Factors That Obstruct the Reporting of Information About Risks in Critical Infrastructure Companies

Abstract

In 2013–2015 two of the present authors conducted the study of tens of major accidents and incidents sought to identify the reasons that prevent the transmission of relevant, clear and accurate information about risks, both within an organization (intra-organizational) and between different organizations (inter-organizational). More than 30 recurring factors were identified that appeared repeatedly in major disasters around the world and within different historical periods. The study concluded that, when employees distort information about risks before or during a disaster, they do it not because of their own individual characteristics or personal motives, but because the internal environment of the organization motivates people working there to hide risks from both internal and external audiences.

1 Causes of Risk Concealment Based on the Analysis of Past Disasters

This section includes previously published materials [©Springer, All rights reserved, Man-made Catastrophes and Risk Information Concealment, 2016], permission to reproduce this had been gained from the respective copyright holder.

In 2013–2015 two of the present authors conducted the study of tens of major accidents and incidents¹ sought to identify the reasons that prevent the transmission of relevant, clear and accurate information about risks, both within an organization (intra-organizational) and between different organizations (inter-organizational). More than 30 recurring factors were identified that appeared repeatedly in major disasters around the world and within different historical periods. The study concluded that, when employees distort information about risks before or during a disaster, they do it not because of their own individual characteristics or personal motives, but because the internal environment of the organization motivates people working there to hide risks from both internal and external audiences.

These 30 intra-organizational and inter-organizational factors preventing adequate risk transmission were divided into 5 groups: (1) the nature of the external environment surrounding an organization and the incentives that it creates; (2) the corporate objectives and strategy of an organization, and internal managerial practices; (3) the conditions of the internal system for communicating and gathering information about risks within an organization (formal and informal channels); (4) internal practices for managing risk assessment; (5) the psychological characteristics of employees within an organization.

• (1) EXTERNAL ENVIRONMENT OF AN ORGANIZATION

  • The short-term focus of global political and business philosophy

  • Deregulation

  • Mutually beneficial relationships between government representatives and private industries which do not serve the public interest

  • Low status and entry criteria, and unattractive wages, for employment with government regulators

  • Weak control over complex systems and fragmentary perception of the whole risk picture

  • Political instability and struggle between political camps

  • National arrogance

  • Fear of widespread public panic

  • National security secrecy

• (2) INTERNAL ECOLOGY OF AN ORGANIZATION

  • Short-term financial & managerial objectives and unrealistic forecasts for future development

  • Permanent “rush work” culture

  • “Success at any price” and “no bad news” culture

  • “Ivory tower syndrome” or the fragmentary perception of the whole picture of risks among top managers

  • Lack of specific knowledge and experience among members of boards of directors

  • Weak internal control within an organization

  • Frequent labor turnover

  • Habituation (problems and risks seem inconceivable because nothing has gone wrong in the past)

  • Wishful thinking/Self-suggestion/Self-deception among decision-makers

  • The remoteness of units/facilities from headquarters

• (3) RISK COMMUNICATION CHANNELS

  • Long chains of communication for risk information. Absence of a direct, urgent 24-7-365 channel between field staff and executives. Field staff who do not have authority to immediately stop a process if they suspect evidence of risk

  • No internal or external incentives for whistleblowers

  • Poor inter-organizational risk communication

  • Absence of direct horizontal communication between departments of an organization (communication between units only occurs through superiors)

• (4) RISK ASSESSMENT AND RISK KNOWLEDGE MANAGEMENT

  • Absence of a prompt industry-wide risk assessment system

  • Unwillingness to investigate in detail the causes of an accident, and absence of established risk assessment systems within organizations (recording, evaluating and ranking risks over decades)

  • High frequency of unconfirmed alerts

  • Ignorance among critical personnel and managers of other accidents or near miss cases within an organization, the industry and abroad. Absence of a system to manage risk knowledge (accumulation, systemization and transmission)

• (5) PERSONAL FEATURES OF MANAGERS AND EMPLOYEES

  • Desire to “look good in the eyes of superiors” and fear of being seen as incompetent, leading to reluctance to admit personal mistakes

  • Unrealistic projections of personal performance

  • Fear of criminal prosecution after a serious incident

Detailed analysis of each of these factors can be found in Chap. 3 of the book devoted to the results of this study.² In the present subchapter, several factors are highlighted that are most significant in discouraging employees of critical infrastructure companies from reporting risks to their superiors, and making managers reluctant to receive such reports.

SHORT-TERM FINANCIAL & MANAGERIAL OBJECTIVES, UNREALISTIC PROJECTIONS OF FUTURE GROWTH, AND ANNUAL BONUS SYSTEMS

Across organizations worldwide, there is a prevalence of short-term development strategies, due to widespread pressure from shareholders on management to achieve ambitious financial results as quickly as possible. Even organizations that operate critical infrastructure are often required to set profitability goals that can be to the detriment of production safety, as meeting them usually involves reducing capital investment, delaying the modernization of equipment and undermining the long-term interests of organizational development. Setting such ambitious goals creates an unhealthy psychological climate within an organization. Employees from the shop floor to the headquarters feel they must hide the true internal situation from shareholders, regulators and other audiences, to create the appearance of a successful company that is achieving, or will soon achieve, phenomenal short-term results. The situation is exacerbated by the widespread prevalence of annual bonuses for executives, which tempts managers to focus on short-term profitability and to “embellish” an organization’s annual results in order to make the grade.

PERMANENT “ RUSH WORK ” CULTURE

Short-term business development goals, pressure from competitors to develop and launch new products, scientific and technological progress—these and other factors can lead to an intra-corporate culture that promotes constant haste in all aspects of an organization’s activities. Employees are always in a hurry. With no time to test solutions, they inevitably make mistakes, but under relentless pressure to deliver, they prefer not to report their problems. Instead of honestly acknowledging the real situation, they will send placatory reports to their superiors and colleagues. Employees will assure them that everything is going to plan, when in fact the quality of decision-making is often poor, risks are ignored and alternative solutions are not pursued due to lack of time. As a result, an organization generates sub-standard products/solutions and hides the risks and internal shortcomings caused by haste.

“ SUCCESS AT ANY PRICE ” AND “ NO BAD NEWS ” CULTURE

Ambitious business development goals impose high pressure on all employees to demonstrate personal achievements and improvement. Companies often create a climate in which goals must be achieved at all costs. Managers will not tolerate subordinates bringing them bad news, demanding to see only successful results. In some organizations, a state of total fear of the management develops: it becomes almost impossible to admit any professional mistake without risking sanctions or punishment, including dismissal. Some employees cannot function well under this pressure and, to preserve the impression of success, they falsify their achievements and embellish reality. Hearing nothing but good news from their cowed employees, executives are under the illusion that everything is going well. When a crisis finally comes, it turns out that the real situation was being concealed to fit in with the impossible standards promoted in an organization and the demand to achieve success at any price.

LONG CHAINS OF COMMUNICATION FOR RISK INFORMATION, AND ABSENCE OF AUTHORITY TO ACT

In some cases, disaster investigation shows that prior to an accident, operators observed a potentially dangerous deviation in the operation of equipment, but they lacked the authority to turn it off or take any extraordinary action to prevent the situation worsening: there was no established “stop-the-job” system. Operators also lacked an emergency communication channel with senior management to request exceptional authority to stop suspiciously functioning facilities. Existing regulations made the approval process very time-consuming and bureaucratic, which made it impossible to get a prompt decision from the top.

ABSENCE OF A SYSTEM FOR ENCOURAGING AND SUPPORTING EMPLOYEES WHO HAVE VALID CONCERNS (WHISTLEBLOWERS)

In some cases, an employee may be concerned about the existence of risks in their area of competence, which their colleagues do not wish to acknowledge or even want to actively suppress. Often a risk exists because of managerial misjudgments by immediate superiors, who are unwilling to admit their mistakes by informing top management. Corporate culture frowns on perceived insubordination, and will not allow employees to take the initiative and pass their concern directly to senior management.

IGNORANCE AMONG CRITICAL PERSONNEL AND MANAGERS OF OTHER ACCIDENTS OR NEAR MISS CASES WITHIN AN ORGANIZATION, AN INDUSTRY AND ABROAD. ABSENCE OF A RISK KNOWLEDGE MANAGEMENT SYSTEM (ACCUMULATION, SYSTEMATIZATION, AND TRANSMISSION)

Many managers believe that their problems and risks are unique, leading them to try to find their own solutions. Often though, they are simply unaware of potentially relevant experience in other departments, companies, industries or countries because there is no accurate, systematized, detailed knowledge bank of previous accidents. Unfortunately many organizations, including government ministries and think-tanks for a given industry, do not systematize sector risks, or collect information about near miss cases on an ongoing basis. In other words, no one describes and studies in detail the causes of accidents elsewhere in an industry or abroad. And in internal corporate journals, there are few articles sharing the experience of other departments of the same organization, let alone that of competitors or foreign enterprises.

RELUCTANCE TO FULLY INVESTIGATE ACCIDENTS OR ISSUE DETAILED REPORTS ON THE CAUSES OF ACCIDENTS AND THE SHORTCOMINGS OF AN ORGANIZATION

Many organizations that have encountered an emergency have been reluctant to assist in subsequent investigation of what happened, or to produce detailed reports on the causes of accidents and their own organizational shortcomings. While this reluctance is understandable, the downside is that no one can then fully establish the mistakes that led to the accident and no sector-wide learning can take place. Further accidents can thus occur under the same scenario, which might have been avoided had an honest and thorough corporate investigative report been issued.

PRESSURE TO LOOK GOOD IN THE EYES OF SUPERIORS AND RELUCTANCE TO ADMIT PERSONAL MISTAKES FOR FEAR OF BEING SEEN AS INCOMPETENT AND/OR BEING FIRED

There is a universal aspect of human nature: people wish to present themselves to others in a good light in order to receive approval and, in a professional context, career promotion. When this is played out in an organizational environment like the ones described above, human nature and corporate culture work together to exacerbate people’s tendency to say what they think others want to hear, rather than speaking unpalatable truths. Many in a subordinate position will distort information about the real situation at ground level when communicating with executives, because they want to look good in the eyes of their superiors. They are unwilling to admit their own mistakes, fearing that they will be perceived as incompetent, and ultimately that they could be fired. In order to demonstrate their competence to managers and colleagues, some employees set themselves unrealistic targets for work progress and achievement. Then, unable to cope with the workload but lacking the courage to recognize that they have overestimated their real strengths, some will feel forced to start embellishing their real achievements. This can lead to inaccurate and misleading information being sent up the chain of command. Such distortion affects the quality of information received by executives, and thus the quality of the decisions they make.

2 Main Factors of Intra-organizational Risk Concealment That Discourage Subordinates from Reporting Risk-Related Information Internally, or Encourage Managers to Ignore Early Warnings When They Are Reported (Based on Analysis of 20 Major Historical Accidents and Disasters)

This section includes previously published materials [©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved, Don’t Tell the Boss!, 2022], permission to reproduce this had been gained from the respective copyright holder.

Between 2015–2022, the present authors gathered information on accidents and disasters where there was evidence of internal concealment of risks by employees and contractors, which subsequently led to emergencies. They also looked for incidents in which employees, contractors and lower/middle managers had warned senior management about the risks long before the accident, but where, for various reasons, the managers ignored these warnings, and accidents then occurred in line with the concerns that the subordinates had reported. From this initial research, 20 such major accidents and catastrophes were identified that have occurred across different industries and different countries over the past 80 years.³

The analysis of these accidents revealed several main factors that motivate subordinates not to disclose risks to their supervisors, or supervisors to ignore the warnings of their subordinates. A detailed presentation of each of the factors can be found in Chap. 2 of the book, where the results of this study were published.⁴ Below is a brief summary of the main factors identified, listed in decreasing order of prevalence.

PRIORITY OF SHORT-TERM SOCIO-ECONOMIC, FINANCIAL AND OPERATIONAL GOALS OVER THE LONG-TERM SAFETY AND WELL-BEING OF CITIZENS, CUSTOMERS AND EMPLOYEES

(this factor was identified in 90% of the accidents studied)

Most of the accidents analyzed involved situations dominated by short-term development strategies, arising from pressure on management to meet the demands of owners/shareholders/politicians to achieve specific financial/production/socio-political results in a short period of time. For critical infrastructure companies, such short-term profitability and production targets are often detrimental to the safety and long-term stability of production. Achieving these goals is usually associated with increased load on obsolete equipment, reduced capital investments, delays in equipment upgrades, and so on.

Prioritizing short-term profitability creates an unhealthy psychological climate within organizations, and puts pressure on senior managers to achieve goals at any cost. In many cases, managers are well aware of the serious problems that these short-term production goals might create. However, they are afraid to challenge the decisions of owners and shareholders because they fear accusations of incompetence and disloyalty, and ultimately the loss of their positions due to the dissatisfaction of owners and shareholders. To replace them, owners can always find new managers who are willing to accept higher risks to meet their targets.

Field staff, lower and middle managers are often aware of the negative consequences of pursuing such short-term goals, and in some cases attempt to warn senior management of the likely problems. However, these messages are often ignored as they threaten the fulfillment of the goals. If the warnings are acted on and appropriate actions taken to manage the risks, this will lead to an increase in costs and reduce the profitability of the organization—and as a result, targets are unlikely to be achieved. In order to avoid questioning the competence of the owners, some senior managers dismiss the warnings of their subordinates, insisting that their subordinates independently find ways to safely control the risks in their area of responsibility and do not bother headquarters with their fears. Those who do not comply with this demand or fail to solve emerging problems on their own are liable to be punished, up to and including dismissal.

In the face of this demand from senior management, employees in the field will in future do their utmost to deal with the risk issue on their own. Only good news will be sent upstairs, and subordinates will avoid talking about any problems they observe. Gradually, the entire management hierarchy enters a state of near euphoria from the continual positive news communicated up through the corporate body, all indicating the unimpeded growth of production and profitability. Meanwhile, risks and issues are accumulating—but it is only at the grassroots level that this is recognized, with senior management not knowing, or wanting to know, about the real state of affairs. Such an organization is heading for disaster.

Frequently when accidents do occur in the operation of critical infrastructure, they come as a surprise to managers, owners and shareholders. However, a detailed independent investigation often reveals a causal connection between the accidents and the existence of short-term goals imposed by superiors, in conjunction with tacit pressure on subordinates within the corporate hierarchy to achieve these goals at any cost—even by violating safety rules.

The situation is exacerbated by the ubiquity of the annual bonus system, which encourages senior managers to focus on achieving short-term profitability to secure their bonus, despite the increase in risks this may create in the longer-term operation of a critical infrastructure company.

In many cases, short-term financial goal setting is a false, and indeed dangerous, economy. In the event of an accident, losses and costs for dealing with the consequences are often hundreds—or even thousands—of times greater than the finances that would have been required to deal with the risks when they were first recognized, and before they led to a major accident.

OVER-AMBITIOUS ORGANIZATIONAL GOALS

(this factor was identified in 75% of cases)

Short-term goals are frequently associated with the achievement of ambitious results. Owners/shareholders/politicians set very ambitious goals for senior managers, but in many cases do not provide them with the necessary additional resources—money, time, materials, and equipment—to achieve these goals. At the same time, senior managers warn their subordinates that they will be punished or fail to achieve promotion if they do not attain these ambitious goals, even when the necessary resources are absent.

Ambitious goals set at headquarters are often impossible to achieve without major safety breaches. Senior managers look to identify ambitious and loyal middle and lower managers who are ready to take responsibility for achieving results—even if this means taking risks and tacitly violating the vital safety rules that cover the operation of critical infrastructure facilities.

