Consider, for instance, the case of a large coking plant of the chemical company. Coke making requires a gigantic battery to cook the coke slowly and evenly for long periods; the battery is the most important piece of capital equipment in a coking plant. In 1975, the plant’s battery showed signs of weakening and certain managers at corporate headquarters had to decide whether to invest $6 million to restore the battery to top form...
No decision was made. The CEO had sent the word out to defer all unnecessary capital expenditures to give the corporation cash reserves for other investments. So the managers allocated small amounts of money to patch the battery up until 1979, when it collapsed entirely. This brought the company into a breach of contract with a steel producer and into violation of various… EPA pollution regulations. The total bill, including lawsuits and now federally mandated repairs to the battery, exceeded $100 million...
This simple but very typical example gets to the heart of how decision making is intertwined with a company’s authority structure and advancement patterns. As Alchemy managers see it, the decisions facing them in 1975 and 1979 were crucially different. Had they acted decisively in 1975 — in hindsight, the only substantively rational course — they would have salvaged the battery and saved their corporation millions of dollars in the long run.
In the short run, however, since even seemingly rational decisions are subject to widely varying interpretations, particularly decisions that run counter to a CEO’s stated objectives, they would have been taking serious personal risks in restoring the battery. What is more, their political networks might have unraveled, leaving them vulnerable to attack. They chose short-term safety over long-term gain.
And:
...according to an environmental manager searching for requisite information to confirm the Superfund legislation on toxic waste disposal, the whole archives of the Covenant Corporation in 1981 consisted of five or six cardboard boxes of materials. His search for chemical waste sites formerly used or operated by Alchemy Inc. revealed the names of 150 such locations, but no further location. For one 29-year period, there was only one document giving any details about the history of the company.
And:
Although managers see few defenses against being caught in the wrong place at the wrong time except constant wariness and perhaps being shrewd enough to declare the ineptitude of one’s predecessor on first taking a job, they do see safeguards against suffering the consequences of their own errors. Most important, they can “outrun their mistakes” so that when blame-time arrives, the burden will fall on someone else. At the institutional level, the absence of any system for tracking responsibility here becomes crucial. A lawyer explains how this works in the sprawling bureaucracy of Covenant Corporation:
“I look at it this way. See, in a big bureaucracy like this, very few individual people can really change anything. It’s like a big ant colony. I really believe that if most people didn’t come to work, it wouldn’t matter. You could come in one day a week and accomplish the absolutely necessary work. But the whole colony has significance; it’s just the individual that doesn’t count. Somewhere though some actions have to have significance. Now you see this at work with mistakes. You can make mistakes in the work you do and not suffer any consequences. For instance, I could negotiate a contract that might have a phrase that would trigger considerable harm to the company in the event of the occurrence of some set of circumstances. The chances are that no one would ever know. But if something did happen and the company got into trouble, and I had moved on from that job to another, it would never be traced to me. The problem would be that of the guy who presently has responsibility. And it would be his headache. There’s no tracking system in the corporation.”
From Moral Mazes:
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