Thanks For the Feedback!

Thank-you for taking the time to send in your thoughts on this Blog.

The recommendations, after careful consideration of ALL points of view, are:

-have more root cause analysis case studies of topical incidents

-the links to download sites for reports on incident investigations is good

-introduce articles that document new theories and perspectives on systems thinking; problem solving and performance improvement

- heads up on opportunities to attend Industry Speaker Events (let us know and we will share)

- introduce book reviews (not sure if we will do this one often)

- Expert comment from interviews on major incidents (we will be talking to you when an incident breaks in your sector)

-The links to Newspaper articles for major Incidents is a good resource

-Profiles based on interviews with Industry Experts (what they see as the emerging issues)

It is a pretty big re-focus ...

Some of the things we will get onto as we head into the end of the year but most of the new material will not start to appear regularly until end of Jan 2009

Thank you again for the calls and e-mails; keep us posted on your thoughts as the new material starts to filter into the blog.

Are Aussie Financial Regulators on the Ball?

“Clearly the Government needs to stop dithering and politicking in the face of this full-blown financial crisis and breakdown of regulatory framework. It needs to get bipartisan support and quickly set up an inquiry staffed with the best minds available and briefed on how to best handle the avalanche of collapses that is upon us. New laws, new regulators, new people and a new approach are required to meet the greatest challenge to the financial system since 1929.” Looks like Michael West thinks that more can be done.

In today’s SMH opinion he then goes on to state “ASIC and the ASX let these paper-shufflers and their fast imitators, Allco, MFS and Centro, get away with whatever they wanted in pursuit of their fast buck. They granted myriad waivers from normal disclosure and, even as financial stocks began to get the death wobbles, have refused to force them to produce management agreements over their satellite stocks.

In a study released in April last year, RiskMetrics found externally managed entities (satellite stocks such as Macquarie Airports, Macquarie Infrastructure Group and Babcock & Brown Infrastructure) accounted for 14.3% of waivers granted in the study period (July 2005 to December 2006).”

Regulation of critical lines of supply is a legitimate government function; it is recognised that in some cases individual corporations may be restricted in their practices; with a view that the greater community can have faith and confidence in the fundamental strength of our major institutions, in this case our money supply.

While clearly the US is facing a much bigger crisis than we are here in Australia, if we fail to take the lessons learned from the US experience and sure up our own regulatory processes we are clearly negligent.

REFERENCES:

http://business.smh.com.au/business/governments-and-regulators-can-blame-themselves-20080918-4jfx.html?page=1
http://www.issproxy.com/
http://blog.riskmetrics.com/

Santos Clean Up Bill Could Be A$830 Million

The United Nations Environment Program and AusAid have released a study that estimates the cost of the East Java clean-up cost to Santos could be as much as 10 times higher than has been reported to the Stock Exchange.

The front page of the Financial Review reports today that the new estimated clean-up cost is now in the order of A$830 Million.

Santos has not admited liability for the drilling accident but they did report to the stock exchange that they had made a provision of A$88Million for the clean-up.

The drilling accident that occured in 2006; it resulted in a “mud volcano” that has now affected 1800 hectares of East Java.

Over 75,000 people were affected by the accident and none have yet been paid compensation.

The new clean up estimate is based on a solution that would transport the mud 14 Km to the ocean and create a new wetland.

REFERENCES:

www.afr.com.au

Complexity – Driving Up Costs & Hindering Growth

Executives recognise that complexity is hurting their businesses growth prospects and is driving up costs was the findings of an extensive Bain & Co study. Complexity is considered a critical issue for over 70% of the executives surveyed.

The biggest part of the challenge for service companies is identifying the real cost of complexity and then eliminating it for reduced costs and more strategy implementation flexibility.

For manufacturing complexity sits around in store rooms as unsold product and piles of re-worked scrap; for service industry enterprises, like banks; telecommunications and information technology providers, the problem is less obvious but just as big a driver for increasing costs.

The good news is that eliminating complexity can simultaneously lead to process change that allows your most profitable customers to receive superior service says Mark Gottredson and Andrew Schwedel of Bain & Co.

They recommend a process that identifies your most profitable customers followed by a process review to eliminate complexity so that you can focus on them delivering the superior service.

The steps in the process are:

1. Calculate what complexity is costing you, and this can be huge. In one insurance company a case manager could realistically only process 4 policy applications per day, half the process performance of its competitors for the most profitable customers. Within a year turn around times had been cut in half and the improved performance lead to significant premium growth.


2. Find out what your customers truly value. Product complexity can be an indicator that you do not know what your best customers truly value; Bain & Co suggest a process for listening to them. A supermarket chain found that their customers got annoyed that the shelves were often empty of the core products they went shopping for; so instead of increasing product range they reduced product range and increased shelf space for the items they did stock. Given 5% of the products in a supermarket can represent up to 95% of the sales this has proven to be sales growth driver.


3. Remain Vigilant. All enterprises operate in a changing environment, customers and competitors do not remain static so a process of continuous review and adjustment delivers results.

REFERENCES:

http://www.bain.com/bainweb/home.asp

Qantas “failing to meet its own standards”??

The Australian newspaper reported today that “The Civil Aviation Safety Authority has ordered Qantas to improve its aircraft maintenance systems to head off "emerging problems" after a special review found the airline was failing to meet its own standards.”

At first this seems to intimate that Qantas aircraft maintenance is failing but in the same report it notes CASA did not find an increase in the rate of incidents over more than year and said the number of monthly air safety incident reports was about the same.

There was no statement that indicates Qantas failing to meet its own standards was failing to meet any regulated standards.

If Qantas standards were above industry average it is worth considering if this move by CASA is a discouragement for airlines to set themselves high standards?

Up-date on the Qantas exploding oxygen bottle incident is that "There's nothing at this stage that the ATSB can identify that could have been done to prevent this, (the exploding oxygen bottle) we don't really know why the bottle failed - that's the key question for the investigation."