Some subordinates may point out that the established production and financial indicators are unrealistic or unsafe within the current state of the equipment and allocated resources, and might even criticize the senior management for trying to impose impossible goals. However, most subordinates cannot challenge the decisions of their superiors without consequences for their own careers, so there is pressure on them to fall into line and comply with instructions from above. In order not to jeopardize their career, most lower and middle managers will avoid mentioning to executives the risks that might arise when implementing such plans. Instead, they and their work teams on the production sites will try to achieve the impossible by taking unnecessary risks, inevitably increasing the likelihood of catastrophic events.

When senior managers set near-impossible goals and over-ambitious key performance indicators, they effectively encourage their subordinates to distort and falsify information in their reports, and convince their bosses that their departments are achieving their targets. How else can they appear to achieve all the development goals?

FEAR AMONG SUBORDINATES AND CONTRACTORS THAT THEY WILL BE BLAMED AND PUNISHED FOR REPORTING A PROBLEM

(this factor was identified in 70% of cases)

Pressure from senior management on employees to implement a high-risk corporate strategy often includes severe penalties for anyone who fails to meet their targets. Senior management may have little or no real interest in how subordinates will actually achieve the goals demanded of them. In such a punitive culture, why would employees try to warn their managers about the safety problems inherent in implementing an over-ambitious corporate strategy, raise issues relating to their area of competence or request assistance or additional resources? Instead, as a rule, subordinates are left to try and solve any problems that arise without assistance from their seniors. This can easily lead to a situation where the only way an employee can be seen to be meet the targets set for them is to violate safety regulations and falsify reports. Therefore in many cases, subordinates prefer to keep quiet about the problems in their area of responsibility when they report to their superiors, insisting that everything is under control and going according to plan. Lower-level workers are afraid of financial penalties; lower and middle managers are afraid of being fired.

When accidents occur, organizations generally focus on mistakes by specific employees instead of looking for possible root causes of the problem. Much might be learned, for example, from analyzing the impact of corporate goals on the work of those employees, or investigating whether they had sufficient resources at their disposal to adequately manage possible risks. But during incident investigations, senior managers very rarely admit that the risk escalation was a result of over-ambitious corporate goals, lack of resources in the field, or other weaknesses in their organization that left individual employees feeling isolated, and seeing no option but to violate safety regulations in order to deliver what was demanded of them.

All these factors ultimately lead to a culture of fear, where most employees are reluctant to disclose risks and problems to superiors in their area of competence.

INEFFICIENT STATE REGULATION (including, in some cases, corruption of government officials)

(this factor was identified in 65% of cases)

Over the past few decades, politicians financed by private business have tried to convince voters that reducing government involvement in the regulation of private business should be the order of the day. The arguments they use are as follows: cuts in budget expenditure for government officials can free up additional resources (for example, for social programs); free from state control, private business can develop more dynamically, creating new jobs and increasing tax revenues; and less control by officials means less corruption.

In addition, several other factors have contributed to the convergence of political and business elites’ interests: active cooperation between authorities and private business in the development of state economic policy; the widespread practice of employees moving back and forth between private business and public service; legitimate corporate financing of election campaigns; and finally, on occasion, outright corruption of specific government officials.

As a result, under the pretense of cutting spending on bureaucracy—and with strong support from private business and voters—politicians reduce the salaries of officials responsible for overseeing regulation of critical infrastructure. Due to a decrease in funding and the reduction of their powers, regulators cannot attract highly educated and experienced employees for the key roles of ensuring quality control and regulation compliance.

In the accidents under consideration, the reduction of effective state regulation allowed the managers of private business, with the approval of their owners and shareholders, to focus exclusively on chasing short-term, ambitious financial goals. This behavior led to frequent security breaches, which jeopardized the long-term sustainability of the business. The accidents reviewed in ^5,6,7 demonstrate that companies who actively lobby for weakening regulation measures and public accountability of their activities often do themselves a disservice: they lose the input of objective external controllers, who could prevent the development of critical events by prohibiting or modifying risky and reckless management decisions. Competent regulators can: (I) impose additional legal restrictions on the operation of critical infrastructure facilities under extreme conditions; (II) require a company to provide comprehensive solutions to control existing risks at industrial sites; and (III) significantly strengthen its own emergency response services to reassert control as soon as potential accidents are identified.

In addition, the legislative reduction of fines for violations in the field of industrial safety has allowed the leaders of some private companies to disregard the regulatory framework, preferring to pay penalty fines: even when repeatedly incurred, fines work out cheaper than making serious investments in the facility to eliminate risks, modernize equipment and prevent further breaches.

Ineffective state regulation, reductions in regulatory resources and powers, and even outright corruption have all encouraged some critical infrastructure managers to disregard warnings from their subordinates about significant risks at the site that could lead to serious accidents. In some cases, employees feel it is their civic duty to prevent a critical development of events, but they cannot take their concerns about safety violations at work to regulatory authorities—because they know that their own bosses have close links with members of those authorities. So why bother? No remedial action will be forthcoming and all that will happen is they will get fired. In other words, they choose to remain silent about the critical risks they know are there, and keep their jobs. Often the cozy relationship between private business and regulators only comes to light after a serious accident—when investigators question hundreds of workers, site managers, and regulatory officials, and begin reconstructing the whole sequence of events.

FEAR AMONG SUBORDINATES AND CONTRACTORS OF APPEARING INCOMPETENT IN THE EYES OF THE MANAGEMENT

(this factor was identified in 60% of cases)

Whenever an organization sets short-term, ambitious development goals, subordinates are afraid to appear incompetent in the eyes of superiors and colleagues when it comes to implementation. If someone in an organization fails to achieve the goals set by owners and shareholders, managers will automatically accuse them of incompetence. Managers expect their subordinates to demonstrate excellence in achieving successful outcomes—even when there are insufficient resources, or when it is physically impossible to achieve them without violating safety regulations. Employees are understandably afraid to appear weak and useless in the eyes of their superiors. On the contrary, they want to demonstrate their competence, efficiency and resourcefulness in order to justify the trust their leaders have placed in them. Sometimes, this can only be achieved by hiding negative information and embellishing reality when reporting progress to senior managers.

PERMANENT “RUSH WORK” CULTURE

(this factor was identified in 60% of cases)

Adopting short-term targets based on maximizing corporate profit and production, as well as tight commissioning schedules, can foster a culture of haste for both managers and their subordinates. As a result, everyone involved in a critical infrastructure organization is always in a hurry. Never having the time to work out best practice and quality solutions means employees will inevitably make mistakes and poor decisions. The pressure on managers to meet deadlines means that they do not want to hear about problems that might cause delay, so employees simply do not report them to their superiors. Instead of honestly admitting the reality of the situation, and pointing out to managers that it is impossible to complete the work safely within the specified time frame, many employees prefer to send reassuring reports to their managers and colleagues. It is easier to just say that everything is going according to plan and on time, rather than warning your supervisor—let alone the site manager—about unrealistic targets and the risks of always working in a hurry.

“SUCCESS AT ANY PRICE” AND “NO BAD NEWS” CULTURE

(this factor was identified in 55% of cases)

Ambitious business development goals create a very high bar for everyone in an organization to achieve certain goals or demonstrate continuous improvement. Leaders often create a climate within an organization in which goals must be achieved at all costs. Therefore, they do not tolerate subordinates who bring them bad news, wishing only to hear reports of success. In response to this, employees feel they have no choice but to solve the problem on their own, and only let management know after a successful solution has been implemented. In some organizations, a real dread of senior management can develop, and it becomes almost impossible to admit any professional mistake or uncertainty for fear of the sanctions or punishments that may follow. Some employees cannot stand this pressure and, in order to maintain the illusion of success, they begin to falsify their achievements. Unwilling to hear anything but good news from their intimidated employees, executives are happy in the illusion that everything is going well on their watch and there are no serious problems or risks. It is only when a critical incident does finally occur that the real situation in an organization finally becomes clear to the management. Until then, the truth has been hidden—because employees felt compelled to conceal it, to meet the inflated demands imposed by their senior executives.

IGNORANCE ABOUT RISKS AND WISHFUL THINKING/OVERCONFIDENCE/SELF-SUGGESTION/SELF-DECEPTION

(this factor was identified in 50% of cases)

Self-deception on the part of those involved in the receiving, processing and reporting of risk information is one of the main obstacles to quickly identifying critical situations and communicating this to other stakeholders. Instead of analyzing the situation, studying the facts, looking for primary sources and objectively evaluating the information received, many managers choose to believe what they want to believe. Even in situations where a cautious and critical attitude would seem eminently sensible and necessary, a significant proportion of managers prefer to rely only on the calming reports they receive from subordinates. Reassured that all is well, they can avoid the anxiety of having to take a critical view of their own earlier management decisions. This kind of wishful thinking from the top can lead to a group mentality developing, where everyone is eager to convince everyone else that all is well and any risks are under control. Self-deception inevitably leads to a faulty perception of reality, which can clearly compromise an organization’s ability to respond effectively to existing and mounting critical risks.

WEAK INTERNAL CONTROL WITHIN AN ORGANIZATION

(this factor was identified in 30% of cases)

For executives seeking to achieve impressive results in a short time, the relaxation of internal control within an organization could appear to support these goals. A professional, efficient and independent control department, which collects information about all activities of both staff and managers and produces impartial assessments, constitutes a dangerous witness that can be exploited by regulators and government investigators in the event of disaster. It is therefore not surprising that, in some accidents examined in the study, internal regulatory departments had either been abolished or were staffed by incompetent or under-resourced employees who failed to perform their duties adequately. If employees are aware that their leaders are unable or unwilling to exert appropriate control on the ground, they are much more likely to delay or withhold the truth about risk concerns in their area of responsibility.

3 Views of Practitioners Managing Critical Infrastructure About Why Managers Are Reluctant to Receive Risk-Related Information, and Why Employees Are Reluctant to Disclose Risks

Between October 2018 to June 2021, the present authors conducted in-depth interviews with 100 senior managers, technical managers, middle and lower managers, and occupational health and safety managers with leading industrial companies in Western Europe (41% of all respondents), Russia (32%), North America (10%), Middle East (9%), Africa (5%) and Australia (3%). These were drawn from the following sectors of critical infrastructure: power industry (40% of all respondents, including nuclear, thermal, wind and hydro generation, and electricity distribution), oil and gas (35%), chemical and petrochemical (9%), mining (6%), metallurgy (6%) and other industries (3%). Some of the respondents had previous experience as representatives of state regulatory bodies in the field of industrial safety.

It was important for the present authors to hear directly from practitioners about the factors that affect the poor quality of risk information transmission within traditional hierarchical companies. Practitioners manage critical infrastructure on a daily basis, constantly analyze technological risks, are immersed in occupational health and safety issues, and regularly participate in internal investigation of incidents.

All interviewees were first asked about: (I) “Why subordinates are sometimes reluctant to inform managers about problems within an organization (e.g. fail to report problems with equipment, errors that have been made, or the impossibility of achieving corporate goals, etc.)?” and (II) “Why managers are sometimes unwilling to hear bad news from subordinates about observed risks and problems in an organization, and about additional investments such as equipment upgrades that are necessary to create a safer production process?”.

3.1 Who Creates an Internal Climate Within an Organization Where It Is not Acceptable to Talk About Problems?

Most of the interviewees, when asked why employees might hide information about the problems of an organization, soon moved on to talk about the responsibility of the leaders themselves. By their reluctance to hear about problems within an organization, leaders can discourage employees from raising these issues in the first place. Therefore, the next question to all respondents was: (III) “Who bears more responsibility (managers or subordinates) for creating an atmosphere within an organization in which discussion of problems is not welcome?”. 97% of interviewees responded by placing the majority of the blame on managers. 2% of respondents argued that the responsibility is equally shared by managers and subordinates. 1% of respondents believed that the reasons for such an internal corporate atmosphere lay mostly in the personal qualities of individuals and their relationship with colleagues, and not in their organizational roles, whether manager or subordinate. None of the respondents placed the main responsibility on employees. However the head of HSE department of a mining company, at the beginning of his interview, categorically stated that he believed employees have a tendency to conceal information about their activities from their superiors. However, on further discussion around the actions of the owners and senior managers he worked with, he changed his point of view and concluded that managers bear most of the responsibility whenever an organization distorts information about risks.

Delving deeper into the points of view of some of the interviewees provides an interesting perspective on the matter.

The head of HSE department of a gold mining company cited Deming, who said that most quality problems at work are due to system errors in management, which put employees in a position where they are forced to make defective goods. Deming believed that 96% of all organizational problems are due to managerial errors and incorrect processes, while employees and other factors influence only 4% of cases.^8,9 The respondent maintains that it is the same story with incidents and safety violations. Ordinary employees are not suicidal. They feel uneasy about the risks involved in running critical infrastructure, and so are ready to talk about problems and safety issues. However, the culture fostered by top management makes it very difficult for employees to air their concerns. In his opinion, the silence of employees about safety issues starts with managers who do not want to hear them.

The head of HSE department of a fertilizer manufacturer agrees that a significant part of the blame for the widespread practice of concealing problems lies within top management. As the Latin proverb puts it—“piscis primum a capite foetet”—“fish rots from the head”. The way employees behave is predetermined by the unspoken position of top management, who do not want to hear about bad news.

The HSE head of an oil company also believes that the behavior of employees depends on the corporate settings that managers determine. Employees are afraid to send bad news up the hierarchy because management do not want to hear about problems. Too many leaders respond aggressively to any negative information, assuming that the bearers of the bad news must be responsible. As a result, employees shut down and decide not to bother this kind of manager anymore—knowing that, if they carry on, their well-intentioned honesty may well threaten their careers. Sometimes a leader like this will not say a word, but his demeanor will make it perfectly clear that he is extremely dissatisfied. In general, until senior managers show their subordinates that they want to receive information about problems, and will put their time into solving them, the transmission of risk information in an organization will not improve.

A safety consultant and former HSE director in mining and metallurgy shared the following experience. When he advises top management in industrial companies, he starts by asking them what they want to hear after an external safety assessment at a production site. 1/3 choose the option “only good news, we are not interested in hearing about bad news”. 2/3 choose the option “if there is bad news, we want to hear it, along with good news”. Clearly one should not expect much appetite from managers in the first group to change things in their companies, even if they have serious safety problems in the workplace. If managers only want to hear good news, then they are not committed to change: they are comfortable in the fictional world that they have created around themselves. But the second group of managers is focused on change. The fact that they want to hear bad news shows they are ready to take action and allocate resources to stop the most critical problems, although in this case too there is still a question of breaking down priorities. It is very important to understand that employees will adapt to the settings determined by top management. Employees are only the executors of decisions made by the authorities. They play by the rules that exist in a company and are established by the leadership. If the CEO and his deputies make it clear that they have no wish to concentrate on the negative, or discuss issues, and constantly turn the conversation to positive news and achievements, their subordinates will get the message: if they want to be respected and build a career in this company, their reports to the management must be a success story. The way ahead is to solve problems yourself, without disturbing the leaders. The responsibility for creating a culture where discussion of problems is not welcomed in the company lies solely with senior management and the owners.

A regional manager in the power industry, responsible for the operation and maintenance of turbomachinery, agrees that executives are the ones who play the greatest part in fostering a corporate culture of “no bad news”. Leaders are those who set an example. If managers do not actively promote dialogue and open communication with subordinates, they are helping to maintain the existing atmosphere of silence about problems.

The head of an oil production facility believes that what causes employees to hide problems is a corporate culture of silence, i.e. the unspoken rules established by senior management that discourage employees from reporting bad news. After all, the attitude of the average senior manager will be something like this: “We must find the culprits who allowed this problem to escalate to a critical level, and they must be punished so that others will see and not repeat their mistakes”. In fact, what “others will see” is that reporting a problem will just lead to a search to identify putative perpetrators; they had better make sure they only send good news upstairs, so that they look positive in the eyes of the leadership and continue to make progress in their careers.

