Maintaining Competitive Advantage Requires High-Reliability Organizing

A healthy dose of paranoia and an obsession with failure: That’s not typical leadership advice. But that’s part of what management guru Jim Collins discusses as a crucial ingredient for leaders hoping to maintain competitive advantage through crisis and adversity.

What he didn’t say, at least in the teaser to his new book featured in the May 25 issue of BusinessWeek, is how much we can learn about business resilience and leadership from “high-reliability organizations.”

High-reliability organizations (HROs) are those that face so much danger, complexity, and ambiguity on a daily basis that we’d expect them to fail very frequently—but they don’t. Typical examples of HROs include nuclear power plants, naval aircraft carriers, and emergency response agencies. For a variety of reasons, these organizations are able to continually cope with small errors and negotiate the ambiguity around them such that they avoid disaster.

Two of the most prominent thought leaders regarding what makes HROs special, Karl Weick and Kathleen Sutcliffe, described five specific principles that HROs embrace:

1. Preoccupation with failure
2. Reluctance to simplify
3. Sensitivity to operations
4. Commitment to resilience
5. Deference to expertise

As I’ve previously written, leadership along these principles is about creating a culture that seeks errors, questions assumptions, and makes sense of circumstances through respectful interpersonal communication. It’s not about always being positive, and it’s certainly not about always saying what other people want to hear.

This notion of leadership differs from much of leadership thought—both in academic and managerial circles—that focuses on leaders as heroic men and women who gallop around organizations on white horses, dream about possibilities, and inspire followers to march along toward greatness. I’m exaggerating for illustrative purposes, of course, but my point is that we can learn from the tough, questioning, interactive model of leadership suggested by HROs.

A common critique of using HROs as a model for leading business organizations through crisis and adversity is that HROs are simply too different from the private, for-profit sector to offer any worthwhile lessons. The research that Collins described, however, suggests otherwise. For example, he suggested that organizations encounter five stages of decline: (a) hubris born of success, (b) undisciplined pursuit of more, (c) denial of risk and peril, (d) grasping for salvation and (e) capitulation to irrelevance or death.

Discussing the dangerous nature of success, Collins wrote, “The best leaders we’ve studied never presume they’ve reached ultimate understanding of all the factors that brought them success. For one thing, they retain a somewhat irrational fear that perhaps their success stems in large part from fortuitous circumstance.” Therefore, it seems that leaders who preoccupy themselves with failure are also those best poised to maintain success.

Additionally, Collins suggests that teams “on the way up” have specific patterns of interaction that allow them to maintain their organizations’ resilience and competitive advantage. These dynamics include:

1. Rewarding those who highlight “grim facts"
2. Leading by asking questions
3. Crediting others for success
4. Arguing and debating to help the organization overall
5. Learning from past mistakes

Therefore, it seems as though Collins is suggesting a way for organizations and their leaders to succeed that has much in common from what we’ve learned from HROs. Or, as I’ve suggested, what we can infer is that maintaining competitive advantage requires high-reliability organizing.

Collins’ new book, How the Mighty Fall and Why Some Companies Never Give in, probably offers numerous other ways in which business organizations can become more resilient and ways in which leaders can effectively lead during crises. All I’m saying is that those principles have much in common with what we’ve already learned from HROs. Namely, Collins’ research strongly suggests that we can apply lessons learned in HROs—be they combat teams, nuclear power plants, or flight-deck operators—to the realm of business, providing distinct ways for leaders in organizations to avoid the disastrous consequences of failure.

The article also appears at Stepping into the Void.