Even more good news for Qantas is that Mr. Walsh of the ATSB said "As far as we can tell from all the information that's available to us the crew have pretty much done a textbook response," it must be good news that Qantas has demonstrated a good standard, a ‘textbook response’ when an incident that apparently could not be avoided occurred - well done!

It may be a bit rough on the Qantas brand to have the findings of the “special review’ reported a headline grabbing perception that has not been backed up with any identified hard data. Nothing has been presented that indicates that standards have dropped at Qantas.

If you are interested in reading the detailed "exploding oxygen bottle" report from the ATSB you can download it from here
http://www.atsb.gov.au/publications/investigation_reports/2008/AAIR/pdf/AO2008053_Prelim.pdf
The abstract page is here
http://www.atsb.gov.au/publications/investigation_reports/2008/AAIR/aair200804689.aspx


REFERENCES:

http://www.theaustralian.news.com.au/story/0,25197,24274725-601,00.html
http://www.theage.com.au/news/news/qantas-tank-explosion-could-happen-again/2008/08/29/1220121086829.html

$75 sale - 1 Million customers details; includes sample signatures

An e-bay computer purchased for £35 ($75.00) came with the added bonus of bank records for 1 million American Express, NatWest and the Royal Bank of Scotland customers.

The bank records included bank account numbers, phone numbers, mothers' maiden names and signatures.

The surplus computer sold on e-bay did not belong to any of the banks but belonged to Mail Source, a data processing company which has recently purchased Graphic Data a financial data processing firm.

The Graphic Data web site proudly announces their new owners: “The document processing business of Graphic Data UK Ltd has been acquired by MailSource UK Ltd with effect from 1st April 2008. MailSource UK is a well established and regarded supplier of innovative, technology driven solutions for outsourced digital mailroom management and document management services.”

Graphic Data are listed as suppliers on the UK government portal and profile them selves with “Our quality-assured, best practice solutions encompass the entire document lifecycle, from digital mailroom, through automated document workflows to archiving and storage.”

Given Graphic Data’s core business is to hold financial information for banks and other organisations the value that can be leveraged from the April acquisition must now be severely challenged.

It is not that the British don’t take data security seriously last year; Nationwide Building Society was fined nearly $2 million after a laptop containing private customer data was stolen from an employee's home.

Given the risk to brand, profit and regulatory penalty it is worth noting that it is not only the UK banks that are struggling with data-management failures; the UK government admitted in November it had lost confidential records for 25 million Britons who receive child benefit payments, and in January, the Ministry of Defence revealed that a laptop with details of some 600,000 people interested in joining the armed forces had been stolen from a naval officer.

The first time a major adverse outcome happens it could be an accident; the second time it happens there is a good chance your processes are playing a part in this – the third time … well we have all the evidence we need that it is our business processes that are producing the outcome.

The good news is if it is your business process that is contributing to the problem you have control and corrective action options – it is your business process, you can change it right now and start reducing the risk of there being a repeat failure.


REFERENCE:
http://www.smh.com.au/news/technology/customers-bank-details-sold-on-ebay/2008/08/27/1219516507005.html
http://www.graphicdata.co.uk/
http://canadianpress.google.com/article/ALeqM5iYgBHThaj1Z6LZYf4N8mJU5mte9w
http://www.planningportal.gov.uk/england/government/en/1115314841753.html

AUD$8.1 Million Fine - Unsafe Aircraft

If you were flying American Airlines during the busy Christmas period you were most likely very happy if your plane got off on time and grateful that you made it to your Christmas parties on time.

If you knew they were able to be so available and meet their schedule because they had delayed their maintenance of the airplane you may have been just as happy to wait a couple of hours.

CBS News reports:
“The Federal Aviation Administration said Thursday it is seeking $7.1 million from American Airlines for continuing to fly airliners after safety problems were reported and for drug-testing violations.

The Texas-based airline delayed repairs on two MD-80s — a mid-sized airliner — after problems were reported with their autopilot systems and flew them 58 times in violations of federal regulations, the FAA said. "The FAA believes the large total amount of the fine for these violations is appropriate because American Airlines was aware that appropriate repairs were needed, and instead deferred maintenance," the agency said in a statement.

"In intentionally continuing to fly the aircraft, the carrier did not follow important safety regulations intended to protect passengers and crew."

It is difficult to believe that airline executives could consider the safety risk and an AUD$8 Million fine worth it but they clearly did; these types of regulatory requirements are no secret in the airline industry.

New York Times reports that American Airlines “deliberately flew two planes 58 times in December with broken parts that made them unsafe to operate under certain conditions and “not airworthy.””

When things escalate to the level that "not airworthy planes" are being sent out full of passengers and crew 58 times, then you are asked to question the level of commitment to good governance.

The culture should have presented other evidence of environmental inducements encouraging indifference to compliance and good practice.

If there ever was a an event that would prompt you to consider making some real cultural change paying off an $8 Million fine should at least cause some pause for reflection.

REFERENCES:

http://www.cbsnews.com/stories/2008/08/14/business/main4351627.shtml?source=RSSattr=Business_4351627

http://www.nytimes.com/2008/08/15/business/15safety.html

http://news.bbc.co.uk/1/hi/world/americas/7562165.stm

The Privacy Issue - Chief Justice Gleeson

While the Privacy legislation that is currently under review (see earlier posts) may be seeking to increase regulation and penalties for SME’s; Justice Gleeson appears to suggest that the boundaries of what is “private” may need to be rolled back; rather than expanded.

The National Press Club was the venue for the Chief Justice of the High Court, Justice Gleeson to deliver his final public address. During this address he said that he had begun to change his view that "certain things … were self-evidently private". "The ground seems to me to be shifting," he said.

"I used to think that having a telephone conversation was normally private. But you can't walk down the street without hearing a number of telephone conversations, some of them with people speaking loudly because of the noise of the surrounding traffic … "When you look at the kind of information that people publish about themselves, it makes you wonder." Justice Gleeson said.

