wrong thing and motivated to avoid opening up the difficulties that simply have to be opened up.

In the 1950s and 1960s the dominant American car makers assumed they would remain so. They failed to learn the lessons from their Japanese competitors, who developed and then refined a much more efficient way of building cars. Not until the 1980s and 1990s, when they had competitors as or more powerful than themselves, did the Americans adopt these lean methods. But it was too late. The need to (temporarily) nationalise General Motors after the 2008 credit crunch shows the consequences.

To sum up …

Beware of managerial behaviours and approaches based on ignorance, certainty and complacency. If you see them, try to alert who you can, and try to do what you can. The perceptions underlying them will, sooner or later, diverge markedly from reality and, however passively, precipitate failure.

The antidotes to these three approaches are described in Part 4 of this book: in particular, for ignorance, see Chapter 11 (information: nourishment for managers); for certainty, see Chapters 12 (especially the sections on living with and loving imperfection, and on managing the unknown) and 13 (gauging the environment); and for complacency, see Chapters 9 (especially the section on relentless management) and 10 (especially the sections on passivity and risk management).