The researchers' concerns have special meaning as Y2K approaches.
"As more organizations face resource constraints and budgetary pressures, operating on the edge is becoming a fact of life in settings as diverse as nuclear reactors, U.S. banks, hospitals, universities, Israeli kibbutzim, Japanese kereitsu, and Korean chaebol," say Alfred A. Marcus and Mary L. Nichols of the University of Minnesota Carlson School of Management. "Evidence shows that organizations operating closer to the border of safety rely on after-the-fact intervention rather than preparation, foresight, and the provision of countermeasures. As Y2K looms, we hope our concerns don't come to haunt us."
Their study, "On the Edge: Heeding the Warnings of Unusual Events," appears in the current issue of Organization Science, an INFORMS publication. The authors use operations research and management science techniques to reach their conclusions.
Comparing Two Nuclear Facilities
The authors, relying on an approach to analyzing businesses called the resource-based view (RBV), take issue with post-mortems of celebrated disasters like those suffered by the Exxon-Valdez and the Three Mile Island nuclear facility.
"The typical analysis focuses on human and other performance lapses, while resource availability and use, which are more deeply embedded in the system, receive less attention," they say. Yet, they maintain, "Keeping an organization firmly in a zone of safety requires the recognition of problems, and heeding a warning requires having the resources to respond."
The case study compares two similar nuclear facilities and their radically different approaches to staying within the safety border. It also examines the effects of budget cutbacks on safety planning at the two facilities.
The first, Medallion Junction (not its real name), won praise from the Nuclear Regulatory Commission in the 1980's as a model of safety and preparedness. The authors hold the facility as a model for organizations that must stay within a safety border to avoid emergencies.
The business's success at staying clear of the danger zone, they say, resulted from an anticipatory approach that stressed preparation, foresight, and provision of countermeasures for likely problems. Factors like shared decision-making and working with all levels of staff led to a high personnel retention rate and voluntary compliance with needed changes.
In contrast the second facility, Peninsula Haven (not its real name), showed a hasty "resilient" approach to safety that resulted in numerous NRC citations.
This facility became known for its after-the-fact interventions to overcome public failures. The company often turned outside to consultants whose recommendations were solicited but only sporadically adopted. The company, which tried to impose these recommendations on staff, experienced a high turnover and never overcame its poor reputation.
Unfortunately, the authors note, more recent cutbacks at both companies, especially the company known for its safety record, took a strong toll.
Describing the hard times at the safety leader, the authors note that, "While the company did not entirely abandon its earlier characteristics, behaviors, and capabilities, it did exhibit a change as financial pressures took on greater significance, its plants began to age, turnover increased, and there was more regulatory scrutiny."
In general, they explain,
"The characteristics, behaviors, and capabilities which make up a competence for safety persist for fairly long periods of time. By itself, an attribute like anticipation does not produce this long-lived phenomenon. Anticipation must be combined with exploitation, retention, internal development, voluntary adoption, and leaders as catalysts and facilitators. Once in place, these dense, highly connected elements are hard to change. Self perpetuation cycles ... support their existence. They are held in place by an organization's distance from the border of safety as well as by its pattern of resource availability and use. However, when an organization is close to the edge..., they begin to change. A competence for safety can be eroded by changes in resources."
The two companies examined in the study have the same reactor technology and were constructed, licensed, and started to produce power about the same time. In-depth interviews were conducted with 24 people on the management teams at the two facilities. Executives agreed to participate on condition that the facilities' identities not be revealed.
The Institute for Operations Research and the Management Sciences (INFORMS) is an international scientific society with 12,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work primarily in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, the stock market, and telecommunications.