Graham Greenleaf, an expert on privacy and information technology law at the University of NSW, said that legal definitions of privacy were "not static" and new technologies had enabled people to be increasingly willing to disclose information that would once have been considered private.

"The widespread availability of communications technologies that allow individuals to publish information about themselves that can be accessed by others is unprecedented in our society," Professor Greenleaf said.

The Privacy issue does not look like it is going anywhere so ensuring that the business process that provides governance for how information on Suppliers, Customers and Employees is collected stored and used is likely to become a much bigger issue for Enterprise size organisations and SME’s alike.

REFERENCE
http://www.smh.com.au/news/national/privacy-laws-out-of-date/2008/08/20/1218911828266.html?sssdmh=dm16.330153

http://systemic-resilient-precision.blogspot.com/2008/08/press-delete-data-security-breaches.html

http://systemic-resilient-precision.blogspot.com/2008/08/privacy-act-changes-increase-data.html

Press Delete! – Data Security Breaches

In April this year it was reported that The HSBC banking group offices in Southampton had lost a computer disc with the details of 370,000 customers.

The lost customers' details included their names, dates of birth, and their levels of insurance cover.

But you don’t need to lose a disk to have security breach, deleting data from old laptops and servers, when they are disposed of is not as easy as it sounds; failure to do it right can create a window of opportunity for your confidential data to be retrieved and end up as tomorrow mornings headlines.

It is important to have a specific data erasing procedure and get some help with the process to ensure your data is definitely deleted – it is not a matter of just pressing “delete”.

Bill Taylor-Mountford, general manager of Acronis says "Deleting data leaves a fingerprint, or a ghosted image. With the right tools, specialists can recover the data after it has been deleted. That's why some software-wiping algorithms use 35 passes to destroy data."

Milton Baar, director of IT Security consultants, and committee member representing Australia for ISO27001, the international standard for information security management says this about Australian organisations "They need corporate governance practices, which cover information security issues.”

Inadvertent data security breaches are a big issue, and if you have an inadvertent data breach you may have to report it publicly to the Authorities.
On 16 June the Office of the Privacy Commissioner closed submissions for Draft Voluntary Information Security Breach Notification Guide.

Major enterprises including IBM Australia, National Australia Bank, Telstra Corporation Limited, Microsoft Australia, Suncorp-Metway Ltd & Unisys have made submissions.

The big Government Departments like Centrelink, Department of Human Services; Inspector General of Intelligence and Security and the Australian Tax Office have also weighed in.

Small changes to legislation and reporting requirements can have a big impact on the bottom line cost of compliance. You can read the submissions by each of these organisations here http://www.privacy.gov.au/business/consultations/breach_notifications.html

REFERENCES
http://www.smh.com.au/news/businessinnovations/the-key-to-data-wiping/2008/06/30/1216162955556.html
http://www.privacy.gov.au/publications/breach_0408.html
http://www.privacy.gov.au/business/consultations/index.html
http://news.bbc.co.uk/1/hi/business/7334249.stm

Privacy Act Changes - increase data-management costs

The Australian Law Reform Commission yesterday (13 August 2008) released a 2,700 page report recommending changes to the Privacy Act.

The impact of the proposed changes on enterprise operations goes way beyond controls on ensuring security when you record credit card details; it impacts on your business process for the collection, storage and use of all information on employees and customers.

The recommendations include the removal of the current exemption in relation to employee records and to expand the scope to new media including email address and web address information.

Ian Jordan, a senior associate in workplace relations at Mills Oakley Lawyers in Melbourne, notes “The biggest impact will be on business. The proposed changes to the Privacy Act will significantly expand the scope of privacy requirements for business and government”

If the proposed changes are given effect, enterprises that allow information to be used in ways other than it was intended face stiff fines for breach of the law.

The proposed changes even outline that information can only be disclosed for the enterprises primary or related secondary business purposes; and specifically address information collected in an obtrusive or unlawful way. Trans-border data flow and personal information of young people are also addressed in more detail.

If you have nothing to do for 3 or 4 weeks … you can download and view the report and its recommendations HERE.

REFERENCE:
http://smallbusiness.smh.com.au/managing/management/privacy-exemption-for-smes-to-go-910283547.html
http://www.alrc.gov.au/

http://www.austlii.edu.au/au/other/alrc/publications/reports/108/

Human Error - Navy Medical Evacuation

ABC news reported today “Leading Seaman Michael Bass, 22, was seriously injured while on patrol last year on Thursday Island, off far north Queensland, but was kept on the island for three days without follow-up medical attention.”

The family of Leading Seaman Bass reported that a Navy review confirmed appropriate procedures were in place but human error resulted in Leading Seaman Bass waiting 3 days for medical treatment.

Human error occurs as a factor in many major incidents, maybe not the major root cause but often a significant contributing factor. Human error is not code for blaming someone, in the Navy, and in all other enterprises individual workers are balancing many pressures at any one time, they work in complex environments with many competing demands.

No one in this situation has a pocket manual that they whip out every 5 mins that tells them what to do next; they need to make decisions that weigh up the pressures and competing demands they have on them.

When a significant near-miss occurs, Leading Seaman Bass is reported to have been “near death” by the time he received treatment in Darwin Hospital, the opportunity to objectively analyse the competing demands on individuals can lead to real systemic change.

We use the RAID™ human factor analysis model. With the RAID™ model unwanted human behaviour is a consequence of one of three factors:
- Individual purposeful decision not to observe the requirements.
(intentional error)
- Individual physical or mental mistake. (mistake)
- Individual response to an obstacle in appropriate behaviour.
(progress blocked)

The first option is rarely the reality for day-to-day operations and often provides limited opportunity to develop a systemic response – the other two options are more common; a person just slips and hits the wrong button or attempts to follow procedure but one or more of the resources for the next step is not available; so they are required to rely on their individual creativity to find a solution that works around the designated procedure.