A critical infrastructure manager also maintains that the key reason why employees are silent and only give good news to the top is that managers are reluctant to hear about problems, reluctant to understand what has caused them and reluctant to allocate resources to subordinates to solve them. According to the respondent, employees are ready to talk about problems—the key question is whether managers are ready to listen.

The HSE manager of a production company managing a large number of hazardous chemical processes agrees that managers are chiefly responsible for this situation. By superimposing the organizational structure of the company onto the company’s “risk pyramid”, he showed that up to 80% of all critical risks are supervised by a board of directors. Top and middle managers deal with 10%, and 10% are left to shop floor managers and ordinary employees. The priorities set at the very top of the company determine how risks will be managed at the very bottom. If a board of directors and senior management are focused on financial results and do not want to hear about safety and technological problems, they will create an atmosphere in which delivering bad news that impacts profitability will not find support. On the other hand, if leaders prioritize the long-term maintenance and development of production assets, they will want to hear about production safety issues and react to risks proactively. Employees will respond to this and inform managers if they see any problems.

The HSE manager of a metallurgy company believes that, when employees violate safety requirements, they often do this because of external pressure. In the investigation of most industrial accidents, it turns out that employees were under unspoken pressure from management to complete the production task faster and without involving additional resources. It is important to understand that the head of a company is responsible for the atmosphere that prevails there. It all starts and ends with the boss. Moreover, leaders can pay lip service to the need for openness in discussing risks, but if nothing really changes, and instead such openness just seems to be punished, then employees will continue to be economical with the truth.

The HSE head of an oil company describes the chain of logic as follows: when subordinates come to senior management with a list of operational problems, they are told that solving these problems is their job because management do not want to be bothered with such minor operational issues. But when these same operational problems cause an emergency at a production site, leaders will reproach the site manager: “Why didn’t you say anything? You need to understand when not to disturb headquarters with small things, and when you need to ring the alarm bells!”. In reality, senior managers are creating and reinforcing a tacit system so that employees do not bring them any bad news. And it is a vicious circle: managers do not want to hear from subordinates about problems, so their employees keep quiet and do not inform them. The respondent identified two primary reasons for employees concealing information about problems: corporate goals and priorities dictating over-ambitious production and financial targets, and the behavior of leaders who say things like “I don’t want to hear any more bad news”, or “We trusted you and delegated power, but you couldn’t do it”. The respondent did not see silence or concealment stemming from the personal motives of ordinary employees. Most employees are simply forced to adopt the established and unspoken corporate rules, and comply with them in order to make a career; those who openly disagree with the rules are forced to leave.

The vice president of a gas pipeline construction and repair company is very skeptical of the idea that employees, on their own initiative, will disclose information about risks if the leaders do not want to hear about them. If managers are not interested, then employees will certainly not volunteer. Even when managers want their employees to tell them about problems, it takes years for employees to believe that they would not be punished for doing so. Therefore, if senior managers want to get an objective picture of the situation on the ground, they must be very persistent. Employees need to see real positive experience for many years before they stop being afraid of disclosing risks.

The head of a power plant shares the belief that the leadership, not the workforce, are responsible for the poor feedback and the concealment of risks in a company. It is the expectations they set that determine how employees will behave when they encounter a problem or a critical risk. If managers create a system of punishment whenever negative aspects of the operation are revealed, then employees will avoid sending honest feedback to the top. If managers guarantee that the prompt reporting of accurate information will meet with approval rather than punishment, then employees will be happy to inform the authorities.

A psychologist and consultant in the field of organizational behavior identifies the following deep-seated fears that employees tend to carry: (I) loss of one’s own worth, of respect or love; (II) loss of career prospects; (III) loss of certainty of the future (knowledge/ignorance); (IV) loss of recognition as a professional. The question is how executives manage these fears to reassure and empower employees. Punitive and intimidating behaviour by executives can increase fear among employees, in which case they will keep quiet. Nevertheless, executives can also reduce fear, by increasing openness and explaining the logic of management decision-making in a transparent way, in which case subordinates are more likely to share their concerns. If a company has a negative track record in responding to feedback, punishing employees for reporting to the head and fostering fear in the workforce, then employees will try to avoid giving feedback. The kind of environment created in a company depends on management. If the pervading environment is one of fear, then the fears of employees will be exacerbated. In an environment of fear, an employee’s response to a threat may take the form of avoidance, paralysis or aggression. If an environment of respect and openness is created, employees will be reassured and their fears will decrease or completely fade away.

The HSE head of a metallurgy company believes that it is important that senior management understand that bad news brought today can help to solve a problem proactively, and prevent it developing into a catastrophe tomorrow. Discussing bad news is a two-way process: it involves leaders, who are responsible for decisions, and employees, who are responsible for reporting problems. Of course, it is up to senior management to make the first step. Without the sincere desire of managers to solve the problems that employees are reporting, nothing will work. If managers do not want to deal with problems, and punish employees for bringing bad news, then of course employees will be silent for the sake of their career prospects. If the upper levels do not want openness and communication, the lower levels will never feel safe to participate in it. If leaders want to change the situation for the better, the higher up they are in a company the more likely it is that positive change will happen.

The chief HSE officer of an oil service company thinks that the reason it is a cliché to say “everything starts from the top” is that it is true. Experience shows that it is the top of the corporate pyramid—the CEO and the board—who are responsible for the corporate culture that develops in an organization. The base of the pyramid—middle and lower-level managers and rank-and-file employees—will follow the tone, orientation and culture set by those at the top. This applies to attitudes around safety just as much as other aspects of the corporate climate.

In this regard, a consultant in nuclear safety with long experience in nuclear power plant operations cites a simple example from everyday life. There is a family of two parents and three or four children. Who is responsible for creating the family culture? Of course, it is the parents! It is the same in an organization: senior managers are responsible for creating a culture of openness when discussing issues, and for ensuring that this culture is correctly interpreted at all levels of the hierarchy.

An HSE/EHS consultant specializing in manufacturing makes the following argument: history shows that all great battles have been won and lost because of the decisions of generals. Subordinates follow the rules set by those in power. Therefore, those who manage by setting goals and giving instructions to subordinates must always be held accountable for their decisions.

A safety expert and consultant working mainly in chemical and steel manufacturing considers that 85% of the internal corporate culture is formed by top management. If senior management has a clear idea of how it wishes to develop the organizational culture, then this can be rapidly achieved.

An HSE manager and consultant with experience in nuclear power and construction believes that a reluctance to discuss problems within an organization will only change when senior management turn to subordinates and say: “We need to know what is happening! Please help us with this”.

The senior vice president managing HSSE (Health, Safety, Security and Environment) for the asset operations of an international electricity company believes that the corporate culture around risk communication is created by senior management. Employees in a company tend to imitate the leadership style used by their superiors, even if this is often subconscious. If senior management want to make a good impression on shareholders and the media by issuing a glossy annual report, then employees will be encouraged to emulate this behavior at their level by reporting good news up the hierarchy and not revealing the problems in their area of responsibility. Employees will not consider this shameful or dishonest: they can see that senior management are doing the same with shareholders and the media, apparently with impunity. Thus, the behavior of senior leadership can create conditions that encourage the concealment of serious incidents, and this unhealthy intra-corporate atmosphere prevents the prompt reporting of problems. Left unattended, those problems will only get worse, and eventually lead to a serious accident.

The CEO of a consulting company in human performance, with wide experience in power generation, agrees that it is senior managers who create the internal organizational environment. If an unspoken culture that does not want to acknowledge or discuss problems is established as the norm, it becomes so ingrained that even a change to senior managers do not alter the situation. Change will only happen when senior managers encourage a more open atmosphere, and show their employees how to behave differently.

The HSE head of an electricity production company considers that a manager who does not want to hear the views of subordinates on the problems of an organization does not meet the standard of a good and effective manager as generally defined in most countries.

3.2 Reasons Why Leaders Do not Want to Hear About Problems from Their Subordinates

In addition to the text, cartoons will illustrate the relationship between owners, senior management, middle managers, junior managers and ordinary employees.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

• 1. TACKLING REPORTED PROBLEMS WILL BE COSTLY, AND OWNERS AND SHAREHOLDERS ARE IMPOSING STRICT FINANCIAL AND PRODUCTION TARGETS

58% of the respondents’ answers about why managers do not want to hear about problems from their subordinates because the costs of addressing any serious issue in a critical infrastructure company will be very high. In addition, owners and shareholders are often imposing strict financial and production targets on their senior managers already. Reports from employees about any serious safety and technological problems may threaten the implementation of these plans, as well as negatively affecting the career and the earnings of senior managers.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

Essentially similar opinions are shared by leaders at various levels in a wide variety of industries. The fact that their views are so similar shows how serious and how prevalent the problem is, occurring worldwide and across different industries.

The vice president of a company building and repairing gas pipelines postulates that in the market economy, the sole criterion by which an organization’s performance is measured is profit. The effectiveness of an organization’s senior managers is also evaluated according to the profits they deliver to shareholders, and their bonuses are calculated accordingly. When employees come to them with information about the risks of operating equipment, addressing the situation requires expenditure, which will cut profits in the short-term. In truth, many senior managers already understand the main problems faced by the enterprises entrusted to them, but they cannot take the action necessary because of pressure from the shareholders, who are only concerned about the short-term profit that management will deliver. This is probably the main reason why senior managers are reluctant to receive information from employees about known problems.

The HSE head of an oil company points out that responding to the existing problems of a large industrial company requires huge resources to modernize equipment. These additional costs are unlikely to be agreed by owners and shareholders if they see their involvement with the company as a short-term financial venture rather than a long-term strategic investment. These “short-term profit” owners, and the managers hired by them, fail to understand that investments in safety are profitable—but only in the long-term, as they maintain the value of the asset and allow losses from accidents to be avoided. In their view, the key factor is the size of the annual profit and not the long-term growth of the value of the asset. Therefore in companies owned and operated by these people, the emphasis is on the growth of production, not the safety of production. Priority is given to profits, not investment in modernization. In these companies, talk of rising safety costs and the necessary investment in infrastructure upgrades is bad news that neither shareholders nor senior management want to hear. They only want to hear good news about how profits and productivity have risen and costs are falling, how employees are embracing the owners’ and shareholders’ austerity, and so on. If someone dares to reproach the senior management for their focus on short-term profit, or tries to point out the existence of a fault or dangerous practice within a company, their response is to get rid of that person so that they cannot set a “bad” example to the remaining staff. In essence, questions about safety lead to costs, and costs are unwelcome news in these companies.

An HSE consultant working mainly for oil and gas as well as air traffic control believes that the most important thing to remember is that senior managers are always accountable primarily to their shareholders. Ultimately, shareholders and senior managers focus mainly on the profits that can be generated by the production process. The costs of mitigating any identified serious risks can be very high and are liable to result in a drop in production, at least in the short-term. All this can negatively affect the implementation of the agreed production plan. Therefore, senior managers are constantly seeking a compromise between production, finance and safety. In many cases, finding a workable compromise solution is difficult. Hence, many no longer want to be informed about problems, with the motto “what I don’t know doesn’t bother me”. As a result, small issues are ignored and left unsolved, and risks accumulate, eventually leading to the development of major problems which are likely to be much harder and more costly to put right.

The head of HSE at a mining and metallurgy company believes that the reason some critical infrastructure executives do not want to hear about workplace problems is the high cost of tackling them. In most companies, key performance indicators for managers are all about maximizing profits, and the additional costs of solving problems will inevitably reduce the profitability of their business. Naturally, this will adversely affect what the owners think of the work performed by their managers, and the managers are likely to lose their bonus. For many executives, it just does not make sense to invest in solving problems that will probably not cause anything disastrous to happen over the next few years. When they look at a potential safety issue, they will assess the likelihood of any negative event occurring—and may then decide to take the risk, and maximize profits by avoiding the costs of modernizing equipment. After all, if senior management do not have the resources to solve a problem, they will have no option but to turn to the owners, and that would mean admitting the unfavorable situation at the production site. Therefore, some senior managers, even when informed by their subordinates of serious issues, will avoid raising them with the owners because they do not want to adversely affect their career prospects. In this regard, it is worth noting the irony that the only managers who are really free to make adequate decisions are those who are wealthy enough, or confident enough in their professional security, not to fear losing their jobs. Job insecurity is no respecter of rank. Whether you are operating production equipment or running the company, you know that your job depends on your performance—and if you are afraid of losing your livelihood and your career, you will be cautious about the decisions you take.

The HSE head of a production company, managing a large number of hazardous chemical processes, observes that any manager has somebody else above them. For senior management, this is a board of directors, and even board members are answerable to owners or a pool of key shareholders. Therefore, if employees bring an issue to senior management that will require significant resources to resolve, senior managers will have to take it to the board or the owners, and admit that there are serious problems in the company. Therefore, in order not to jeopardize their own careers, some executives prefer simply not to hear about problems from employees. The employees, of course, get the message that they should only bring good news to the boss. Ultimately, instead of hearing about a potential threat in advance from their subordinates, leaders will only find out when there is an emergency and the situation gets out of control. The staff on the ground knew about the risk all along, but were afraid to inform their superiors.

The executive vice president of sustainability and HSSE at an international electricity company believes that senior managers are in the same situation in relation to shareholders as their subordinates are in relation to them: no one wants to tell their bosses about bad news, everyone wants to shine and the bosses are mostly told only about the good things.

The CEO and chief nuclear officer of a nuclear power operating company thinks that a poor corporate culture typically starts with the behavior of a board of directors or senior executives and then trickles down from the top. Everyone wants to please the person above them and, as a result, an organization will become a reflection of the values and behaviors of its most senior echelons. If the person at the top is all about results, does not want to hear about problems, and is focused on profits, then everybody else in the company must adopt the same values in order to survive. In this scenario, negative information about problems that might lower profits has no chance of reaching the board of directors or senior managers.

The HSE director of an oil company points out that even senior management are subordinate to shareholders and governments, because critical infrastructure is part of national security. If employees inform them that for any reason it will not be possible to meet the targets they have set, the senior managers will be in a difficult position: they have no choice but to go to the shareholders and the state authorities and admit that the goals they have agreed on cannot be achieved. This will not go down well. At the corporate level, shareholder returns will already have been determined. At the state level, the company’s projected production output will already have been integrated into national development programs, and budgets will have been set up according to the expected tax revenues. Desperate not to seem incompetent in the eyes of shareholders and the state, the leaders of an industrial company will try at all costs to prevent the disruption of their production and financial plans. If any subordinate tries to warn them that their plans cannot be safely fulfilled, they will make it clear to them that plans must be implemented by any means necessary. Leaders know they can get away with admitting some minor problems, but anything fundamental must be resolved one way or another before they can report it to shareholders or the state. If it seems impossible under any circumstances to do so and still achieve the agreed production and financial targets, then some managers will attempt to prove to shareholders that the plans could not be implemented without unacceptable risks. However, if the plans seem feasible to managers at what they feel is an acceptable level of risk, they will do what it takes to achieve them, despite the objections of employees.

The head of the Nuclear Design Department of a multinational electric utility company believes that in addition to financial and economic demands, leaders of large projects are under political pressure to develop their infrastructure. The owners and senior management will often have made overly optimistic promises to politicians about the progress they expect to make in developing their facilities. Therefore, they do not want to hear from their subordinates about problems which will cause delays and additional costs during the commissioning of new critical infrastructure.

