The Myth of Mitigation
February 2012
Everyone has experienced both service and
product failures, probably multiple times. If you are on the "receiving end"
of this failure, you have certainly been upset. This can extend across the
full array of emotions, from disappointment of simple annoyance with a minor
inconvenience through white-hot, litigation-inducing anger spawned by a
major catastrophe. The consequences of a quality failure in either products
or services because of this emotional component of the event can be
significant. A business relationship is always about a transaction, which
involves delivery of some service or product, with expectations. When there
is a failure to do this, the failure ruptures that relationship. This always
generates an emotional response.
by Ron
Prichard, P.E. Ph.D.
Arcanum Professional Services
The emotional component of failure response is driven by two elements.
The first is the size of the gap between the reality of the failure, based
on the actual delivery, and what was promised. Ultimately, this later
aspect, the failure of the promise, is the essence of the nondelivery of
quality. The promise is the basis of the business transaction and the
relationship that it establishes. This rupture (like the one in the hull of
the Costa Concordia, now lying on its
side in Italy) can "sink" a business relationship. A construction defect
ruptures the contractual agreement established by the parties in the
construction project. The problem is that the failure is not just limited to
the impact of the gap between what was to be delivered versus what was
actually provided. There are always ramifications as the fallout affects
other aspects of a project. This damage is the "spark" that ignites the
ensuing dispute.
The second component is the degree of the damage associated with the
failure. This is a measure of the extent of harm that one party does to the
other party. This harm can range across a wide array of effects, some of
which can be insured against. This element, which represents one corner of
the Litigation Triangle, will drive the damage response phase following the
failure. This will continue until all the dollars available have been
consumed.
These two fallouts of the unmet expectation, triggered by the quality
failure, fuel the emotional response of all parties involved in the failure.
Ill feelings are always spawned by failure and its consequential damages.
Fortunately, this ill will does have a half-life. This means that the
intensity of anger will gradually decay over time, much like the half-life
decay of radioactive particles. Unfortunately for the providing party, this
is never short enough for it to avoid a serious hit on its bottom line. This
aspect of a quality failure can be the most difficult to deal with in the
post-event period.
Conclusive research has long established that a satisfied customer, who
is likely to return, is not likely to voluntarily or spontaneously talk to
others about his or her experience. A dissatisfied customer is just the opposite.
An aggrieved party is seldom quiet about it, and the more exasperating the
consequences of the failure, the more other people (and potential customers)
will hear about the problems. Issues with a long half-life will continue to
be spoken about long after the immediate consequences have diminished to the
point of being a bad memory. Until enough time has passed or those who still
remember have moved on, this bad memory of a failure will linger.
Collapse of Reliability
Have you ever planned for a quality failure or said, well, now would be a
good time for something to go wrong? Of course, you do not plan for a
failure. Thus, quality failures come as unexpected events. This element of
surprise further unsettles you. Being caught off guard means that you have
to scramble and focus your attention on something that, prior to the
failure, was not a concern because it either seemed to be fine or was only a
peripheral issue. As a result, you must direct your attention away from
where you want it to be and onto cleaning up the consequences of the quality
failure.
If you were asked to describe which aspect of the event was the most
disconcerting, it would be difficult to unravel the emotional elements of
the failure from the mad scramble to recover from the consequences. The
collapse of reliability of something (or someone) that you thought you could
count on and the need to create a solution in the midst of dealing with the
failure are highly disruptive. There may also be a multiplier effect for
failures of products or services that have a more significant interplay with
the business of the client.
When caught up in the emotional aspects of a failure, it is often
difficult to "walk in the shoes" of the other party. However, it is
important to realize that at least two parties are always "victimized" by
any quality failure. The first party suffers the direct impact of having an
unexpected product or service failure. The goal of acquiring those goods or
services was to obtain some result in the belief that they would work as
intended. The second party that suffers from the failure is the providing
party. The "victimization" of this second party is less obvious than the one on
the receiving end of the failure. However, the consequences, in many cases,
may be even more expensive for the second party.