The RAID™ approach is a process to analyse these incidents; the factors are analysed accross four dimensions:
- Requirement; how was the requirement of the task/function specified to
the individual
- Assignment; how was the task/function assigned to the person, did they
know it was clearly their role to act
- Inducements; were there inducements in the environment that encouraged
the person to make poor choices i.e. time pressure, pay reward on volume
not quality, past expectations that the rules would be overlooked when
under time pressure?
- Disposition; if the person was required to creatively problem-solve and find
a solution that worked around the procedure; where they experienced and
mature enough to make those decisions in an informed way?

By analysing human error in a structured way it is possible to deploy changes that will bring systemic returns. The lessons learned from a near miss can be translated to real change in the workplace and the near-miss never becomes a critical incident.

REFERENCES:
http://www.abc.net.au/news/stories/2008/08/11/2330585.htm

$1Billion - getting NAB’s technology right

NAB is certainly taking the strategic view in terms of its automation risk management announcing a $1 billion program (over 5 years) to overhaul its technology platforms.

We posted during July on the payroll processing failures at Westpac and NAB and that each of these failures impacted on service delivery to millions of people.

The overhaul of the technology platform is will position NAB for a more aggressive assault on the internet banking market share of its competitors.

The move by NAB follows on from an earlier commitment by the Commonwealth bank to a $580 million core banking modernisation project to speed the development of new online products.

A benchmark business process is a benchmark business process; regardless of the application. The management of process failure risk and error in one industry sector is very similar to management of process failure risk and error in another industry – the subject matter may change but the process and principles of good practice do not change.

Referring to our earlier post on Harvard’s Professor Andrew MacAfee’s views on IT deployment the breakdown of IT budget into:
1. Function IT - Supports execution of tasks i.e. spreadsheets, CAD
2. Network IT- Supports collaboration and connections i.e. e-mail, wiki, blog.
3. Enterprise IT- Specifies a Business Process i.e. defines tasks and sequences, mandates data formats, use is mandatory.

This type of deployment fits into the Enterprise IT and really creates an opportunity for the individual Banks to create unique competitive advantage through process innovations.

Getting the right technology aligned with the right deliverables and the right people is the change management challenge for large enterprises; as the payroll processing failures have demonstrated the margin for error is extremely small when the volume of transactions is high and customer expectations are at 100% reliability.


REFERENCES:
http://www.australianit.news.com.au/story/0,25197,24141373-15306,00.html

Andrew MacAfee’s Blog: http://blog.hbs.edu/faculty/amcafee/
HBR Article: http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?ml_action=get-article&articleID=R0611J&ml_page=1&ml_subscriber=true

Qantas – “There was no systemic error behind the incidents”

Today’s Sydney Morning Herald reported that Qantas chief executive Geoff Dixon said “there was no systemic problem behind the three incidents.”

This was followed on by CASA spokesman Peter Gibson saying “there is no evidence that safety standards at Qantas are dropping.”

Given the last 10 days of media coverage, is this just spin or do the statements stack up against the publicly released facts?

Root cause analysis theory holds that good governance requires an organisation to maximise all opportunities for corrective action by creating windows that prevent a system failure from escalating to the point where there is an adverse outcome.

It is unrealistic to expect that adverse unexpected changes will not occur in a dynamic and changing environment; airline operations are complex, they have hundreds of airplanes taking off and landing every day. There is a continual dynamic of engineering and human factors in play that are bound to come together at some time in a way that is unexpected.

What is realistic is to expect, from a governance and safety perspective, is that Qantas; and any other organisation, will have pre-planned and taken precautions to ensure that there are many barriers that prevent the failure from escalating to the point that passengers are at risk.

At each moment in time every opportunity to create a window for corrective action needs to be taken.

When the oxygen bottle exploded (theory) on the Boeing 767 last week, the crew are reported to have responded in a well trained way; the 767 dropped to 10,000 feet (breathable air); landed safely at a nearby airport location; all crew and passengers were able to leave the plane safety.

In addition to finding out why the oxygen bottle exploded, the investigation team is sure to explore the reported failure of oxygen delivery to the passengers face masks.

If the 767 had of been flying at a higher altitude, and taken longer to drop to 10,000 feet, the incident may have identified a latent risk where there is only a single source of back-up oxygen for passengers. This may have resulted in an adverse safety outcome occurring. The investigators will also no doubt be looking to ensure that there is more than one source of back up oxygen for the flight deck – even though this was not a reported risk during this incident the consequences are evident.

In relation to the second public incident; QF19 to Manila sprung a hydraulic fluid leak. From the publicly available information, Qantas had appropriate safety precautions in place and responded in a well trained appropriate manner.

To prevent a failure escalating they are reported to have had two (2) back up hydraulic fluid systems; they acted immediately to land and disembark the passengers; they dumped the fuel (in order to reduce landing risk) all in all, from a safety perspective, the reported information indicates that they responded as any responsible organisation could be expected to.

The front page Sun-Herald photograph of QF19 with smoke coming out of the right hand engine did not look that comforting for prospective passengers; but there is nothing in the report to indicate the Qantas response was anything other than appropriate.

Clearly the RCA for this incident will now look at why the hydraulic fluid was leaking and seek to address that in a systemic way i.e. maintenance procedural change, change in schedule for replacement of hydraulic fluid system parts (maybe the age of the aircraft is causing the maintenance schedule to be more frequent).

While Qantas new CEO may have hoped for a more relaxed introduction to his transition from JetStar to Qantas the public reports on the incidents over the last 9 days has not revealed any item that indicates systemic failure, unless something else comes out as part of the investigations Mr Dixon and Mr Gibson appear to be backed up by the reported facts in their safety assurances to the public.


REFERENCES:
http://www.smh.com.au/news/news/qantas-the-safest-airline-probably-says-ceo/2008/08/04/1217701907795.html

http://www.abc.net.au/news/stories/2008/08/03/2322458.htm?section=justin

One week after Westpac .. NAB's payroll processing system fails

Only one week after Westpac's computerised processing resulted in double pay or non-payments to over a million customers; it was reported on Wednesday 30 July that, as of 1.40pm, NAB's bulk payment systems had not cleared the processing backlog from the failure to process that occurred on Monday night.