The HSE manager of a petrochemical company reports that some executives believe that, if they are informed of a serious problem—which even they do not have the resources or expertise to solve—they will have to go to shareholders and ask for additional resources to tackle the situation. This puts them in the same situation as their subordinates, who could not solve the problem on the spot without involving their superiors. Most managers feel that staff members should solve any issues they encounter, but that if their subordinates cannot do so for any reason, the managers themselves will have to deal with it. If a senior manager has to ask shareholders to allocate additional resources to deal with a problem, shareholders may well reconsider their decision to appoint that manager in the first place. After all, most shareholders of large assets have the same attitude as their managers take to their subordinates: “We hire people on a very good salary, and we expect them to solve a company’s issues without having to draw our attention to the problems that arise”. Naturally, senior managers do not want to give shareholders a reason to doubt their ability to hit their profitability and production targets and make effective decisions. Many company executives, especially in finance departments, believe that if a figure is set for expenditure per year, it is unacceptable to exceed this estimate. The last thing managers want to hear about is an unforeseen problem, when they know they cannot find funding to solve it within the approved annual budget.

The head of the HSE department of an oilfield service company has a similar opinion: shareholders hire top managers to show a positive result in the form of growth in profits and output volumes, and they expect them to deliver. Therefore, the ambitious financial and production plans set by shareholders dominate the work of senior managers. When they get a message about a serious production problem, they know that it will require enormous resources to solve—stopping production, lowering profits, and increasing costs. And as soon as senior managers respond to the message, they are on record as knowing about the problem. They will now need to contact the shareholders and explain that they can no longer guarantee that financial and production targets will be met, and that they will need to increase costs in order to solve accumulated problems in the workplace. Obviously, the shareholders will not welcome this news, because they expect senior management to solve any problems that come up and still meet their targets. Some senior managers will therefore simply ignore warnings from subordinates, hoping that they will find a way to solve their problems independently. Managers can very easily make it clear to employees that they do not want to hear about problems, but only want to hear about positive results.

The head of HSE at a steel company has also been a consultant for dozens of large industrial companies, and has come across several cases where senior managers knowingly ignored negative information from subordinates about their company’s operations. In every single case, those managers were working on a very ambitious development plan for a company, imposed on them by shareholders. Senior management refuse to respond to problems, even those constantly reported by various employees, if tackling them might stop them meeting targets set by the owners. They are afraid that the owners or shareholders will question their professional competence if they seem unable to independently solve complex problems and achieve the planned production and profit levels. With neither the resources nor the motivation to change anything, they would rather not react in any way to messages about problems coming from below. In this situation, the lack of objective feedback in an organization is primarily related to the goals being set by shareholders and the resulting actions of senior management, rather than any reticence from employees. In other words, the concealment of information about risks does not stem from the bottom of the corporate pyramid—between ordinary employees and lower or middle managers—but primarily arises from the communication between top management and shareholders, and between the middle and top tiers of management. Key performance indicators (KPI) and management bonuses also tend to be tied to the production and financial plan of a company, which has been defined by shareholders. Anxious to meet the annual performance targets set by shareholders, managers prefer not to respond to problems. The head of a workshop at this steel company once told the respondent in a private conversation that the only people who survive in the company are those who solve problems on their own, and do not raise them to the level of their superiors. With a corporate set-up like this, workers will do their utmost to deal with problems independently and complete the tasks they have been set. They will only inform bosses at the last possible moment if there are problems that threaten the financial and production plans approved by management. For their part, managers do not want to hear about risks, because of pressure from owners, shareholders, and aboard of directors. It is incentives and priorities set at this top level that make senior management unwilling to hear about problems being raised from below.

The HSE head of a mining company says that, in recent decades, many owners and shareholders of critical infrastructure companies have begun to view their assets as short-term investments, from which they can squeeze the maximum profit in a short time without making investments.¹⁰ That is why employees and managers who object to such short-term opportunism are driven out of an organization, while the rest are expected to dutifully take whatever risks are required to achieve the owners’ or shareholders’ aggressive corporate goals. Employees who are willing to go against the compromising tide—to defy the leadership at all levels of a company, and jeopardize their own career and livelihood in the process—are extremely rare. Most staff prefer to tow the company line and take the production risks they are tacitly expected to. With no honest feedback from their subordinates, owners and top management impose more and more ambitious and unrealistic production plans, either ignoring or quite possibly having no idea, that their employees on the ground are already taking dangerous risks to fulfill existing targets. In the opinion of this respondent, the position of owners and senior management thus has a key influence on the practice of concealment/disclosure of risks by middle and lower management, as well as by employees on the shop floor. If the owner and the executives do not want to know about problems, they will not hear about them. At every level of management, all the way up to the boardroom, the information passed on will be “filtered”.

The SSE manager of a gold mining company notes a pattern that he observes when preparing the annual work plan of industrial companies for the next year. Managers at different levels always try to plan their activities based on the most optimistic forecast for profitability and cost reduction. This automatically means that the bar of corporate achievement is constantly rising, affecting all employees, and that the senior management’s perception of the real situation within an organization is distorted. At the end of the year, a company is inevitably faced with the reality that it was not possible to fulfill its overly optimistic plans. Disappointment and fatigue from the “failed” year sets in, but the problem was that unrealistic goals had been set from the beginning. According to the respondent, senior managers should be ambitious, but realistic.

One lower-level manager, more directly responsible for the operation of a critical infrastructure on a daily basis, shared his company’s existing practice. Every year, plans are set for 2–5% growth on several business indicators. Accordingly, senior management set ambitious goals, and no one at the top wants to hear from subordinates that these goals cannot be fulfilled: “Every year you need to show a better result than in the previous year. In reality, this cannot be achieved without additional resources or without the threat to other indicators, including safety. But fewer resources are being allocated, and plans and KPIs are becoming more ambitious. We cannot object to this system—if we do, we will be perceived as disloyal employees. Therefore, no one can write at the end of the year that he was not able to fulfill the plans set by the management. In all reports the situation is embellished from what is really happening. However, senior management are happy to receive such reassuring reports, which have little to do with the reality of what is happening on the ground. Going openly against such plans is suicide for the career of any employee. After all, the senior management will not listen to anyone, but simply mark down such an employee as a rebel, a direct threat to the course intended by top management. All this resembles a fairground attraction with a squirrel in the wheel, when every minute the squirrel is forced to run faster and faster. But muscles have a limit, whereas the company has no growth limit and demands that everything must keep improving year after year”.

The vice president of an electricity company and the head of a large power plant both maintain that sometimes senior managers are aware of serious problems that employees have reported to them, but do not have the resources to solve them. This is mainly because the shareholders who appointed senior management consider their investment in this asset as short-term, and as such, all they want to hear from senior management is positive news: rising profits and measures to reduce costs. As a result: (I) senior management know that shareholders will be extremely negative about any requests for increased production upgrade costs to solve operational problems; (II) senior managers cannot admit to employees that they lack the resources to eliminate problems and thus in reality are unable to solve them, as admission of their helplessness to subordinates will undermine their authority as managers; (III) when resources are limited, senior management must be creative if problems arise, and make difficult decisions to find resources within an enterprise to solve them. Therefore, senior managers will do everything they can to avoid hearing bad news from employees, shutting down the communication of negative information and delegating the solution of any arising problem to the middle tier of production site managers. But middle managers also lack the resources to fix problems. They too try to avoid receiving bad news about problems that they cannot solve, preferring such problems to remain at the level of lower management. These lower level managers do not want to hear about problems from their subordinates either, and insist that they are solved by the workers who have spotted and reported them. In the end, the only resource available to deal with risks is the ground level staff at the production site, who come to managers of different levels and warn them of these risks. It turns out to be a vicious circle: when employees complain to management, who have extremely limited financial resources because of the position of shareholders, they put themselves in conflict with management. Ultimately, by blowing the whistle, the workers operating the hardware take the burden of solving the problem on themselves, because they are in fact the management’s only resource to tackle it. This is how feedback collapses within a large critical infrastructure company: information about risks and problems remains at the grassroots level. The entire management hierarchy is in a state of euphoria from all the positive news about the growth of financial and production indicators, the transmission of which is welcomed. However, the risks are not being tackled and the company is moving towards a catastrophe, which will come as a nasty shock for senior management and shareholders as a result of their approach to the allocation of resources. Such short-term financial target-setting turns out to be a false economy: when disaster strikes, dealing with the consequences will require hundreds, if not thousands of times more resources than the funds that would have been required to reduce risks when they were first noticed, often many years before the emergency, as already mentioned.

A safety consultant with experience in various industries notes that when he works with supervisors and rank-and-file employees in the workplace, people complain that higher and middle managers ask them to carry out a production plan, but none of the senior managers asks about the risks associated with its implementation. In other words, managers often directly push those operating their facilities to violate safety standards to implement the plan, and do not want to discuss how to deal with the risks involved. This is a one-way (monologue) communication system, where orders come from above to achieve certain results, but there is no feedback channel that would allow employees to express their views in an honest dialogue with their superiors.

In this regard, one thermal power plant director (middle management) relates an interesting example of the feedback he once gave to senior management. Headquarters had asked the power plant entrusted to him to increase power generation, reduce costs, and increase productivity to improve the annual financial performance of the energy company. In response to this, he told senior management at headquarters that he would be able to ensure a multiple increase in the revenue of the power plant and the productivity of his subordinates in the very short-term, but only by cancelling planned repairs of equipment and laying off most of the employees. He continued by stating that, in the first year, the plant would show the phenomenal growth of efficiency they were asking for, but most likely, it would be the last year for the plant to produce electricity. There would be an exponential increase in equipment accidents and failure, likely leading to a major incident, which would destroy the plant’s equipment. As a result, such a short-term strategy of maximizing profits and minimizing costs would result in a sharp increase in financial efficiency over the short-term, but lead to a long-term depreciation of fixed assets. Having listened to this argument from the director of the plant, the senior management at headquarters stopped sending ultimatums to the power plant to increase production and the productivity of workers by any means necessary.

The HSE head of an oil company expresses the view that responding to the problems of a large industrial company requires huge resources to upgrade equipment and train people to behave safely in the workplace. However, owners and managers hired by them do not understand that investments in safety in the long-term are profitable, that they will preserve the value of the asset and avoid losses from accidents. Priority is given to profits, not to investments in modernization or safety of production. In such companies, talking about rising safety costs and necessary investments in infrastructure modernization is bad news that neither shareholders nor senior management want to hear. They only want to hear good news about how profits and productivity have grown, how costs have been cut, and how the workforce approve of the course of austerity set by owner and shareholders. If someone starts to reproach senior management for following such a course, or tries to point out the presence of very dangerous practices in the company, they will be silenced and most likely dismissed. In general, talking about safety involves cost, and costs are bad news in such companies.

According to the HSE manager of an oil company, many rank-and-file employees subconsciously divide their activities into two components: meeting production targets (drilling indicators, volume of oil, etc.) and managing industrial safety. Of course, management will approve of employees who help them achieve industrial indicators and results. Low accident rates and other actions to improve industrial safety are also approved by managers but, in many industrial companies, this is perceived as a secondary task in relation to achieving production indicators. If employees offer management something that will further improve industrial performance and financial results, these tips are seen as innovative ideas and rationales (“good news”) and get quick approval from senior management. Information on industrial safety risks and problems, however, tends to be seen by senior management as a headache (“bad news”) as it will require additional financial resources and time to solve the problems identified. Subconsciously, managers want to hear good news from employees, not bad news, and employees instinctively know what senior management want to hear. Being part of the good news story about achieving industrial performance can make a career within a large company, so many employees invest in this area of work. The same goes for priorities: employees for example prefer to focus on drilling and extracting more oil than filling out STOP [Safety Training Observation Program] cards on the observed risks or taking a leadership course in industrial safety. It is natural that they prioritize these because they know their managers are paying attention to production achievements, not to safety issues. Unfortunately, this leaves most employees with a feeling that industrial safety issues are secondary to production results. It all stems from the attitudes determined by senior management. Accidents are rare—many employees have been working for years and never faced serious emergencies—and managers constantly demand more progress towards the industrial indicators they have agreed with the shareholders. Inevitably then, the focus of communication between employees and senior management is on results and achievements, not on problems. Moreover, employee salaries are generally tied to performance, and safety issues are seldom integrated into pay systems in the same way. Every factor motivating employees is pushing them to neglect technological risks in favor of meeting performance targets.

• 2. MANAGERS ARE AFRAID OF BEING SEEN AS INCOMPETENT IF THEY TAKE RESPONSIBILITY FOR PREVIOUS BAD DECISIONS THAT HAVE CREATED CURRENT PROBLEMS

38% of respondents believe that when employees inform managers about any serious problem or risk, they are highlighting the bad decisions and mistakes made by managers in the past that have led to the problem developing in the first place. So rather than admitting that they may have made a mistake, managers try not to hear about or respond to current problems.

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The vice president of a gas pipeline construction and repair company points out: “Problems don’t just come from nothing!”. In other words, every problem is the result of a series of poor managerial decisions.

The HSE head of a petrochemical company says that some executives consciously support the myth that they are infallible, so that their credibility remains unshakable in the eyes of colleagues, subordinates, and shareholders.

An HSE manager of a steel company observes that a problem will often have developed in the first place because senior managers in a company made a bad decision. As such, acknowledging the problem is seen as an admission of guilt.

The HSE head of a mining company takes a similar view. When an employee informs management about a problem, it turns out in many cases that the problem stems from previous erroneous management decisions: as the fable puts it, the emperor has no clothes. For many managers, such a message from a subordinate is tantamount to their own public humiliation and an accusation of unprofessionalism. As a result, in order not to lose face in the future, some managers decide to remove the “offending” employee from an organization as soon as possible. It is enough to publicly dismiss one such detractor: after that, most employees will think twice before criticizing the executives. Rather than speaking unpalatable truths, they will send only reassuring and inspiring reports. Many executives do not have the wisdom to make sure they have an honest adviser—someone they can trust to give them an objective assessment of the situation in a company and, when necessary, an unflattering evaluation of their own decisions. In the end, employees just give up reporting to their seniors about any problems that management had a hand in.

The HSE director of a steel company cites some of the tactics employed by senior management when the question of previous mistakes is raised. Especially in organizations that use a system of punishment for mistakes, they will try to prevent any information on the issue coming out. For example, if a company decides to build a new workshop without proper consultation on environmental risks, and a problem later emerges there, management will do all they can to cover up. After all, solving the problem will require huge costs: it may be necessary to resettle residents, scale down production, or upgrade expensive and possibly recently bought equipment. Not wanting to take the blame for this extra expenditure, managers will simply not tell shareholders about the problem. Leaders are very afraid of looking incompetent, so they try not to associate their name with any decision that turns out to have been a mistake.

A project manager in oil and gas exploration notes that in some organizations, executives are promoted before the consequences of their poor decision-making in previous managerial positions come to light. This includes occasions where subordinates had raised objections to a manager’s plans but had been ignored, even though this subsequently led to a problem for an organization. Many managers who were involved in the genesis of these problems in their previous position use every possible strategy to prevent senior management eventually finding out, in order to avoid being marked down as incompetent and quite possibly dismissed.

An HSE manager at an oil company thinks the problem is with the egos of some executives, who despite their best efforts to achieve good results, end up failing. Leaders do not want to admit that they did not succeed. They do not want to admit they failed.

The HSE manager of an oil company draws attention to the fact that many modern executives may have training and experience in economics or finance and administrative management, but often have no idea about the specifics of a manufacturing process or the management of industrial sites, let alone industrial safety systems. Therefore, they delegate responsibility for decisions in these areas to subordinates who have competence in them. In order to make adequate decisions, executives need the support of a team of high-quality technicians who can assess risks and make informed technical decisions. Many executives with an economic background simply do not have such a team, so they try to avoid having to deal with technological issues by not hearing about them. For executives who lack the experience to understand the technical aspects of an industrial enterprise, leadership on HSE issues is very onerous. Rather than having to tackle them, they relegate issues of production safety to the background. If senior managers are not willing to communicate on these issues with employees, the employees will not communicate with the managers. If executives do not travel to production facilities or communicate with ordinary employees on a regular basis, employees will not risk passing information up the hierarchy, and no one will report new or existing problems to higher ups.