An illustration of this is
the case of the Toyota "sudden acceleration" event. While it affected many
of its customers individually, the cumulative impact on the company itself
was enormous. These impacts are seldom limited to just financial issues, as
will be addressed in this article.
Dealing with Quality Failure
Businesses spend significant sums of corporate resources creating brand
recognition and years in building a brand reputation, all of which can be
erased by a single failure. So, there is great import associated with
quality and its consequences. An unrelated but pertinent IRMI article by
Matthew Leitch in April 2008,
Internal
Control Disaster: Fiasco at Heathrow, told the tale of the quality
failures at Heathrow Terminal 5. For the passengers who were inconvenienced,
this event has long been displaced within their minds by other intervening
events. However, for the airlines and those other businesses adversely
affected (the "clients" of the airport authority), it is likely that a
lingering aftertaste remains. Since there were few alternatives, the
airlines using the terminal had to work out a solution and absorb a
substantial portion of the impact. This illustrates a reaction that occurs
in every quality failure.
Since quality failures are a not infrequent event
in life, organizations have developed methods to deal with the consequences.
This has spawned many approaches, from redesign of process and product to
investigations and litigations. Routinely, the result is terminating the
offending product or discontinuing the failed service. The quality failure
is tied to a business transaction and, as a result, there is also an
associated expectation tied directly to it. This expectation is the
"third rail" for any business when it experiences a quality failure. This
stems from the realization that the business relationship has been ruptured.
The objective is to restore things to the status quo that existed before the
event. It is understood that a significant failure, especially when there
are readily available alternatives, may lead the disgruntled client to sever
the business relationship. The impetus to prevent this fosters the myth of
mitigation.
The goal of the post-damage event efforts is to retain the
client. The intention is to reinforce the business relationship while
recovering from the harm of the crisis by using it as an opportunity to
strengthen the client's tie by "wowing" them through an outstanding
response. This is done in the mistaken belief that it is possible by acting
fast enough, spending enough money, and showing the right attitude to
restore the level of trust that existed previously.
The idea behind this
effort—to repair the relationship by acting quickly and appropriately to
mitigate the effect of the failure—fosters the belief that everything can
somehow be made right after the fact. The underlying foundation of this idea
stems from the idea that emergency response, if it is done correctly, is
somehow the equivalent to prevention. The most proffered case study to
demonstrate this is the Tylenol case and how the threat to the brand was
used to strengthen customer ties. Ask any business school graduate to
compare how many case studies they examined about prevention versus the
number in the category like the Johnson & Johnson Tylenol case study. It is
likely to be a very lopsided comparison.
Prevention versus Remedy
This
orientation explains why there is so much more attention paid to efforts for
remedy than is ever even contemplated for prevention. Enormous volumes of
corporate resources can be expended in a vain (although often valiant)
attempt to achieve full recovery from the failure. It is routine to see much
more resources (often greater than a ratio of 100,000:1) dedicated to trying
to repair, rehab, or replace the offending service or product than was
involved in its original delivery.
There is a second reason for the
popularity of the emergency response mode. Since humans, who are always
prone to mistakes, are always involved in quality failures, it is
predictable that they will occur. Also, there is a long and littered trail
back through history of quality failures that have been studied and used to
craft procedures for dealing with future occurrences. As a result, there are
clearly established protocols that can be followed. Prevention of quality
failures is a much more idea-intensive action, with each situation requiring
a unique approach.
The recovery phase is always a fear-based scramble as
part of the routine of damage response. It is a never-ending source of
wonderment as to how corporations, which cannot find either the time or the
money to prevent, seem to have unlimited access to resources in emergency
response. As was shown in the article
Getting Deeper into Quality: Time, the Systems Model, and the Damage Event
Divide, it is impossible to change things that have happened, due to the
reality that the precipitating event recedes further into the past the
longer the damage response efforts go on. By the time the failure has
occurred, the organization has carved a history it is helpless to change, no
matter how much money is thrown at it. Accordingly, while the consequences
of the failure might be fixable, the event of the failure cannot be undone.