Some of the NAB's customers were ensuring that their staff received their pay by resorting to old tried and true methods: including the withdrawal of $60,000.00 in cash and placing the cash in envelopes to pay staff; other customers entered the individual salary payments and bank details of a whole payroll via the online banking – one transaction at a time.

While it may not be proof positive that accountants are part of the creative class, it does show commitment to employees and is evidence that some organisations do truly put their staff first. Hopefully their heroic efforts will pay off when their employees consider other employment options in this talent-short employment market.

When a small process failure can affect a million customers it really highlights the incredible job the banks do each day keeping so many complex processes working seamlessly.

The processes that failed for NAB would have been repeated every night, hundreds of times with 100% precision. This time a small change would have connected with a few latent conditions and the 100% precision, over a whole complex processing procedure, fell to zero - in a very public way.

When the IT Problem Solving Team are able to move away from just fixing the problem (it was reported that many of their 2000 technology workers were prioritising clearing the processing backlog) they will have time to analyse what went wrong and set about changing their business process to ensure that it just cant happen again.

When we look at process management, we ask our clients to consider their core business process in a matrix of two dimensions, "Criticality" and "Frequency".

When considering the type of incident that Westpac and NAB faced, it is clear that the transaction automation is a high-criticality and high-frequency business process - every near miss and certainly any process failure demand the highest level of rigour be applied to analysing the causal structure that allowed even the smallest of near-miss to occur.

NAB and Westpac are very mature organisations with well established quality processes. What ever their internal process for problem solving, part of the analysis process will include a documentation of the causal structure; and a search of their Lessons Learned Database to see if there was any near-miss or other incidents that should have been resulted in a warning being raised.

For our clients they would use the REASON® methodology to guide us through the analysis process and to document the full causal structure of the incident and any early warning signs.

We would ask our clients to pay particular attention to any latent conditions contributing to a major adverse outcome; if these conditions played a significant role in this process failure then they are just sitting there waiting for some other small change to interact with them, in an undesirable way, so they can play a role in the next process failure.



REFERENCE:
http://www.australianit.news.com.au/story/0,25197,24101547-15306,00.html
http://www.news.com.au/adelaidenow/story/0,22606,24100923-5006301,00.html

Qantas - the Missing Oxygen Cylinder

Monday is certainly not a quiet news day for Australian enterprises. The weekend papers published images of luggage slipping out of a 3 meter hole in the fuselage of a Qantas Boeing 747.

Qantas is envied the world over for its exemplary safety record, this is especially commendable given airlines are one of the world’s safest industries.

To see such a graphic image from such a high-performance enterprise helps us all remember that there is always room to improve our process and practices; and that this commitment to continuous improvement is directly linked to the value of our corporate brand and customer confidence in the product that is delivered.

It was reported in today’s newspapers, that the initial focus of the safety investigation is oxygen cylinders that are usually stored between the luggage compartment and the fuselage. These cylinders provide back-up oxygen for the aircraft. Mr. Neville Blyth, an investigator from the Australian Transport Safety Bureau, advised that one of the cylinders which provides back up oxygen was missing.

The Age Newspaper also reported that “some months ago” the US Federal Aviation Administration ordered airlines that come under their jurisdiction to examine their emergency oxygen cylinders because many of them had not been properly heat treated and needed to be replaced. The Age article documented the reasoning for the directive to include “… which would cause the oxygen cylinder to come loose and leak oxygen”.

The Brisbane Times has posted a video news report from Reuters that shows images of the inside of the aircraft and the hole in the fuselage; here is the link:
http://media.brisbanetimes.com.au/?rid=39943

There are reports of passenger distress as the aircraft rapidly descended from 29,000 feet to 10,000 feet, with all due respect being accorded to the good work done by the crew in getting all 346 passengers and 19 crew safety to Manila Airport.

A preliminary report is due to be released by the Australian Transport Safety Bureau in two to three months; as information is released we will be building a REASON® incident model that will be available for free download.

If you would like to be sent an email when that incident model becomes available (or participate in online discussion to finalise the model) please let us know at rca@reason4rca.com


REFERENCES:
http://media.brisbanetimes.com.au/?rid=39943 VIDEO REPORT

http://www.brisbanetimes.com.au/news/national/qantas-blast-airlines-were-warned/2008/07/28/1217097102406.html

http://www.theage.com.au/action/printArticle?id=167718

http://www.theage.com.au/articles/2008/07/28/1217097102556.html

Lessons Learned System – COLLECTION Considerations

The post earlier in the week outlined some common process flows for Lessons Learned Systems.

By looking in some detail at just one of these systems we will provide you with tips on the things to consider when you set up the functionality requirements for your automated your Lessons Learned System.

The model we will look at in more detail is Model #1 from the earlier post.
This post is a closer look at the COLLECTION element of the process flow.



COLLECTION

Your people are only human; if you minimise the extra effort required to submit lessons to your Lessons Learned System and maximise the flexibility of using the lessons to solve local operational problems; the use of the Lessons Learned System will be maximised.

The RAID™ human factor rca identify’s this process in the context of forces pressing the person to behave in the desired way (the requirement and assignment) and the potentially opposing forces (inducement and disposition).

The recommendations in this post aim to guide your functionality considerations towards minimising resistance and maximising encouragement for use of your Lessons Learned System.

Integrating the collection of data, for your Lessons Learned System, is more likely to be taken up if it can be set up as a next logical next step in the problem resolution process. Wherever possible, we recommend that the submission of lessons to the Lessons Learned System involve only a small amount of extra work, it should mostly be submitting already prepared problem resolution analysis.

We also recommend you consider building into your Lessons Learned System with scalable data-entry options. The amount of time an individual is required to invest in preparing the problem resolution information, ready to submit to the Lessons Learned System, should be scalable to the complexity and criticality of the problem being resolved. To submit the fix for a printer that has repeatedly jammed should not require the same level of analysis as submitting a lesson from a fatality or major outage.

