Week 6

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Week 6 !!!!!!!!!!!!!!!!!!! How Boeing's managerial revolution created the 737 MAX disaster → Two deadly crashes of Boeing 737 MAX aircra± → Indonesian airline Lion Air and Ethiopian Airlines in October 2018 and March 2019 → Total of 346 deaths. → Crash was due to a so±ware system, Maneuvering Characteristics Augmentation System → It was designed to prevent the aircra± from stalling → MCAS malfunctioned and caused the planes to nose-dive uncontrollably. → Root cause of the crashes was a "managerial revolution" at Boeing → Company prioritized profits and shareholder value over safety and quality. → Due to a lack of oversight, the flawed MCAS system was certified by regulators → Federal Aviation Administration delegated the responsibility of Boeing to itself. → Boeing was effectively regulating itself, without proper oversight from the FAA. FAILURE Failure → Refers to the deviation from organizational goals and normative standards to produce a suboptimal outcome. Failure can take different forms, depending on the magnitude and scope of the negative consequences it produces. Sociologist Diane Vaughan (1999) has identified three types of failure: mistakes, misconduct, and disasters. Mistakes → Accidental deviations from norms and standards → Limited in scope and impact → Can cause injury, small property damage, or unintended death → May be caused by human error or other factors Misconduct → Deliberate violation of rules, laws, or regulations → Serves individual or organizational interests over public interests → O±en involves illegal or unethical behavior → Examples include insider trading, embezzlement, and fraudulent accounting 1/7
Disasters → Large-scale, costly, and public consequences → O±en unpredictable and surprising events → Examples include nuclear reactor meltdowns, dam collapses, and plane crashes. → Overwhelm the normal functioning of organizations and society _________________________________________________________________________ Places for failures to emerge → Cognition/Decision-making → Organizations/Tasks/Process → Environment _________________________________________________________________________ Cognition/Decision-making → Refers to the process of how individuals or groups process information and make decisions. → Limits to rationality: Humans are limited in their ability to process information and make decisions due to constraints on time, attention, and cognitive capacity. → Contexts inform decision-making: Decisions are o±en influenced by the context in which they are made, including factors such as culture, social norms, and institutional practices. → Herbert Simon (1947, 1957) → Examples: Difficulties in identifying child abuse for social workers can arise because it requires costly observations that are not public and obscured. To reduce the risk of failures → Measures such as training on decision-making, diversifying decision-making teams, and implementing systems for checks and balances to ensure decisions are based on accurate information and analysis. __________________________________________________________________________ ORGANIZATIONS → Organizations are complex structures that can be prone to failure due to various factors. → Institutional isomorphism can lead to the adoption of structures that may not be well-suited to an organization's needs or goals. → Excessive formalization can inhibit an organization's ability to adapt and introduce unnecessary complexity. 2/7
→ Structural secrecy can lead to hidden or informal practices within an organization that may undermine its goals or lead to failures. → Culture can encourage poor behavior or risk-taking and contribute to organizational failures. → Process and tasks within an organization can be complex and imprecise, leading to poor assessments and compounded errors. → It is important for organizations to be aware of these potential areas of failure and take steps to mitigate risk and prevent failures from occurring. Institutional isomorphism → Tendency for organizations to adopt structures and practices that are seen as legitimate in their field, even if they are not necessarily efficient or effective. This can lead to the adoption of structures that may not be well-suited to the organization's needs or goals. Excessive formalization, or the use of strict rules and procedures, can also inhibit an organization's ability to adapt and introduce unnecessary complexity. Structural secrecy refers to the use of hidden or informal practices within an organization that may undermine its goals or leads to failures. Culture can also play a role in organizational failures. Employees may be socialized into a company or occupational culture that may excuse poor behavior or encourage risk-taking. Finally, failures can also arise from the process and tasks that are carried out within an organization. These processes may be governed by tacit knowledge or rules that emerge only a±er the fact, leading to uncertainty and imprecision. For example, in the medical field, the process of diagnosing a patient can be complex and imprecise, leading to poor assessments and compounded errors. Overall, it is important for organizations to be aware of these potential areas of failure and take steps to mitigate risk and prevent failures from occurring Process & Tasks: In an organization, failures can also arise due to the processes and tasks that are carried out. Informal practices that exist within the organization may undermine the achievement of organizational goals. This is because these informal practices may be in conflict with the formal organizational procedures or guidelines. Such practices are o±en governed by tacit knowledge or rules that only emerge a±er the fact. For instance, medical diagnosis relies on a series of tasks aimed at assessing the human body. These tasks are uncertain and imprecise, which makes the diagnosis challenging. Poor assessments or incorrect interpretations of test results can compound the error and lead to a misdiagnosis, which can have severe consequences for the patient. Another example is the manipulation of accounting practices to inflate the value of the company. The use of creative accounting practices or hiding information from stakeholders can lead to inflated valuations, which can eventually result in a major failure of the organization. Similarly, excessive risk-taking encouraged by CEOs and higher management can also result in organizational failure. 3/7
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