• 3. SENIOR MANAGEMENT ASSUME THAT ONCE THEY HAVE BEEN TOLD ABOUT A PROBLEM, THEY WILL NEED TO SOLVE IT

36% of respondents think managers are afraid that, if an employee informs them about a problem, they will then have to solve it.

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Some leaders think: “Why is he telling me about this—it would be better if I didn’t know anything”. They do not want to get involved in solving the problem, so would rather have the employee find a solution, and come to them with a plan. Or better still, the employee would solve the problem without even notifying senior management, and only inform them about the successful solution. There is an interesting analogy for this: when an employee tells a manager about a problem without solving it, it is as if the employee is passing a monkey sitting on his shoulders over to the shoulders of the manager. Some leaders may feel that the monkey belongs with the boss, not the employee, but if all the “monkeys” of a whole department end up sitting on one boss’s shoulders, the boss may collapse under the weight. This is what some leaders fear.

• 4. SENIOR MANAGERS EXPECT EMPLOYEES TO SOLVE PROBLEMS INDEPENDENTLY IN THEIR AREA OF RESPONSIBILITY

28% of respondents note that some managers prefer not to pay attention to warnings from employees, because they believe that employees are well enough paid and should be able to deal with problems that arise independently, without involving them.

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The manager of a production site at an oil company (middle managerial level) observes that some senior managers do their best to make sure difficult issues are resolved at the level of their subordinates, to whom they have delegated the responsibility and authority to make decisions. They tell their subordinates “we pay you a good salary to solve problems at your level and not bother us with operational issues”.

The HSE director of a mining company describes the problem as follows. Some senior managers believe that middle and junior managers are paid a decent salary precisely so that they should solve problems in their area of competence, and look for ways to mitigate risks with the equipment entrusted to them, without troubling senior management. Employees working under managers like this are forced to conceal the true situation when reporting to them, in order to survive in an organization and protect their career prospects. The constant unwillingness of managers to listen to employees over a long period of time can only result in one thing: a culture of lies at every level of an organization.

A risk management consultant in the oil and gas industry notes that many management and leadership books promote the creation of an internal corporate culture of only good news. They recommend that senior managers give the following directives to their subordinates: “Don’t come to senior management with problems—only come with problem solving”. Many years later, when their subordinates become senior managers, they will repeat these instructions to the workforce: “Don’t bring me problems, just bring me solutions”. These attitudes are deeply rooted in modern management philosophy in the form of the so-called “can-do” culture. However, this encourages employees to hide serious problems if they cannot suggest or implement a solution. They are likely to think: “Well, if I have a problem without a solution, I’d better not say anything”.

• 5. SENIOR MANAGEMENT PREFER NOT TO KNOW ABOUT RISKS, IN ORDER TO AVOID BEING HELD RESPONSIBLE (INCLUDING LEGAL RESPONSIBILITY) IF THINGS GO WRONG

27% of respondents feel that some managers do not want to hear about existing risks from their employees because they do not want to be held legally responsible for an accident or emergency. Some managers—irrationally but perhaps understandably—believe that, if risk information does not reach management, the responsibility for the onset of an emergency remains entirely with their subordinates who are managing the facility involved. This has some basis in experience. During investigations in several countries following major accidents in critical industries, some senior executives were able to avoid criminal liability because they claimed they had not been aware of the problems that ultimately led to the accidents—while their subordinates, unable to plead ignorance, were punished.

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One HSE manager of a steel company postulates that as soon as a manager knows about a risk, they share the responsibility for mitigating it, but as long as the manager is in ignorance, the employee carries sole responsibility.

The board director and site manager of a chemical company points out that from an organizational point of view, if managers do not know about a problem, then they are shielded from the obligation they would have if they knew to inform their superiors or their subordinates about it. From a legal point of view, the authorities cannot punish managers if they did not receive information about the risks that led to an accident. All this motivates managers to remain deaf to bad news.

The head of HSE of an oil company believes that, for many managers, receiving information from subordinates about a problem inevitably means that: (I) they should be involved in its solution; (II) they will have to immerse themselves in the problem and it will take up their time; (III) managers do not always have the competence to make a good decision, and therefore (IV) they will need to spend time learning new facts or skills so they can make an informed decision about the problem; (V) they will be held accountable, both for their commitment to tackle the problem and for solving it. Summarizing all this, it can be said that some managers would rather not know about problems or be part of their solution, but would rather leave solving any problems that come up to their subordinates or other managers. That way, if the problem cannot be solved, they can point the finger at others and not be held responsible. In the respondent’s opinion, this is a universal corporate “disease”.

The senior manager of an electricity company puts the situation more specifically: often the “system of silence” about the risks within an industrial company is actually created by senior management. This is primarily because senior managers want to reduce the extent of their responsibility in case an accident occurs at production site, especially if it results in major damage or even death. In organizations where this “system of silence” prevails, as the situation progresses upwards through each level of management, real-life information is adjusted to improve the assessment of existing risks. This means that the responsibility for risk prevention moves further down the managerial hierarchy. When an emergency occurs it is the grassroots employees, who independently took risky decisions, that are found legally liable. Meanwhile, their senior managers can say that they did not receive any warnings from them—and in support of this claim they can duly provide embellished reports, previously sent up the corporate hierarchy by their subordinates under the unspoken “system of silence” about problems.

The HSE manager of a gold mining company confirms the existence of this practice in many companies: it is in the interest of managers to shift the responsibility for risk management down to ordinary workers. In the investigation following any incident, few people pay attention to the underlying system of over-ambitious tasks set by senior management, which puts ordinary employees under pressure to violate safety rules to comply with unrealistic targets. If employees disagree with the guidelines of their leaders, they will be fired. Understandably, most employees dutifully follow the orders from on high, even though they do not agree with them. Fear of losing their jobs forces employees to keep their heads down, ignore their better judgment and violate safety regulations.

The HSE head of a chemical company believes that, in many companies, managers do not even think they are responsible for safety. Instead, this accountability is delegated to the HSE department, and the HSE director must single-handedly steer the safe operation of a company. Senior managers do not believe that they should be responsible for safety, so are unwilling to receive information about risks. In their opinion, these should be addressed to the heads of HSE units, leaving them unscathed by any bad news so that they look better to the owners and shareholders. This arrangement suits the managers, because they can avoid responsibility in case of an emergency at work.

The HSE director of an oil company cites an example of how she tried unsuccessfully to persuade a senior manager from the parent company to visit the company’s foreign facilities. This executive preferred to limit his supervision to the work of a limited number of facilities known to him in one country, even though he was formally accountable for facilities in several other countries. The executive did not officially admit to making no foreign site visits, but instead avoided them under various pretexts, mostly that he had been too busy. However, the facilities entrusted to him were in poor technical condition and the probability of serious accidents was high.

The HSE head of a mining and metallurgy company has repeatedly confirmed that during their trips to production sites, some managers do not allow any new risks identified to be documented. Instead, they insist that subordinates make oral reports. That way, in the event of an emergency, there will be no legally binding documents that could indicate that the risks that ultimately led to the emergency had already been identified, and that senior management were perfectly aware of them.

In some countries, the legal liability in the event of an accident falls on site foremen and shop supervisors. In other countries, the industrial directors or senior managers bear the primary legal responsibility for accidents. In the latter case, senior managers have far more motivation to immerse themselves in the problems of the production sites. They work hard to get information about risks from their subordinates as early as possible, and long before these risks become uncontrollable.

• 6. LEADERS DO NOT WANT TO STEP OUT OF THEIR COMFORT ZONE TO SOLVE COMPLEX QUESTIONS

26% of respondents note that some leaders do not want to step out of their comfort zone, change their routine or take on extra work to respond to problems their employees have warned them about.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

The HSE head of an electricity company points out that on hearing bad news, senior management should act. However, some managers do not want to leave their comfort zone to immerse themselves in solving a problem. The last thing they want to do is leave their cozy headquarters, and rush to some remote region to deal on the spot with trouble at one of production sites.

The HSE director of an oil company makes the same point: some leaders prefer not to leave their “ivory towers”. As long as the bonus comes in, they would rather not know about problems on the ground, and thus avoid responsibility for their solution. The main reason why a company hides information about risks is the attitude of the leadership, which for many years has punished the bearers of bad news and made it clear that only positive and comfortable news is welcome. He attributes this to the reluctance of managers to leave their comfort zone: they would rather “sit it out” in the hope that the problem will somehow “blow through” without personally affecting them, or upsetting the beautiful positive picture they have built around themselves.

• 7. LEADERS ARE PEOPLE TOO—LIKE ANYONE, THEY WOULD RATHER HEAR GOOD NEWS THAN BAD ONES

24% of respondents point out that one should remember that leaders are just humans underneath, and it is just human nature to prefer good news rather than bad.¹¹

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

A psychologist and consultant in the field of organizational behavior shares his professional opinion: there is more fear at the top of the corporate hierarchy than there is at the bottom. The higher up the ladder you go, the greater the entropy. Uncertainty causes fear, and managers have to deal with greater uncertainty and have greater responsibility in making decisions. Managers, like their subordinates, want a safe environment around them and want to feel safe themselves, as a result, they prefer to hear good news. Bad news strikes fear into managers because it reduces the feeling of security. Subconsciously, managers do not want to work in a dangerous or threatening environment, so they do not want to hear about problems that could upset their inner peace. When they are faced with a threat, they have the same instincts as their subordinates: avoidance, paralysis or aggression. This is why managers do not want to hear about the problems their subordinates bring to them. This can easily create a vicious circle where fearful executives respond with scorn or aggression to messages from their employees, which in turn raises employees’ fears. Employees stop passing negative information upstairs, because they are terrified of the consequences for their own careers.

The HSE director of a mining company said that everybody wants to hear mostly good things. Leaders are people too. So when the manager makes a call to a production site with the question: “How are you doing?” he expects to hear “Everything is fine”. Naturally enough, subordinates want to please the boss, so if the unvarnished truth is likely to be upsetting, they tend to embellish the situation to make it more palatable. Many employees do this quite subconsciously. And of course, many managers are tempted to surround themselves with employees like this, who will dutifully follow the implicit instructions of their superiors and say only good things.

The prevalence of this practice is confirmed by the HSE manager of a metallurgy company: many executives like to surround themselves with people who tell them “sweet” stories about what great managers they are, how well they are handling everything and how wonderful everything is in a company under their leadership. However, when things go wrong in the areas of labor protection, fire safety or industrial safety, the message is clear that the company is not doing quite so well after all. But even then, with “don’t upset the boss” as company practice, many employees will avoid bothering their superiors with inconvenient questions about the causes of accidents, as they do not want to spoil the cozy world picture the managers have built around them. In companies like this, the blame for accidents or “close shaves” will fall on specific employees in a specific area, thus avoiding the unpleasantness of looking at systemic shortcomings in the work of the organization as a whole.

The head of the well construction and repair department of an oil company believes that you should not ignore the personal strength or weakness of individual managers. Some can calmly assess problems and take fearless action to solve them; others, unfortunately, are afraid to bear responsibility, so they take a formal approach to finding out about problems, avoid initiating any decisive action and try to create bureaucratic barriers in order to protect themselves.

• 8. MANAGERS SEE ISSUES REPORTED BY EMPLOYEES AS UNIMPORTANT

23% of respondents express the opinion that most of the problems employees bring to senior management are insignificant from the managers’ perspective. As a result, some executives are reluctant to hear about the concerns of rank-and-file employees and do not want to have to respond, as for them these are minor issues. But with this approach, there is the chance that vital information about a critical risk may be overlooked.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

The HSE head of an oil company sums up the situation: senior managers tend to think that most of the problems subordinates face are local issues that the employees should deal with themselves, rather than wasting management time.

According to the safety consultant with experience in various industries, some managers have a pretty low opinion about their employees and think there is little point in getting feedback from them. They assume that all they will get from their employees is complaints, and do not expect to learn anything useful.

The head of a power plant has a similar opinion: 99% of appeals to him from ordinary employees are about better wages, reducing the workload, or considering one of the employee’s friends or relatives for work at the plant. It is extremely rare that an employee comes to him from the shop floor to discuss the risks of equipment operation or safety issues. The direct channel is intended exactly for communication about operational safety matters, but the issues that concern ordinary workers are things that relate to their material well-being, not to the critical risks of the enterprise.

The HSE head of a fertilizer mining company illustrates the problem with some examples. A group of employees running mining harvesters in a mine will think more about the health risks of working on a particular section of the mine or how to reduce the likelihood of staff injury rather than about the risk of equipment failure. The interviewee notes that, in his experience, very few people working on the shop floor are thinking broadly enough to predict the consequences of equipment failure or consider the critical risks of the entire production plant. A direct line has been set up in the company so that the workforce can warn decision-makers about the risks they have become aware of or suggest measures to reduce them. But instead, employees mostly complain to their bosses about low wages, demand more comfortable working conditions and so on—which, as far as management is concerned, is just more bad news which does not increase the added value of the product. Managers are reluctant to communicate with ordinary employees because the value of such communication for the growth of productivity and profits is almost zero. It simply generates a huge heap of problems, which cost money to solve and do not increase profits. For example, let us take the old steps in the mine. If a person slips on them, he/she may get injured. For senior management, the issue of replacing the steps seems inconsequential. Instead, it is easier for them to just tell the staff to go more carefully. The bosses are willing to spend a few pence to have signs put up warning people to be careful on the steps but will not allocate money to renovate or replace them. It seems obvious that this is a problem that could be solved promptly and that tackling it properly would be in everyone’s best interests. But in fact, managers are reluctant to deal with “small issues” that do not increase the added value of the product, creating only a wave of routine tasks in the field of occupational health. Replacing all the old stairs and ladders in an enterprise does not lead to improved product quality or speed up production time—“all” it does is slightly improve the injury rate but with increased costs and reduced profit margins. It is worth noting that all this is more likely to occur when the law only imposes low fines and penalties on companies for industrial injuries and deaths at work. If every serious injury or death of an employee cost a company a significant amount of money and made them financially responsible for creating conditions that caused such accidents, then managers would recognize that rectifying faults in non-critical equipment would be cheaper for the company than the costs arising from financial penalties and employee absence following injuries.

According to the SSE manager of a gold mining company, there are many small problems that bother ordinary employees at industrial sites every day. Workers disclose these problems to their seniors and anticipate their solution. However, the managers generally reply that these problems are insignificant, and thus not worth dealing with. In this way, the managers imply that they only want to hear about big, serious problems from their subordinates.

As serious critical problems appear quite rarely, this dismissive attitude from senior managers towards minor problems reported by their subordinates may well mean that information about a critical risk does not reach the ears of management in a timely manner. If employees see that managers will not take action to tackle small problems which are personally important to them, they may decide that it is pointless to inform them about more important issues—issues that could eventually affect the work of the entire enterprise.

• 9. SHORT-TERM CONTRACTS FOR MANAGERS

19% of respondents note that the reluctance of some managers even to hear about serious problems, let alone get engaged in solving them, is influenced by their short-term contracts as part of the short-term corporate goals they are expected to achieve. These respondents feel that the short-term contracts of senior managers (up to 3 years) are detrimental to creating a favorable environment for the reporting of information about risks. Leaders feel under pressure to show shareholders a quick positive result and, therefore, they are unwilling to receive bad news about production issues that will require time and money to rectify. Solving serious problems in critical infrastructure companies generally requires sustained effort over many years. The technological cycle of renewal of fixed assets can take many years or even a decade. The design and regulatory approval of a project alone will require at least three years.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

The HSE head of a mining and metallurgy company emphasizes that the main reason for the priority of profit over safety is the desire for short-term results. In many companies, corporate strategies are planned over 3–5 years, so the maximization of profit takes precedence, and industry leaders agree to a KPI to produce a given rate of profit within just one year. Few bosses even have as much as a three-year action plan. If a company is only working towards short-term development goals, there is no need to prioritize safety above profitability. Therefore, many executives focus on “quick wins” rather than on tackling longer-term issues.