Having data-entry options with a sliding scale of time commitment, you can ensure that you maximise the data collected. With maximum longitudinal data, regular reviews will identify trends before they escalate to critical events.

In line with the recommended systemic approach to data collection, we recommend that enterprises set up a cause code matrix (to identify the classifications of each Lesson) then give as many people as possible the rights to submit relevant data to your Lessons Learned System.

Your Lessons Learned System will be a silent monitor that records all the little failures and near misses so that you can identify the trend and linkages before it becomes a problem. You won’t need to pay an expensive consultant to come in and find out what has been happening; you will know just as soon as the trend is identifiable and before it is a problem.

For enterprise organisations, dealing with multiple worksites and often in different countries, the collection method for a Lessons Learned System should be able to collect information in a way that allows for recording situations that are unique, there is no point in forcing people to chose an answer from a fixed list of possible solutions – this can perpetuate any existing system flaws and limit the opportunity for true innovation or quantum process improvements.

Significant benefit can be derived through the recording contextual information. The capacity to rapidly modify the application of lessons to the unique contextual environment allows users to quickly bypass recommended actions that were linked to erroneous contextual causal factors; allowing them to hone in on only the corrective action options that specifically relate to their situation and context.

Beyond the conceptual considerations, for the Collection stage of the Lessons Learned System process, there is the practical on-the-job collection and recording of the physical data for problem analysis and problem resolution.

Reducing the need for Investigators to re-enter data when they return to the office is a significant consideration for accuracy and take up of the Lessons Learned System.

We recommend that your Lessons Learned System allows for mobile use (without a direct connection the central server). Synchronisation between a laptop and the central server will allow problem resolution data to be collected on operational lessons in any location.

SUMMARY
1. Minimise the extra work required to submit completed problem analysis to the Lessons Learned System.
2. Scale the analysis and detail to fit the complexity and criticality of the Lesson being submitted to the Lessons Learned System.
3. Within a cause code framework, allow as many people as possible to submit their lessons to the Lessons Learned System.
4. Submit lessons to the Lessons Learned System in a way that allows for innovation and quantum improvements in process.
5. Submit lessons to the Lessons Learned System in a way that allows users to quickly identify and discard erroneous contextual data and customise for their own unique situation.
6. Allow independent workers mobility to analyse and record lessons in a format that is ready for upload to the central Lessons Learned System.

If you would like more information about your Lessons Learned System or designing a Lessons Learned System for your enterprise
visit us at www.systemic-resilient-precision.biz

© Systemic-Resilient-Precision Pty Ltd - 2008

Lessons Learned Systems – Mining & LLS Process Flows

The local Australian mining and engineering sector is currently booming. The cyclical nature of demand for this sector, and the transient nature of the workforce, helps keep the mining sector at the forefront; when it comes to embedding efficiency gains in the business process.

There is currently a high level of interest in automating that systemic change through the practical deployment of Lessons Learned Systems.

While most of the recent interest has been from the mining sector, any enterprise size organisations can benefit from using a Lessons Learned System; is an invaluable tool to ensure that investments made in process innovation and risk management are rapidly transferred across the whole organisation.

Regulators and Industry bodies can apply the same principles to quickly transfer learning’s across a whole sector.

The mining sector, like other multi-site enterprises (banks, supermarkets, government departments,hospitals & manufacturing plants) have many sites performing similar functions and/or using similar equipment to deliver similar goods and services; lessons learned are readily transferred.

Failing to effectively record and share information about new innovations and solutions to new and old problems is not only a systemic waste of resources it can result in latent risks not being corrected in a timely manner. This latter point often revealed after an accident or significant adverse event has occurred; when it is all too late, the special investigation reveals that some work locations had good practices in place that could have prevented the critical event.

Below is posted three of the most common approaches to the Lessons Learned System as a process flow.

Blog posts still to come have a more detailed explanation of each step in the process flow.

For more information please feel free to call or send an email to
srp@systemic-resilient-precision.biz

Lessons Learned System Model #1



Lessons Learned System Model #2



Lessons Learned System Model #3

Employee Engagement: Threatens Growth

Large Enterprises are increasingly reporting that the biggest threat to achieving their growth targets is the attraction and retention of skilled employees. The Age reported that economists are warning that the No. 1 "success disease" of the Australian economy is skills shortages and associated wages pressure.

The longitudinal research by the Gallup Institute has demonstrated significant productivity increases can be released, at the same time as increased employee satisfaction and engagement, through the use of a strengths-based approach to individual and team management.

Gallup Institute findings were revealed by studying high-performing individuals and teams in over 100 Enterprises. Their research found that managers who consistently perform at the top of their cohort tend to naturally adopt a strengths based approach to their team management.

Moving away from a rigid focus on job descriptions to a strength-focus, leverages the individual strengths of team members in new and innovative ways: improving productivity and minimising individual resistance to change.

Marcus Buckingham (previously of the Gallup Institute and now in his own company) has authored or co-authored a number of books on human performance that included practical application examples and strategies that managers can deploy to leverage team member strengths for improved productivity.

The Gallup Institute research findings are consistent with the findings of Positive Psychology specialist Mihály Csíkszentmihályi; American psychology professor at Claremont Graduate University in Claremont, California and the former head of the department of psychology at the University of Chicago.

Mihály Csíkszentmihályi has authored a number of books that documented the increased levels of individual satisfaction, happiness; creativity and well-being are attained when people spend time in a state of “Flow”.

He is best known for his seminal work, 'Flow: The Psychology of Optimal Experience'. To achieve a flow state, a balance must be struck between the challenge of the task and the skill of the performer. If the task is too easy or too difficult, “Flow” cannot occur.

Marcus Buckingham is clear that a strength is not necessarily some thing that your Supervisor says you do well, in fact “Activities that you happen to perform well can actually deplete you if don’t also enjoy them. That makes them a weakness for you” he defines strength as “the work activities that consistently make you feel productive, energised and engaged.”