Mitigation Can Be Counterproductive
It is the pursuit of the myth of
mitigation—this belief, because it is so flawed, leads people acting upon it
to generate counterproductive results, while being baffled by the outcomes.
It is easy to understand how people fall into the trap of the safe but
narrow focus on damage response. This outcome is clearly understandable. You
go with conventional wisdom and concentrate attention on recovery from the
quality failures. Then, having followed what "everyone" suggests is the
smart approach, you are stunned to discover that, since it is not possible
to change what happened in the past, you are not really back in the good
graces of the wronged party, despite having poured vast amounts of resources
into the effort to recover.
Unfortunately, as though the colossal
expenditure of resources in damage response were not enough, most
institutions end up "doubling down" on their failure. Invariably, with any
quality failure there will be an investigation. (See
IRMI.com Construction Safety articles, especially those on investigation
and learning from failure.) The scope and scale of investigation will be in
direct proportion with the impact of the failure on the provider.
Inevitably, as day follows night, investigation is always followed by
recommendations for instituting a variety of new control measures. This is
offered as a surefire method to eliminate whatever problem led to the
failure.
In the normal course of this response, an institution magnifies its
own failure. The imposition of new control measures invariably burdens its
people, systems, and processes with still more rules, policies, and
procedures. While this may foster a public image of having made an
appropriate response, it is woefully inadequate. What it really results in
is ever more complicated work processes. This tends to inhibit the ability
of people to be able to make appropriate adjustments during the course of
work activity, further diminishing their ability to deliver quality. It also
adds to the possibility of more failures in the future by introducing more
places where error can occur.
Despite heroic measures to "recover," a
quality failure generally leads to the severance of the business
relationship. This is more likely if there is an available alternative that
has a sufficiently low opportunity cost. This severance can occur in either
of two ways. The first will be immediate. This is generally what happens
with a product failure. Products are usually readily replaceable, as
alternatives are more routinely available. With a service failure, there is
usually an ongoing relationship, and severance is more difficult. There
needs to be some natural "break," when the relationship can be terminated in
a logical manner. There is also a time lag, as provisions to make this shift
in service have to be negotiated and set in place prior to this severance.
If there is no readily available alternative, the client may have to
reluctantly continue its relationship, which tends to be interpreted as
reinforcing the confidence that mitigation can be an effective strategy.
All
of these problems associated with emergency response measures pale in
comparison with the real reason that mitigation is a myth. Business
relationships rely on the existence of trust between the parties to the
process. Trust facilitates the interactions, while distrust spawns all sorts
of unproductive measures as the parties engage in maneuvers to protect
themselves. The distrust, an "elephant in the room," spawned by unmet
promises, ultimately prevents the damage of a quality failure to be
mitigated. No business relationship can be either productive or profitable
if distrust lies at the core of it, since people must constantly hedge their
bets to protect themselves in the event of another failure. This is the
corrosive effect of the failure to deliver and lies at the core of why a
business is not likely to be able to mitigate the impact of a quality
failure. It generally results in the severance of the relationship, and, if
this is not possible, it greatly increases the costs of monitoring the
transactions for continuing the relationship. Neither of these approaches
bodes well for the future of either party.
Conclusion
So, if one
cannot really mitigate the impact of a damage event, what's to be done? The
first thing is to retain all of those procedures for responding to the
failure. While they will probably not salvage the existing relationship,
they will reflect that the enterprise does care about the impact on its
clients and is willing to go the distance to rectify the adverse situation.
This will not save the bad situation, but it may create positive market
perceptions that can facilitate obtaining a replacement.
The second thing is
to redirect efforts toward prevention. This begins by weaning the
organization off of its addiction to emergency response (and the adrenaline
rush it produces). Since those efforts are resources intensive and counter
to the desired goal, the focus must be to move upstream in the delivery
process to fix the problems at their source. There will be further
discussions of alternatives to mitigation in future articles, as this is the
real path to success.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author's employer or IRMI. Expert Commentary articles
and other IRMI Online content do not purport to provide legal, accounting, or other
professional advice or opinion. If such advice is needed, consult with your attorney,
accountant, or other qualified adviser.