The HSE director of a mining and metallurgy company points out that managers’ performance is judged mostly by short-term profitability, and their work contracts are also short-term (1–3 years). As a result, most of them will choose to maximize profits and increase personal bonuses to the detriment of solving serious problems or investing in costly equipment upgrades. At the same time, it is worth noting that most companies do actually have the resources to solve serious problems—but at the level of owners and top management, there is a consensus on the priority of bringing in short-term profits and minimizing costs.

The HSE head of a petrochemical company postulates that the short-term nature of executive contracts is dangerous for companies managing critical infrastructure. If a management team is “in it for the long haul”, it is not in their interest to leave risks unmitigated, as this could lead to an accident that will adversely affect the success of the entire company. Therefore, it makes more sense for managers operating critical infrastructure to be offered contracts with no end date. This will encourage them to remain with a company for a long-time, to employ forward-looking strategic thinking, and view the success of both themselves and the company as one and the same.

The head of a power plant (middle management) also makes the case for longer-term contracts for senior management. According to him, 3–5 year contracts for executives have recently become more popular. This is an extremely flawed idea because it does not motivate the heads of large industrial companies to deal seriously with equipment problems, which may well have a payback period of several decades. Such short contract terms do not motivate managers to think strategically and develop solutions with an eye for 20, 30 or even 50 years ahead. Understandably enough, they will plan to work out the specified short period of their contract, show a short-term result and then move on to another company. Of course, such managers do not want to take responsibility for solving the serious problems that arise from the operation of critical infrastructure. After all, solving major problems requires significant resources. The bill for these will ultimately be passed on to shareholders, and spoil the rosy picture the senior management want to maintain regarding the success of the company under their charge. Leaders must take responsibility for any decisions they make in solving problems, but the trouble is that solving problems inevitably leads to a decrease in the profit margin of the business. If they go to the owners and shareholders with news like that, they will not be welcomed, even though they are only trying to make the business more sustainable in the long-term by actively investing in equipment modernization. For many shareholders, the ideal senior manager is somebody who does all they can to reduce costs, keep the payroll down, and increase profits year on year. All of this works well in the short-term and this is the role model that most senior managers on short contracts try to follow. That is why many senior managers do not want to hear about the risks and problems faced by production sites. In their world of short-term contracts, such information is bad news, which threatens the security of their position. As a result, senior managers make it clear to subordinates that they do not want to hear about problems, and that lower and middle level managers should deal with risks on their own and on the spot, without disturbing their superiors.

The HSE director of a gold mining company expresses a similar opinion. Some managers tend to focus on quick victories instead of serious changes—but experience has shown that quick victories are often followed by a pushback, as they do not fundamentally change the way a company works.¹² Such a short-term approach means that managers do not focus on working with critical risks, but concentrate on minor problems that they can quickly solve. As a result, many managers prefer to ignore information about the more serious problems that employees bring to them.

According to HSE director of an oil company, executives responsible for production are generally very competent in technical terms and have a deep understanding of the potential life of the equipment, based on their own experience. When properly informed about an operational problem with a given piece of equipment, they can usually assess whether it will continue to run without accident for, say, the next two or three years. However, if they are due for promotion soon, they will be tempted to ignore the warning and leave the problem and the costly equipment upgrades it will bring to their successor. As the saying goes, “Après nous, le déluge!” (“We don’t care what happens once we’re gone!”). The point is that the moral character of managers, and their willingness to engage in solving problems, are more important than professional competence in many technical matters.

The HSE head of a mining and metallurgy company stresses that some managers do not want to share responsibility for serious problems that have developed in a company over decades. According to the respondent, this is especially true for those who are going to leave a company. They do not want their names to be associated with the solution of some old problem because solving a problem takes time, and may also cause a conflict that will become public and cast a shadow on the reputation of the manager who was in charge. Therefore, they do their utmost to avoid hearing about problems or participating in their solution.

The head of a safety department at a nuclear power plant cites his own electricity company, which forces a mandatory rotation of managers every 3 years. This model of personnel management has its advantages and disadvantages, but in the end, the company cannot identify who exactly is to blame for this or that problem. For example, a problem was recently discovered at one of the company’s sites. The former head of the site is already working at another site, and the new head says that he is not to blame for the problem, because it existed before he joined the company. All these short-term contracts lead to a situation where managers prefer an easy life and are reluctant to plunge into solving the serious problems at their current company, knowing that they will soon be transferred to a new job somewhere else.

According to one of the HSE directors of an oil company, managers with very short contracts will only “bring to light” a serious problem in their first six months in post, as this allows them to explain it away as something they inherited from their predecessors. After this period, identifying any problem can be a threat to the career of a senior manager, as he can no longer claim that the problem has not occurred on his watch.

In general, high management turnover can have a damaging impact on safety. The frequently limited tenure of individual managers affects the whole management team’s knowledge of the details of the infrastructure entrusted to them. According to one respondent, it will take at least a year and a half simply for a new senior manager to get acquainted with the peculiarities of a company, such as learning what each subordinate manager is capable of, who amongst the workforce can be trusted, and so on. A manager in charge of a critical infrastructure company for many years has time to get to know the company thoroughly, develop an understanding of all the critical risks and weaknesses of the infrastructure, and have a good instinct for the priorities for investment. In this regard, it is significant that some critical infrastructure companies do not seek external applications to fill senior positions, so that all the managers are long-term employees who have passed all the steps of the career ladder within the same company. Until a few decades ago, many critical infrastructure industries operated like a family, with entire dynasties of workers and executives who linked their fate to that one company or industry. This good practice is now largely lost.

• 10. A COMMON CORPORATE LEADERSHIP CULTURE PERVADES THE ENTIRE COMPANY AND INDUSTRY

15% of respondents refer to the existence of generally accepted rules of conduct for leaders in their industry. These often predetermine the behavior of senior managers in any given company, and in turn foster a pathological corporate culture that discourages honest and accurate communication through the corporate hierarchy.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

According to the HSE vice president of an oilfield services company, the industry’s accepted “code of conduct” and a company’s accumulated corporate culture together influence how former workers behave when they become executives. As managers, they feel they should behave in much the same way as they saw their bosses behaving when they were still ordinary workers. If there is an unwritten rule within the company that workers should not bring bad news to managers on a Friday night, then a leader who has come up through the ranks will also not expect to hear any bad news on a Friday night. If a subordinate turns up then with a negative report, the leader will say, “What can I do about this now? You’ve ruined my weekend! Why couldn’t this have waited till Monday morning?”.

The HSE manager of an oil company notes in this regard that in many companies there is simply no expectation at all that senior management will interact with ordinary employees. The system is designed so that managers never communicate with employees on the shop floor, let alone get honest, practical feedback from them. Managers live by the rules of a traditional hierarchy, where senior executives interact only with their immediate subordinates, and they in turn, only with their subordinate middle managers, and so on down to ordinary employees. In top-down organizations like this, information about the real situation on the ground, which ordinary employees observe from their direct experience, only ever reaches the leaders in a distorted state, if at all—because as it is passed up each successive level of management, things are slightly embellished to make them more palatable to the next manager up. If you introduce some feedback tools—for example, a “master’s day” when the craftsmen tell the chief engineer about their problems, or the senior management visit industrial facilities to meet with ordinary employees—then more managers will be included in the feedback process. But in many companies, there is simply no tradition of such initiatives, and all communication is strictly hierarchical. It is because of this that senior managers never get to hear the truth about the situation at the bottom of the organizational pyramid. These attitudes have formed over decades, and are deeply embedded within the corporate culture of a company and the unspoken rules that senior management impose. Entire generations of leaders have grown up in a culture in which only good news can be brought to the authorities. Therefore, one should not expect quick changes, even if a company’s management genuinely want to radically improve the quality of the information that reaches them.

A regional manager, responsible for the operation and maintenance of turbomachinery in the power industry, believes that in some large companies, a corporate culture of “no bad news” accumulates over decades, and dictates the behavior of many executives. If individuals—even at a senior level—try and take a stand for more open communication, the system will reject them, and they will be forced to leave the company. The prevailing culture is cumulative, constantly reproducing and reinforcing an atmosphere in which it is better not to discuss problems. Ordinary managers can do little about this situation as corporate culture is almost always formed at the level of a company’s board. As a result, a tacit collective agreement not to raise problems develops between the various levels of a company. Ultimately, it is impossible to blame any particular individual for creating this atmosphere.

An HSE consultant believes that most companies simply do not have a benchmark for a more effective model of organizational behavior. People who work in companies with a corporate culture of “don’t bring bad news to the boss” have probably never seen an alternative way of working where they can calmly discuss problems with their managers or directors without fear of being punished for simply telling the truth. The prevalent corporate culture has its own inertia and those imprisoned in it have no idea of how it might be possible to work differently. This respondent once worked in a regional division of an international safety consulting company. The company preached all the right values about the priority of human life, the need for dialogue between the employee and the leader, etc. But many clients of the regional unit, after talking with consultants there—who, like the interviewee, had come back to the region after several years of work at headquarters located on another continent—believed that these consultants were “spoiled” by the high-flown values of a different culture, which encouraged praise rather than punishment, and treating everyone humanely. Local customers would shake their heads and say: “These are all fairy tales about a good attitude to the workers! We know that in reality, employees do not work without a whip and tight control”.

The HSE manager of a metallurgy company considers that if a company continues to promote a culture of “no bad news”, it will eventually collapse. The most principled employees will be the first to leave; the rest will keep reassuring the management and the owner, maintaining their self-deception that everything is going well in the company. One major accident at a critical infrastructure facility can lead to financial disaster, change of ownership at the insistence of the authorities and a complete replacement of the senior management team.

OTHER REASONS

No free time (12%)

Senior managers are extremely busy people who often lack the time to (I) comprehensively study safety and technological problems that employees have reported to them, (II) find an opportunity to visit a given industrial site in order to discuss with other managers possible ways the identified problems can be solved, or (III) make an informed decision about how and by whom the problems will be tackled. One respondent explained that some senior managers are so busy from 8 am to 6 pm in constant face-to-face and online meetings, that only from 6 pm onwards do they have any opportunity to focus on examining documents, reports, and e-mails. When managers are under time pressure like this, they often react negatively to any serious problem that unexpectedly crops up, because in order to deal with the situation they will have to completely reschedule their already busy diary, with the result that there will be delays dealing with other, often equally pressing, matters.

Manager reputation (9%)

Bad news undermines the success story that executives wish to project. Many managers do not want to associate themselves with unpleasant events, so they try their best not to respond to—or ideally, not to hear at all—information about serious problems in an organization. They do not want to be responsible for solving them, and would rather concentrate only on successful projects and good news stories. Unwilling to risk his or her career and reputation by having to go to the board with bad news, a leader will try and arrange matters so that bad news will simply not reach them. One of the respondents relates an example of this from his practice. He knew of one mine manager who was legendary in the industry, with an excellent professional reputation, many state awards, and honor and respect among his colleagues. He was also renowned within the industry for never having had an accident on his watch. However, the truth was that there had been incidents, but they never made their way into official reports. To maintain his image as a senior manager in charge of a safe coal mining enterprise, he had told his entire work team that if there was ever an accident, the whole team involved would be fired, and the same would apply if he found out later that an accident had been hidden from him. To keep their jobs, all the miners’ brigades kept quiet about any injuries their workers had suffered, claiming they had been injured in their everyday lives. Officially, the company had a perfect safety record for years—but the truth was that incidents had been repeatedly hidden by frightened employees.

Unwillingness to talk about anything bad and reluctance to discuss what a company will do in the event of an accident (4%)

In some large industrial companies, there is no talk of organizational problems at all. The whole orientation of the company is to show off their successes and achievements, because many leaders insist that “Everything has to go well on my watch”. No one, especially the leaders, wants to talk about problems and risks. If we look at corporate brochures and magazines, everything is about what is good in a company: achieving production targets, the results in those areas of the corporation that are clearly successful. But at the level of official corporate rhetoric, no one publicly talks about organization’s weaknesses. There is silence on any area where the corporation is not winning, no acknowledgment that any organization must overcome difficulties in order to become stronger. Successes and strengths are promoted; failures and weaknesses are not officially discussed. Naturally, this leads to reluctance on the part of employees to bother senior management with negative news. In addition, many companies do not make a point of recognizing and praising safe production. Instead, they want to create the impression that this is a given, that there are never problems with safe working conditions. These days most industrial companies are active on social networks, but public discussion about serious safety issues involving a company are quite rare. Employees pay attention to the trends set by corporate media, and unfortunately, production safety does not get a mention. If safety is off the public agenda of an industrial company then its employees, taking their cue, will not want to bother managers with their fears or technical risk assessments. Therefore, much depends on the stance of senior management—if leaders are willing to openly discuss problems within an organization, employees will follow their example.

Few executives regularly discuss what a company will do in the event of a dangerous incident. Special divisions of a company systematize risks and rank them by probability of occurrence. However, at the highest management level of many companies, there is no system for regular discussion of a company’s actions in the event of these risks. There is in effect a kind of unspoken taboo that nothing bad can happen in a company. This has a direct impact on the general reluctance of employees and managers to discuss problems.

This lack of a formal dialogue on problems means that they are only discussed behind the scenes within specific units. If there was a company-wide discussion of difficult issues, then everyone could bring their experience to bear on solving them: a problem coming up in a particular division or region will often have been encountered and solved somewhere else in a company before. But because of this organizational silence, each unit has to face problems in isolation, learn from making their own mistakes and try and find their own solutions. Obviously, a more efficient approach would be to use standard, consistent, tried and tested ways to solve a problem. Best practices for solving problems, and lessons learned from similar incidents in the past, should be shared and replicated.

Some executives consider themselves smarter than their subordinates (3%)

Some managers believe that they know better than their subordinates. They have a big ego, and think their job is to give the orders, not to listen to their subordinates. These managers are “dazzled by their own crown”: they are not interested in going down to the shop floor to talk to their subordinates on an equal basis about the risks they can see. If they did, they would find that those working at the forefront of the production process have a much clearer understanding of many of the technological issues than anyone else in the organization.

