By Emery Roe and Ian Mitroff
An odd aspect about the financial mess is how little discussion has been given to managing it, and the economic crisis with it, as messes.
In all the finger-pointing, one party has escaped with less attention than deserved – business schools. It is opportune to ask what schools would be teaching if they took mess management seriously.
First, they would be teaching systems thinking, not the mathematical modelling that passes for it today. Mess management requires people who know the interconnections among diverse systems of households, finance, the economy, politics and society. It requires people that tolerate and can map out complexity. Too many business faculties do not do this, consequently adding to the mess instead of helping to manage it.
Second, inter-systems experts are not in business schools. Mark Lombardi, a conceptual artist, showed how important Osama bin Laden was to politics and finance. He placed bin Laden in an earlier financial and political crisis – he did it in 1979!
Our argument is that works such as Caryl Churchill’s play, Serious Money, about the events leading to the 1987 stock market crash, must be part of systems thinking about the events of 2008-09. Unless we make these connections, we manage the wrong problem. By ignoring the “messiness” of complex systems, many in business schools are guilty of solving wrong problems precisely.
Third, we need to show students how connecting the dots in the financial crisis changes the dots. The crisis has been described as a hurricane breaching the levees of banking and financial institutions. This confuses the hurricane with the limitations of the levees.
Levees can be overwhelmed to the extent that independent flood protection systems become tightly coupled systems spreading the disaster further. Unless we mitigate climate change, we cannot lessen future hurricanes, but we can design and manage better levees. In crisis and reliability management, we can and should design systems that work even when independent risks turn out to be inter-dependent and when rescues create their own messes. This requires better damage containment systems before the arrival of the next crisis and better management of setbacks during the crisis.
Fourth, good mess managers are not just the Paulsons, Trichets and Bernankes, they are also the professionals in IT units, engineering divisions and business continuity operations. Governments promoting infrastructure development as an economic stimulus need to understand and capitalise on their management skills in recognising system patterns and formulating local scenarios.
Financial and economic services cannot be reliable without equally reliable telecommunications and electricity. Those who provide these services constantly work on the edge, around the messes created by ill-informed policies and poor technology design. These managers keep our interconnected critical infrastructures running and prevent accidents which would add billions more to the financial and economic crises. Society’s most under-utilised resource remains the skills of professionals who keep our infrastructures reliable.
Business schools would do well to learn a lesson from the September 11 attacks; air traffic controllers achieved the unprecedented in landing all 4,500 commercial and general aviation aircraft in the US safely. Success meant managing all the messes in between.
This is what we expect from business faculties – guidance in landing the economy and finance safely. They could do more if they understood better what experienced mess managers are doing to land the assets set into flight by business schools.
Emery Roe (along with Paul R. Schulman) is the author of High Reliability Management: Operating On the Edge, Stanford University Press and a member of the Collaborative for Catastrophic Risk Management, UC Berkeley.
Originally published on February 2, 2009, on FT.com. Republished with permission.
Copyright The Financial Times Limited 2009