Posts Tagged ‘hubris’

Very good project managers have been trashed over the misuse of best practice. The example I have in mind is a client financial firm (Firm X) that wanted to buy another firm in order to grow and lower the probability of being bought themselves. The chairman was able to win the battle but lost the war. It happened by his leveraging the firm’s reputation and applying spin to “best practice.”

Strategic Positioning

A little background will help. This happened when consolidation was occurring in the financial world. Firm X had a very positive, understated reputation on Wall Street. They usually exceeded their performance predictions. Consequently, the chairman’s word had a great deal of cache.

In order to gain leverage in buying the other firm the value of Firm X’s stock needed to increase. Here is where spin comes into play. The chairman cashed in on Firm X’s reputation. Wall Street analysts were told that plans were underway to improve operational efficiencies in credit card processing – a large area of operations for Firm X. Also, there would be economy of scale by applying the improvements to the merged entity.

The chairman simply made empty promises. No one down the food chain was consulted (the critical nature of which we will look at later). The organization was simply told, “Make it so if you want to survive.”

Win the Battle

As predicted, the value of their stock increased. The other firm couldn’t compete with this and was purchased by Firm X. All seemed well and good.

A Blood Bath

Everything was fine until it was time to publish the results of the methods of improvements – those best practices that were to be put into place. Not only were there no improvements in operations, costs actually soared tens of millions of dollars.

Inside Firm X it was a combat zone. In IT they went through project managers like little kids eating M&Ms. As the reality of the actual numbers began to surface desperation set in. Bonuses were offered to anyone who would sponsor a project that would give the desired results. Imagine a Greek trireme going into battle and the captain promises a bonus to the piper (the guy who beats out the rowing rhythm) if the ship could just go faster.

Lose the War

The chairman got what he wanted – the merger. He also got something else – the boot. When the numbers were published Wall Street told the chairman in the future he would have a hard time borrowing even a dollar. The board had to react and did so by removing him from office except for overseeing the credit card operations debacle. His title became, “Chairman of Special Projects.” As in any other organization, one might as well have leprosy as have “Special Projects” as one’s title. Three months later, the chairman resigned. The top two tiers of IT were replaced with people from the firm that was bought. They were conservative in practice and a more stable organization.

Chaos and Best Practice

Most mergers fail. One possible reason being spin, i.e., propagating the belief that if one knows the rules better than anyone else then a highly reliable model can be generated that will predict the outcome. The blindness associated with this approach and how it can backfire was addressed earlier in the Black Swan blog.

It is important to remember chaotic systems are rule-based. The difficulty lies in the fact they are unpredictable and can turn on you in an instant. Knowing all the rules does not guarantee the desired outcome will be achieved. The chairman in this case thought he could dictate top-down what the results would be. The reality is solutions emerge from the bottom-up.

Wanting to buy a competitor or merge for some perceived gain is fine. The trick, though, is to be humble, realize the realities of chaotic systems, and strive to work together to dampen the distractions and amplify the opportunities through a bottoms-up approach while leading the way towards the goal.

Through his hubris the chairman blinded people to the reality of the situation by spinning best practice in a chaotic situation. “Doomed” is too small a word.

To my knowledge, none of the sacrificed PMs were rehabilitated or reinstated to there former positions.

Leadership Cancers #7: Hubris and the Titanic

by Gary Monti on April 27, 2010

In Greek mythology those who had hubris (powerful people with over-reaching, extreme arrogance) were visited by the goddess Nemesis, who restored balance in a vengeful, remorseless manner. The story of the Titanic is a good example. Nemesis’ message was clear. Over 1500 people were lost and engineering, even beyond nautical engineering, was set back on its heels for several years.

Apparent Unending Successes

In the 19th Century technology reigned supreme. There seemed to be no limit to what could be accomplished and no downside was expected. The rapid pace of triumph was shown in the ocean liner industry where the size of ships quadrupled in a few short decades.

The Illusion of Safety

At that time, the Titanic had the highest concentration of wealth ever in one spot. The captain, Edward Smith, was called the “Millionaire’s Captain” because many of the rich would only travel with him. Combined with the belief that the ship was unsinkable there was a rush to be on the maiden voyage with no worry for safety.

The Reality

The destruction caused by an overly proud group of individuals played out in a very small, pivotal way. It is what would be called a tipping point today. The stage was set for the arrival of Nemesis by the creation of a perfect storm between two engineering decisions and a material flaw:

  • Only 16 lifeboats were present when 48 were needed. Bruce Ismay, the Chairman of the White Star Line wanted the millionaires to have an uncompromising view of the sea and horizon.  It was felt lifeboats weren’t needed but the Board of Trade had to be kept happy so the minimum of 16 were installed.
  • The bulkheads (walls) for many of the watertight compartments were lowered in height to accommodate a larger, more opulent grand staircase.  This resulted in water spilling between compartments and the ship sank in 2 hours.
  • Lower cost and -quality #3 wrought iron was used for rivets when #4 was required. The heads popped off when the iceberg was struck and the steel plates peeled back like a zipper. Water entered at the rate of 400 tons/minute.

The Trickle Down Effect

Beyond the technical errors there was a deeper issue – leadership and the impact of hubris. Specifically, the focus on social status and wealth affected the crew’s performance.

Wireless operators had two functions – track weather reports and transmit messages for the rich. They made their money from the latter. On April 14, 1912, another ship, the California, continually sent wireless messages to the Titanic that a large iceberg (one million tons) was in Titanic’s path.

Receiving these messages annoyed the operator trying to get messages out for their rich patrons. The Titanic operator demanded the California stop bothering him. They did and turned off their wireless. The messages never made it to the Captain.

The Solution

Everything is simple. When working with the US Navy on risk management I asked what the solution was. The answer was, “Rather than ask, ‘What is the probability of sinking?’ ask, ‘What do we do when the ship sinks?’” Nemesis brought this home very clearly.

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