Reluctance to learn the lessons of the past, in case management errors are brought to light (3%)

Many managers will not countenance even an internal corporate discussion of lessons learned from past incidents, let alone a public enquiry. The HSE head of an oil company cites an example of this from his practice, when he had been involved in the investigation of a major fire at a gas field. Headquarters had ordered the field managers to launch the field on time, although many safety systems had not yet been installed—indeed, it would not have been possible to start production safely with the project at its existing level of readiness. Many ordinary employees knew there were problems, and some, including field managers, were aware of a small leak of gas condensate. But managers and workers alike were in a hurry to meet the deadline set by headquarters to get the field into operation, so they ignored these obvious minor flaws. Nobody in the field dared to defy headquarters and report that the facility was not ready for production. Their careers and reputations depended on a timely launch. Smart field managers have certain strategies for working round such impossible demands. If they fail to persuade senior management to delay the launch of facilities due to the existing risks, they will do what they are told by the boss and launch. However, once the ceremonial ribbons have been cut and the company top brass and state officials have left the field, production stops immediately until the facility has been brought to a safe state. But in this case, the facility continued to operate after the official launch despite gross safety violations. Field managers wanted to show their superiors that they would do whatever it took to deliver on time and according to the production plan. They were cutting corners to meet their impossible targets, but nobody at headquarters knew about the dangerous risks being taken as a result. Why would they have known when they had made it implicitly clear that they did not want to know? It is possible that the field managers had tried to warn headquarters earlier, but their concerns were overruled, and they were reminded of the deadlines for putting the facility into operation. In other words, the field managers were only allowed to send good news (“we are on track to meet the deadline”), and never bad (“the facility is really not safe for operation yet”). Fortunately, no one was killed or injured in the fire that resulted from the condensate leak. But it is noteworthy that after this major accident nobody was held to account, and the company was not required by national regulators to change the way they were working. It goes without saying that senior managers were very keen not to raise the issue of what had forced middle managers at the site to neglect safety procedures. They also appreciated that the field managers had been doing their utmost to meet the deadline from headquarters. No one was punished, and in the respondent’s opinion, no lessons were learned—essentially because none of the senior managers were interested in discussing what had led to a gross violation of safety regulations, and ultimately to a major fire. Had there been any desire from within the company to understand the root causes of this accident, grave errors at all levels of management would have come to light: the pressure that headquarters had put on the local leaders, and in turn, the willingness of those running the field to allow a gross violation of safety precautions rather than put their careers on the line by demanding postponement of the launch. Conducting such a detailed investigation, which would have called into question the entire decision-making structure of the company, was not in the interest of managers at any level.

A senior HSSE vice president at an international electricity company is accountable for their asset operations around the world. He believes that after an accident, many companies immediately look for culprits in the workforce who violated some internal regulation or instruction. For senior managers, this is the easiest way to apportion blame and much less trouble than investigating the true causes of the incident—which will unearth uncomfortable questions about what motivated junior employees to make errors, and whether they had been provided with everything they needed to carry out their work safely. Honest answers to such questions would inevitably lead to a discussion of the role of the wider organization, and of middle and senior managers, in causing the emergency. Therefore, for most leaders, it is much less dangerous to quickly point the finger of blame at specific culprits within the rank and file, rather than identifying organizational flaws that may be impossible to fix without jeopardizing the careers of many of the senior staff.

Previously reported risks have not led to any incidents (3%)

The HSE director of one mining company observes that sometimes, senior managers hear about critical risks and do not respond to them. A few years then pass, but these risks do not translate into incidents. Some managers begin to believe that the criticality assessments put forward by employees must have been erroneous. Next time a subordinate reports another critical risk to them, they will ignore the warning—they just assume the sender is “crying wolf” and overestimating the risk. This approach leads to a dangerous situation where the manager now generally refuses to respond to information about problems, greatly increasing the likelihood of an accident. Based on more than 25 years of experience in the field of safety, the interviewee makes an intuitive observation, not perhaps amenable to logical interpretation: in his opinion, what should go wrong often goes right. There is not always a direct relationship between the information received about a critical risk and its impact any time soon. There are many examples of critical risks existing within a company for many years or even decades without a serious incident occurring. However, after a major incident occurs, things can quickly swing to the opposite end of the scale, where every message about risk is analyzed in detail.

The head of the well construction and repair department of an oil company believes that the problem with the perception of the criticality of risks is that on many previous occasions, ignoring similar risk notifications did not lead to any serious consequences. Therefore, managers chose to ignore disturbing messages from employees, expecting that once again the problem will simply “blow over”. And indeed, on ten occasions the risk might not lead to a serious incident, perhaps due to a favorable combination of related circumstances. But the eleventh time, a serious problem does arise—quite possibly on account of one changed variable that the manager was probably not even aware of, having refused to receive any up-to-date information about the problems that the field operatives were facing.

State regulation in the field of industrial safety (3%)

In some countries, state authorities monitor the situation with injuries on industrial sites, and if they seem to be on the increase, they will demand that the company concerned take measures to reduce them. But some executives prefer to redefine injuries in order to “improve” the statistics for reporting purposes. Legally, they cannot order that injuries be hidden, so they act through a motivation system. For example, senior management can ensure that if there are injuries at a production site, the site manager loses some of their salary. This principle then cascades throughout the company, so that if an ordinary employee is injured, they will declare that the injury occurred outside of work, rather than at the production site. In this way, managers can set specific KPIs to create a climate in which it is beneficial to hide risks. Of course, this affects what it is acceptable to say about risks and incidents within a company. With such a pervasive culture of concealment, it is difficult, if not impossible, to gain any understanding of why dangerous events occurred, to analyze cause-effect relationships, to draw conclusions, or to take corrective measures. Without this key information, it is very difficult to prevent the recurrence of similar emergencies on a company’s sites.

It is hard to credit that senior managers could believe it is in anyone’s best interest to conceal risks in this way. It suggests a very poor understanding of the importance of safety for the long-term development of an industrial company. If a serious incident is hushed up, it is destined to be repeated, quite probably on a larger scale.

The CEO of a nuclear operating company states that he personally remains open to discussing problems at the nuclear power plants entrusted to him, including when communicating with external audiences and regulatory bodies. However, he observes that some representatives of regional regulators are liable to use such openness from a critical infrastructure company against them. Nevertheless, this senior manager has successfully established honest and trusting relationships with representatives of the national regulator of the nuclear power industry. During their association, a number of problems have come to light, and all have been successfully rectified. Senior management at the company willingly disclosed the problems, actively set about solving them and have thus helped to create a strong culture of safety at their power plants. When the promises of senior management are translated into concrete action and problems at nuclear power plants are effectively resolved, regulators begin to trust the company. In this way, good relations between business and regulator can be built over a period of time, to the benefit of all involved.

Executives hope and believe that a problem will somehow be solved by itself (2%)

The head of risk management at a renewable energy producer points out that some managers naturally prefer to hide bad news and will convince themselves that things will eventually sort themselves out. So rather than rock the boat by telling a board of directors and shareholders of a company, they keep quiet in the hope that the problem will somehow cure itself and go away.

Growth in insurance and fundraising costs in case of risk disclosure (1%)

Divulging information about the deplorable state of an enterprise’s assets can have a dramatic effect on insurance fees. The leak of such information can cost a company millions of dollars by increasing the cost of insurance. It may also push up the cost of borrowing from any financial institution. So in preparation for IPOs (initial public offerings on a stock exchange) HSE departments are often tasked with “polishing up” industrial sites, even to the extent of sweeping any problems under the carpet.

High-ranking clerks—the gate-keepers at headquarters (1%)

A respondent from the electric power industry states that in his experience, there are many levels of control between those who directly manage equipment (site employees, lower-level and mid-level managers) and those who manage a company at the most senior level. Often the reason that crucial information does not reach senior management is that there is an additional management layer, which is often not officially represented in organizational structures of industrial companies but can be very influential. This layer consists of high-ranking clerks and is located between the heads of industrial sites and senior management. Such clerks include the heads and senior executives of departments at headquarters and represent the third tier down from a company’s CEO. These senior figures will often be responsible for filtering risk information, and when reporting to their seniors may distort information to suit their interests. Managers of production facilities (middle management) may not always call their boss (senior management) with their problems, because the CEO of a company is often busy with strategic issues, and it does not always seem advisable to distract them with information about the risks at a particular site. Therefore, the site managers inform senior clerks about their problems, expecting that resources will duly be provided from above to solve them. High-ranking clerks are like a retinue under the king, whose information and advice forms the king’s opinion on most matters. These managers greatly value their status as senior advisers and stay very much in their comfort zone. They tend not to be considered responsible for the quality of decisions within a company, as their job basically boils down to passing on information to senior management in a manner that is advantageous for them. Senior managers make the decisions, which will then be implemented by middle management under the supervision of these same senior clerks. As a result, the clerks have great authority within a company, but are not held responsible for their actions. The legal responsibility lies with the CEO of the company (senior management) and the heads of the production facilities (middle management). If the high-ranking clerks are brought in information about a significant risk or problem from a production site, then they will often downplay the scale of the problem to senior managers, tailoring their account to suit their own best interests, or avoid passing it on at all, thus avoiding any responsibility for solving the problem. Sometimes there are letters and reports sent from the production site to headquarters describing safety and technological problems, but the clerks do not reply. If they did, they would have to commit to helping to solve the problems. After all, if the clerk comes to senior management with a problem that has arisen at the site, then they may well decide to make the bearer of the bad news accountable for overseeing the solution. Even worse, the boss can always ask a question: why did the clerks ignore the problem for years, and only now, when the situation has become a threat, come to senior management for an urgent solution? In general, for a high-ranking clerk, telling senior management the truth about a significant production problem can create potential problems for them—both the onerous responsibility for solving it, and the threat to the clerk’s career if the boss accuses them of taking no action on it for years.

This interviewee cites another example. Production sites inform headquarters every year about the resources needed for the balanced development of sites over a given period: equipment modernization, investment in the construction of new facilities, etc. Meanwhile the senior clerks are cutting back on resources for these same sites. Often, senior officials and their deputies do not look too deeply into the problems of production sites, trusting their senior clerks to develop optimal solutions for equipment modernization and other production issues. And if a company’s shareholders have given senior management targets to reduce costs, then the clerks will know what is implicitly expected of them, and implement a company’s policy of cost reduction. For example, with production sites, they will cut the resources allocated for repairs and updating of fixed assets. Moreover, in many companies there is an unwritten rule: do not go over your boss’s head. Therefore, when the senior clerks “slash” the allocation of resources needed for the routine safe operation of production facilities, the site managers (middle management) cannot complain to senior management about what the senior clerks are doing as this would be seen as insubordination, and would “expose” clerks to senior management. If the middle link continues to complain to the top link, then they risk making enemies of senior clerks, with whom they may have to work for many years and who may well threaten their own career prospects. So middle managers prefer not to disagree with the decision of high-ranking clerks and accept as a given their decision to cut resources for the production sites. In their day-to-day operations, middle management just have to try to manage the issue of safe site operation with scarce resources.

In general, senior clerks help senior management to achieve cost savings, and middle management see senior management as innocent, uninformed victims of the ruthless senior clerks (the “bad cops”). But to use the analogy coined already, clerks are the “king’s retinue” helping the “king” implement the cost-reduction strategy set by the shareholders. When middle managers gain an audience with senior management, senior managers will play the role of “good cops” who are ready to listen and take action, punishing the “bad cops” (the senior clerks) and allocating resources needed to solve the problems. Not every mid-level representative is ready to seek an audience with the senior officials of a company. Many are worried that their perceived insubordination will damage their careers if they are viewed at headquarters as upstarts, rebels, or employees who expect special treatment. Instead, many middle managers accept the resource cutbacks imposed by the clerks at headquarters and try to solve existing problems on their own. In truth, senior managers often understand the situation perfectly well, and are working together with their clerks to force the middle management to deal with local issues without asking for help.

If an emergency occurs, no big decisions can be expected from the senior clerks. They will scrupulously avoid taking any initiative and distress messages from the site about the escalating crisis will remain unanswered. Instead, the clerks will try to push all decisions down to middle managers on the ground or up to their bosses. At all costs, they will avoid endangering their own careers by making any decision that would implicate them in the responsibility for dealing with the emergency.

Low-level shift work and lack of collective responsibility (1%)

Some lower-level managers, team leaders and shift supervisors live in a shift-work paradigm and are only willing to take responsibly for what happens during their shift. If you are working with potentially dangerous industrial machinery and you report a risk to the head of the next shift, this lower-level manager may refuse to work the shift and demand that you take responsibility for initiating an emergency shutdown. Disclosure of risks also attracts the attention of senior managers and threatens to worsen their perception of the manager concerned. In organizations with a widespread system of punitive sanctions, a halt in production could have negative consequences for the career of an honest and proactive manager. Therefore, some lower-level managers prefer to keep quiet about the problem, leaving its solution to their successors.

Fear of competition from employees with an active civic position (1%)

In companies, as in the wider world, there are some people who are “active citizens”, full of ideas for how to change things for the better. A confident and forward-thinking senior manager might see natural leadership potential in such employees and want to encourage them. Nevertheless, some managers do not want to promote subordinates with this kind of reforming energy, let alone bring them to the attention of a board of directors or shareholders. They are afraid of competition from such proactive employees: at the bottom, they fear for their own jobs. If key owners or representatives of a board of directors were to meet such a workplace reformer and be won over by his/her ideas, they may decide that the current bosses are not dynamic and effective enough and invite the reformer to take their place.

3.3 Reasons Why Employees Are Reluctant to Disclose Risks to Their Managers

• 1. FEAR OF BLAME AND PUNISHMENT FROM EXECUTIVES: SUBORDINATES ASSUME THAT THEY WILL BE HELD RESPONSIBLE FOR THE OCCURRENCE OF ANY PROBLEM THEY REPORT TO THEIR MANAGERS

63% of respondents believe that employees are afraid that if they raise the alarm about a problem, management will accuse them of having caused or exacerbated it through their mistakes. In most cases, problems do not arise from nothing. They usually develop partly because of poor decision-making by managers (for example a refusal to approve adequate resources to keep facilities running safely) and partly through the actions of employees who may have been forced to violate operational safety to meet production targets dictated by managers.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

The HSE head of a fertilizer mining company sees the situation like this. Employees reluctant to report problems upstairs are often afraid that they will be accused of allowing what was initially a manageable situation to develop into something so serious that senior management have to step in. In response to such an accusation, they may say that they were not given the resources to prevent the escalation of events, or that they requested resources but were refused or ignored. Senior managers will likely reply that the employee was not insistent enough and did not make clear the critical consequences that could follow if resources were not allocated. But making such persistent complaints and demands can threaten an employee’s career, as management begin to associate them with the problems they have highlighted. It becomes a vicious circle: people are afraid to talk about problems, because they may be reprimanded for not tackling them earlier and nipping them in the bud, but if they do have the initiative and integrity to bring issues up earlier, they may well be punished for doing so.

The head of a production facility at an oil company describes the situation as follows. When something goes wrong at a facility, the management often look for mistakes or negligence on the part of employees, rather than flawed production processes, outdated equipment, or their own previous decisions. In the traditional paradigm, poor production indicators mean that some people or teams have not done their job properly; someone has made mistakes. The managers tend to believe that the fault must lie with their subordinates, not with production processes, equipment, or the allocation of resources. Hardly surprising, then, that employees are afraid to tell management about problems and risks when they know that the first people the bosses will look to blame are those delivering the bad news, and anyone else involved in letting the situation escalate to the point that it has been brought the attention of the management. In other words, the instinct of managers is to “shoot the messenger”.

The HSE manager of a petrochemical company also notes that employees are often afraid they will be accused by managers of allowing a problem to get beyond a stage where they could manage it themselves. This suggests that a critical infrastructure company has precedents when employees were found guilty of mismanaging problems, publicly reprimanded, and maybe demoted or dismissed, despite the fact that they had taken the initiative and voluntarily disclosed information about problems to managers. In fact, the fault lay with senior management, who did not want to understand or tackle the problem, but simply shifted the blame for its occurrence to the employees who had been proactive and courageous enough to talk about it. If senior management had reacted differently to the risks being disclosed—for example, by providing resources to solve the problem rather than searching for subordinates to blame—then employees would be more willing to inform managers about risks when they first encounter them.