The extensive Gallup Institute longitudinal research demonstrated conclusively that teams comprised of people who spend most of their time using their strengths deliver higher performance than those who spent less time working to their strengths.

Marcus Buckingham has designed some practical tools to help individuals determine if an activity is strength, including the 4 signs that something is strength and suggests that managers can help employees improve their productivity by supporting them to leverage their strengths:
• Listen to them and trust their judgement; they are the only ones that know if they are energised by an activity.
• Adjust their jobs (wherever possible); be open to other ways that an activity could be completed. This releases the employee from the feeling of being stuck.
• Actively support individuals to find ways to make less desirable activities less onerous; consider partnering, doing an activity as a team excised etc.

Considering a focus on leveraging the strengths of your team also guides organisations towards respectful communication between other departments and other divisions, it also supports an innovation culture by daily re-enforcing the concept that there are many ways to achieve a good outcome.


REFERENCES:
http://www.cgu.edu/pages/4751.asp
http://www.marcusbuckingham.com/home.php
http://www.gallup.com/consulting/positive/107755/2008-Gallup-WellBeing-Forum.aspx

Annual IT Spend - IPod or Blackberry; Linux , Mac or Windows?

A Process for Prioritising the rapidly escalating annual IT Spend

Failing to keep up with technology can be competitively fatal, but technology annual spend is just like all business decisions; it requires a process, the business case needs to support an informed decision that allows priorities to be set based on a justifiable ROI.

Andrew MacAfee, an associate professor at Harvard, noted that the US spend per employee on physical IT was $5,100 per employee per year in 2004, it had trebled in the period from 1987 – later figures are not yet available.

As the bottom line impact of the IT spend has become a significant expense item Andrew MacAfee recommend a process to help Executives determine priorities and support decision making in this rapidly expanding expense area.

He recommends a process where the IT purchases down into three distinct categories.
1. Function IT
- Supports execution of tasks i.e. spreadsheets, CAD
2. Network IT
- Supports collaboration and connections i.e. e-mail, wiki, blog.
3. Enterprise IT
- Specifies a Business Process i.e. defines tasks and sequences, mandates data formats, use is mandatory.

His HBR article also provides a list of questions that Senior Executives can ask their CIO’s to help clarify priorities and ROI, a couple of the questions are:
1. Functional IT
- Will any of these new software options allow our operations people to do their jobs more efficiently?
- Is any of our current IT out of date – what changed?
2. Network IT
- What technologies are our people collaborate?
- Do we know what they think on hot issues?
3. Enterprise IT
- Are there best practices that should be embedded in our Enterprise IT?
- Are there important business activities, events or trends that we
should monitor?

There is a word to the wise in Andrew MacAfee’s article in terms of the ROI, he notes that while business cases will inevitably present a can’t lose scenario, the reality is that IT deployments “are never a sure bet because they rely on a complex interplay between technologies, capabilities and compliments”.

Finding a structured way to work through all of the IT capability options, and ask bottom line focused questions of your CIO, is a solid governance approach.

We especially like the Enterprise dimension of his model with its focus on the automation of non-negotiable core business process.


REFERENCES:
The referred to “compliments” being the compliments of process: better skilled workers, higher levels of team work, re-designed process and new decision rights.

Andrew MacAfee’s Blog: http://blog.hbs.edu/faculty/amcafee/
HBR Article: http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?ml_action=get-article&articleID=R0611J&ml_page=1&ml_subscriber=true

Apache Energy Varanus Island Gas Plant Explosion wipes $A65 million from Alcoa's bottom line

A systematic way to analyse and respond to ambiguous signals of impending crisis

While the Newspaper reports may make it appear that Apache Energy management have demonstrated management behaviour that is less competent than other organisations; even if it is all proven to be true, their behaviour many not be that unusual.

In fact this type of behaviour is often the norm for large enterprises; including NASA (Colombia Disaster), Merck Pharmaceutical (Vioxx Incident), Kodak & Schwinn Cycles.

Enterprises that have a culture that is highly reliant on evidence and data can have a cultural weakness when faced with problem-solving in an environment where the available data is ambiguous. There is a systematic way to analyse and respond to weak signals of impending crisis.

M. Roberto (Bryant University) & J. Bohmner and A. Edmondson (Harvard) conducted an in-depth 2-year study, following the Columbia Disaster, that revealed that a culture that responded poorly to ambiguous threats was a naturally occurring behavioral trait in enterprises.

This problem-solving skill shortfall was more pronounced in enterprises where hard facts and data are the cultural norm for decision making. Of it’s self this data-focused trait is a strength but when combined with a mature organisation that has many accepted norms it tends to limit individuals ability to speak up when ambiguous threats start to appear.

Post incident analysis inevitably reveals that there was a “recovery window” where the enterprise could have responded in a way that would have averted the disaster:
· NASA management did not authorise a space-walk or approve additional satellite images be produced to study the possible effects of the foam strike after take-off.
· Merk did not act quickly enough to ambiguous data linking Vioxx to cardiovascular risk bringing their product to market with significant reputation damage.
· Kodak dismissed early signs that their film business was in decline
· Schwinn did not act quickly enough when mountain bikes hit the market, announcing the rapid decline for their road bike business.

Why do organisations fail to deal with ambiguous threats well?

Roberto, Bohmner and Edmondson found that the big three contributing causes were:
· Human Cognition - suppression of danger, emphasising information that confirms our existing belief and supports our existing execution strategy.
· Group Dynamics – Teams for high-risk and high-complexity projects are often designed with a strong focus on the expertise of the individuals; limited planning is invested in the dynamics of the group to ensure it works effectively as a team. Including the creation of an environment of ‘psychological safety’.
· Organisational Culture –Strong bias to data-driven decision making combined with a presumption that how things are being done (have been done for years) is a sound way to respond. Any challenger is therefore required to present data that is not going to be available in the short term.

For Apache Energy, their Varanus Island Gas Plant has been shut down since June 3; the immediate consequence of the explosion was that WA’s domestic gas supplies were reduced by 30%. Westfarmers are reported to be facing a total cost blow out of $A120 million, paying $A20 million a month for replacement gas supplies, and now Alcoa are facing a loss this quarter of $A65 million due to the same incident.

A valve replacement is reported to be a major directly contributing cause of the explosion but from a systemic change perspective the problem-solving culture may play a bigger role in deploying a corrective action strategy that would prevent a similar incident from re-occurring.

Police Superintendent Dave Parkinson is reported to have said “Apache had been told of a potential problem with a valve similar to the one the company is now trying to replace as a result of the explosion”. When told to buy a duplicate valve, Apache had commented "how can we justify having an $8 million component sitting on the shelf?" Mr. Parkinson commented "I got the impression they were not taking the need for contingencies too seriously".

The study by Roberto, Bohmner and Edmondson noted that enterprises that respond well to an ambiguous threat, do not improvise during the “recovery window”, they set in place a rigours process of detection and response capabilities that they have developed and practices prior to the crisis.

This rigorous process of detection and response includes:
· Rapid problem-solving and teamwork skills
· Recognise and take advantage of the ‘recovery window’
· Amplify the threat, making it culturally ‘safe’ for employees to ask potentially disconcerting ‘what-if’ questions.
· Explore (scenario model) possible responses to threats through low-cost experimentation.

We look forward to seeing what the findings of the investigation reveal and hopefully they will be using a root cause analysis tool like REASON® that will reveal causes that take them beyond the immediate engineering fix to the real structural and systemic issues that could provide valuable lessons to all involved in the Energy Sector.

If you would like more information in developing you own internal problem-solving capacities contact Kimmaree Thompson at srp@systemic-resilient-precision.biz


© 2008 K. A Thompson http://www.systemic-resilient-precision.biz/
Please cite web-link with reference.

REFERENCE & LINKS TO RELATED ARTICLES:
http://www.theaustralian.news.com.au/story/0,25197,23995860-5005200,00.html
http://news.smh.com.au/national/police-warned-varanus-plant-report-20080628-2yez.html
http://www.businessspectator.com.au/bs.nsf/Article/Wesfarmers-counts-up-lost-hatchlings-from-Varanus--FXVBD?OpenDocument
http://www.theaustralian.news.com.au/story/0,25197,23883858-2702,00.html
http://harvardbusinessonline.hbsp.harvard.edu/hbrol/en/search/saSearchResults.jhtml?Ntt=R0611F&N=0&Ntk=hbrsa&Ntx=mode%2Bmatchallpartial&x=19&y=13

Westpac: +$1 Billion Incorrect Transactions

Tens of thousands of people were either double paid or missed out on getting their pay due to a processing error by Westpac Bank.

Westpac is reported to have confirmed that a “processing error” caused $1 billion of incorrect transactions to be processed on their computerised pay-roll & Direct Debit system.

The Sydney Morning Herald reported that the Finance Sector Union Spokesman attributed the error to a review of backroom processing that had left processing staff under pressure, believing that their jobs may be sent offshore.

In his recent Harvard article Michael Hammer, the father of the BPR, identified 6 factors that were the difference between successful and unsuccessful process innovation.

Michael Hammer also gives Gail Kelly, the new CEO at Westpac, some good support for sticking with it when things go wrong.

The 6 success factors he identified are:
1- Process Focus – describe your enterprise within an enterprise process model (a small number of value-creating end-to-end processes).
2- Process owners – senior executive empowered to make decision across the enterprise, overcoming silo focused resistance.
3- Full-time design team – don’t try and get your staff to fit it in while doing their real job!
4- Managerial engagement – don’t let the team’s work sit in reports waiting endorsement; have a senior executive charged with sponsoring approvals fast.
5- Buy-in – the people at the front will be the ones doing things differently, don’t let this be a surprise to them; keep them informed.
6- Bias for action – “the perfect is the enemy of the good” Voltaire: To maintain momentum implement at a defined standard; fine tune when it is operational.

While the SMH article did not provide enough information to make even an uneducated guess at the contributing factors, when looking at the comments by the Union Spokesperson you get the feeling that Item 5 may be a bit harder to implement if you are considering offshoring the work that the frontline people are doing.

In defence of Michael Hammer on Item 5; The Union Spokesperson’s comments also indicated that any tension or apprehension the frontline staff may feel could be just gossip and rumour. If it is just speculation, decreased anxiety levels may have been delivered if the frontline people were provided with frequent up-to-date information on the progress of the internal review.

In the RCA’s we are conducting, the tight employment market is showing it’s self to be an increasingly relevant causal factor in operations process failure.

We are finding that enterprises are unable to consistently fill jobs with staff that have the same level of experience and skill as the staff they were employing to fill similar jobs three years ago, or even 12 months ago.

The employment of less experienced staff is often just overlooked on a day-to-day operating basis. No changes are being made to increase the resilience of the business process that supports the less experience staff member. The opportunity for new process failures to occur consequently increases.

Where a more experienced worker will monitor or correct obvious errors the less experience staff member just does not notice the error and therefore does not correct it.

A high-profile process failure, like the one at Westpac, would keep any CEO awake at night but the return on investment from process innovation is huge; in Michael Hammer’s case study a logistics firm generated hundreds of millions of dollars per annum, in just two years, from one process innovation initiative -improving response time on RFP’s.

Here is hoping that Gail Kelly keeps on remembering all of her earlier victories during the next couple of days. This event will end up being just a “blip” on what has otherwise been a golden start to her new role as CEO at Westpac.

© 2008 K. A Thompson http://www.systemic-resilient-precision.biz/ Please cite web-link with reference.
REFERENCES: Michael Hammer - http://www.hammerandco.com
Harvard Management Update Reprint # U0504B http://www.hbsp.harvard.edu/
SMH Article: http://www.smh.com.au/news/technology/computer-glitch-sparks-westpac-chaos/2008/07/03/1214950997519.html