A low-level manager describes how most incidents on critical infrastructure in his company are investigated. The company searches for specific employees to blame, rather than changing the corporate goals, conditions or business processes that created a situation where employees were not able to cope with problems in their area of responsibility. Even when analyzing incidents resulting from external factors, the system still looks for shortcomings in the work of specific employees of the company. According to him, the company’s senior management are so skilled at conducting internal investigations of incidents that employees have no choice but to admit that they were to blame for the onset of risks that led to emergencies. During these investigations, the management would never acknowledge that a lack of resources from the company had anything to do with the risks escalating. Instead, a scapegoat would always be found. After one such incident investigation, five leaders at various management levels were fired. With this sort of precedent, it is hardly surprising that employees are afraid to get involved in emergency situations or to discuss risks honestly, as they naturally fear that the investigation will end with their dismissal. Clearly, this interviewee’s company has an unspoken rule: nothing bad can be reported upstairs and everyone tries to avoid mentioning problems to their seniors. If they do, they know they will be asked: “What did you do in your role to prevent these risks/problems/mistakes?”. Everyone is under pressure to meet targets and deadlines, and there is a repressive system of disproportionate penalties for any shortcomings at work, so people are afraid to admit that something is wrong. The interviewee summarized it by saying, “At the heart of everything is fear. Employees are afraid of material punishment, managers are afraid of dismissal”. He gave a further example of his company’s practice. Years ago, if there was an emergency at a production site, the regional head was called to headquarters. As a result, when the scapegoating of middle managers began, mass concealment of any incidents at production sites became more common. All employees in the regions, including managers, took care not to “expose” themselves or their colleagues by disclosing information about risks and incidents to headquarters. Local workers simply stopped reporting incidents to avoid being held responsible and punished. Who is to blame for this situation? Of course, senior management—because they have repeatedly scapegoated specific employees rather than looking for the systemic problems that forced the workers to violate safety rules in the first place. And of those systemic problems, the most significant is the lack of adequate resources, which senior management should have been allocating to the regional enterprise to keep the equipment operating safely.

The HSE manager at a utility services company believes that the problems of a critical infrastructure company can be divided into two categories: problems with equipment and employee errors. In the first case, employees do not feel responsible for the failure of equipment and therefore they are not afraid to say: “This machine should be fixed”. In the latter case however, most employees are very reluctant to say: “There is a problem because I made a mistake”, because of the possible negative consequences for them if they admit this to their superiors.

The head of HSSE-Q (Health, Safety, Security, Environment & Quality) at an electricity company has an example. It is very hard to go to your boss and say, “Look, there’s a problem because I messed up”. It is like you are confessing that you are a failure, useless, and can’t be trusted.

• 2. EMPLOYEES ARE AFRAID OF LOSING INCOME AND RUINING THEIR CAREER PROSPECTS BY LOOKING INCOMPETENT IN THE EYES OF THEIR BOSSES

48% of respondents expressed the view that, for many employees, the fear of losing earnings and damaging their own career prospects stops them from reporting serious problems and risks.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

According to respondents from several different industries, workers are fearful of losing their income, their jobs, and even their whole career. Many have children and a mortgage to pay, so are dependent on having a well-paid job. All this could be lost overnight if a problem arises in their area of competence that they cannot solve with their own resources and experience and have to take up to the management.

Employees are afraid to seem incompetent in the eyes of their boss. If they cannot solve something, they are afraid to let managers know that there are limits to their capabilities. Senior managers may then question their ability to manage risks and will think twice about promoting them up the career ladder. In the traditional paradigm of managerial perception, employees should do everything possible at their level to prevent negative developments. If a problem has to be brought to the leadership, the assumption is that their subordinates failed to show due diligence and have not justified the trust placed in them. Any demonstration of incompetence can have several bad consequences for employees: (I) it will threaten their career progress and maybe even their job; (II) it will irritate the boss, who now has to engage in solving the problem; (III) the boss will be less inclined to trust the subordinate, who may previously have been delegated significant authority. Therefore, employees are afraid to appear weak or lacking in resourcefulness. On the contrary, they want to demonstrate their competence, effectiveness, and ability to resolve any issues, to be seen as “a safe pair of hands” and justify the trust of their managers. Sometimes this is done by hiding negative information.

A safety consultant with managerial experience in chemicals, mining, oil and gas believes that if subordinates send a report to superiors that draws a seriously problematic picture of the state of affairs at a facility, then the whole operation at the facility may be threatened with closure, and people will potentially lose their jobs.

A senior technical professional from the oil and gas industry also believes that people are reluctant to be honest about the serious hazards they face in their jobs because know that the costs of correcting them may be considered excessive by shareholders and a board of directors, so that instead of investing they decide to close the entire facility and make lots of the employees redundant.

Competition among work colleagues to keep their own jobs can motivate both front-line employees and middle managers to be very cautious before revealing problems in their area of responsibility to superiors. After all, if the heads of nine facilities tell senior management that everything is fine and under control, but the director of the tenth is constantly informing them about various problems and shortcomings in his enterprise, senior management may well begin to question the competence of that manager and consider replacing them. Senior management will look for a new candidate to promote among those employees who have previously been able to prove that they can solve problems without requesting the attention of their superiors.

• 3. INERTIA OF CORPORATE CULTURE

43% of respondents consider that most employees will go along with the corporate culture that exists in their company. If that culture dictates secrecy about problems, demands only good news and punishes staff for the presence of problems on their watch, then most employees will simply not inform the authorities. Over time, a continual unwillingness of managers to listen to employees when they raise concerns inevitably results in an ingrained culture of lies at every level of an organization.

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The CEO of a nuclear operating company believes that a “Don’t Tell Me Bad News” organizational culture arises when senior managers lack the skills to create a safe and supportive work environment, where employees are encouraged to share issues and concerns about their work on a regular basis with their superiors. It is clearly the responsibility of those at the very top of the hierarchy to establish and maintain a framework that supports honest and open communication at all levels.

• 4. FEAR OF DESTROYING RELATIONSHIPS WITH COLLEAGUES OR LINE MANAGERS

32% of respondents believe that many employees do not disclose risks to their bosses because they think this will ruin their relationship with their colleagues, or with their immediate supervisor.

The head of HSE at an oil company puts this starkly. The fact is that if risks are disclosed to senior management, many people in his company will face punishment. Management can punish an individual employee or even an entire unit for flagging up a serious problem. Instead of finding solutions, they are more likely to search for specific perpetrators, thereby jeopardizing the careers of many people. To avoid this, many junior employees and some middle managers will put pressure on any would-be whistleblower and silence them.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

The heads of HSE departments at two different metallurgical companies describe how a team can influence employees who want to stir things up by warning management of problems. Shop floor employees tend to operate in small teams, who work together to avoid pressure from their bosses. A golden rule for teams like this is “we do not surrender our own”, or “never snitch on your mates”. So consider the situation when a proactive employee wants to tell top management about a serious issue. In effect, they will be disclosing the fact that a dangerous risk has been present at the production site for a long time but has been ignored or tolerated. To do so could cost the career of the whistleblower’s immediate boss, and probably some of their colleagues as well, because once the risk is exposed, it will be obvious that many workers have known about it for ages but failed to report it. This then raises questions about the competence and trustworthiness of those employees who: (I) coexisted with risks before they were disclosed; (II) did not report them to management; (III) did not take any measures to reduce them. To prevent these awkward questions being asked, the immediate supervisor or colleagues of the employee who wants to “snitch” may threaten them: “Do you think you’re so much better than the rest of us? You want to betray us all to get in with the management? Whose side are you on?”. As a result, even those who know it is their moral duty to try and stop dangerous safety violations are afraid that if they do, it will be make their lives very difficult. There will be conflict with colleagues and punishment by the authorities, not only of themselves but possibly the entire team. Most employees, once they realize the consequences of whistleblowing, decide that it is safer to keep quiet about problems rather than risking communicating with their superiors. This peer pressure creates a mutual understanding not to communicate risk information from the production site to senior managers.

One respondent has some experience of “cracking” ordinary employees in incident investigations. Without exception, they initially do not want to talk about any safety violations in the team before the incident occurred. It is only when the HSE manager presents them with facts that have already come to light, meaning their careers are already on the line, that some ordinary employees will eventually share information about what actually happened before the incident and any violations their colleagues were guilty of. People are extremely reluctant to immediately inform the authorities about such violations. To do so would break the widespread but unspoken rule for working in teams, that “shopping” your colleagues is taboo and punishable with expulsion from the group. If managers do get full information from an employee about the details of an incident, therefore, they are advised to maintain the anonymity of the source to prevent such retribution.

One of the interviewees has an answer to a rather complex question: “Why does the ‘stop-the-job’ system not work in so many companies?”. It is widely understood that if an employee shuts an operation down, this will immediately signal to senior management that there is a serious problem. The bosses will then punish the site manager for failing to take steps to tackle the risk sooner. In turn, the low-level managers will look below them and punish the proactive employees who stopped the suspiciously functioning equipment in the first place. Once again, we have a vicious feedback circle: if you reveal a risk, however morally right you were to do so, you will inevitably be punished for it in the end.

A risk management consultant in the oil and gas industry has analyzed the tasks facing employees and low-level managers at the bottom of the corporate hierarchy. Ordinary employees are focused on doing a specific job within designated time and quality parameters, and in return, they receive the remuneration owing to them and go home. The foreman of a work team has a different task: to get the team of ordinary employees to finish the work on time and to the requisite standard and then report to the higher boss that this has been achieved. The task for lower-level managers and the director of a production facility is to coordinate work across all operational areas to meet the output and timeline targets of the production program that have been set by senior management. When someone highlights a problem that requires a halt in operations for it to be fixed, the interests of all workers at the bottom of the corporate hierarchy are affected. A single worker choosing to be an active citizen and blowing the whistle interferes with the whole team’s operations. Therefore, it is not always a lower or middle manager who will discourage employees from reporting issues. Just as often, a team colleague will say: “Don’t upset everything now by blabbing. We all need to make sure we get the job finished”. The respondent suggests using the following process in cases like this. Come down to the shop floor and ask employees, foremen, and site managers a simple question: “Will your day get better or worse if you notice a problem in your operations and report this to higher managers?”. It is obvious in most cases that the answer is their day will get much worse. They will be unable to achieve their production goals, risk suspension from work, and have to prepare various reports explaining exactly why the problem that has stopped production has occurred. Finally, those individuals who disclosed the risk to their superiors in the first place may come under attack from their own colleagues for disrupting teamwork. Therefore, hiding information about risks is not always due to the actions of lower and middle managers. Sometimes it is a result of the desire of shop floor employees to complete their own tasks, knock off from work on time, or simply to keep their heads down, focus together with the rest of the team on the job in hand and not go around creating problems that nobody wants. Anything for a quiet life!

• 5. FEAR THAT EMPLOYEES WILL BE EXPECTED TO SOLVE ANY PROBLEM THEY REPORT

27% of respondents think employees are afraid that if they report a problem to senior management, they will be left to deal with it themselves with no extra resources to do so.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

Tackling a major safety issue with no management support or resources will require huge extra work beyond their normal responsibilities. The typical reaction of many managers to negative news will be something like: “You need to show more determination with problems like this and find a way to solve them on your own”. Employees are understandably cautious about taking on this kind of extra responsibility. They have seen too many managers who do nothing to solve a problem themselves, but instead leave it to the employee who dared to report it in the first place, often without allocating necessary extra resources. Having seen the negative experience of their colleagues, many employees prefer not to inform managers about problems in their area of competence, so as not to be saddled with even more work. Lower and middle managers are usually aware of most of the risks that may arise with the infrastructure entrusted to them, but they know it is unlikely that headquarters will give the resources to mitigate them. To get these resources, they would have to send the bad news up to senior management level and prove that the situation at the facility is critical. But bringing a critically dangerous situation to the attention of the management can jeopardize an employee’s career. As a result, lower and middle managers prefer to remain silent about problems, dutifully accepting the meager resources allocated to them against a likely background of ever diminishing budgets. Consequently, there is no investment for measures to prevent risks escalating, and issues are only tackled when they develop into an emergency. Then, at last, the whole company is forced to pay attention to a critical weak point in the infrastructure, even though these risks were known about long before disaster struck.

The HSE head of an oil company has an example from their own practice. A conventional oil company, working in production regions where the industry has been operating for decades, usually has outdated equipment that needs to be fully replaced. This would obviously require additional investment and impact the financial profitability of the production sites. Senior managers know that the equipment on some sites is outdated, and are willing to consider programs for its replacement, but only if the profitability targets they have agreed with middle management will still be reached. They will tell middle management at the site: “Do what is necessary to update the equipment, but keep financial performance within such-and-such parameters”. In effect, headquarters leave site managers with the impossible task of tackling the equipment problems without adversely affecting the budget. There is little point in middle management informing headquarters about these risks and problems: they know they will not be given the resources needed to mitigate them, but instead expected to find some creative solution on their own. By informing senior managers about the risks at the site, middle managers only create problems for themselves. They still will not have the resources to tackle the risks, but now that their bosses know about the problem. As a result, the site managers will be put under additional pressure to solve the problem one way or another. Of course, impossible demands like this from their superiors understandably make middle management increasingly reluctant to report their problems to headquarters. In addition, in some countries senior managers are not held legally responsible for emergencies. Here middle management are stuck between the “rock” of relentless production and financial targets and the “hard place” of maintaining safe production, knowing all the time that they are likely to be held legally and criminally liable if things go wrong. Production site managers are constantly juggling two conflicting priorities, and having to hide the logic of decision-making from the management. The respondent describes the conflict of purpose and priorities in many critical infrastructure companies. On the one hand, most oil companies prioritize raising oil production and other industrial indicators. Getting results is the overwhelming focus for senior managers, who constantly hammer the importance of this into the heads of their subordinates. On the other hand, managers know they must also give attention to safe production. In many companies, these priorities are in direct conflict. For example, an order was sent around one large oil company: “The field must be launched on time, but safely”. It is worth noting that the deadlines set for commissioning a new field are often very ambitious and based on the most optimistic scenarios. Such messages have a deep impact on employees. They recognize they are being given conflicting goals, but as both priorities are combined into a single message, they are left unsure as to which should take priority. Such conflicting goals are irreconcilable and bring employees to a standstill. When they set such impossible production goals, managers do not absolve employees of responsibility for the safety of their work. In other words, managers do not formally give permission for unsafe work, but they make the true priority perfectly clear: first and foremost production performance is to be achieved, with safety relegated to second place. All too often production and financial indicators prevail over safety because these will bring in the money, whereas safety improvements will lead to extra costs and lower profits.

The head of a power plant describes a typical scenario when senior managers do not have the technical training or experience to make informed decisions on operational matters. Over the decades of his career, the respondent has seen many senior managers—highly experienced and trained in operating energy facilities—leave the power industry, to be replaced by managers with only financial and economic experience. When employees approach one of this new generation of managers about a technological problem, they will often not get much help in solving it. The new bosses simply do not understand the technical aspects of the problem, and instead their concern is avoiding any extra costs that would reduce a company’s profitability. Employees soon learn that there is no one to consult with at a senior level, no one who can be relied on for help, and no one who will give them the resources that are required. It is no surprise, then, that middle management give up asking for assistance and try to solve the problem alone. In future, middle managers will avoid informing their bosses of risks and problems as they know it will not solve anything, but instead create additional difficulties.

• 6. EMPLOYEES DO NOT FULLY UNDERSTAND THE RISKS THEY ARE RUNNING, AND LACK THE TRAINING OR EXPERIENCE TO ASSESS THEIR CRITICALITY

22% of respondents point out that sometimes employees do not realize the risks they are encountering in their day-to-day work, so they do not inform their superiors about them. If people are not aware they are taking risks, then they are unlikely to think that they are doing anything wrong, so see no reason to inform anyone. It will generally be employees who are unqualified or inexperienced who fail to recognize or assess risks. Sometimes employees only care about their own area of work and do not want to look at the risk picture across the entire production process. In this case, they are unlikely to report problems outside their own limited area of competence.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

Several respondents believe that some employees find it difficult to assess the criticality of the risks in their area of responsibility, so do not report them to their superiors because they cannot be sure they are significant. They do not want to be “the boy who cried ‘wolf!’”, repeatedly warning management of risks that never develop into serious incidents.

According to the HSE head of an oil company, it is rarely possible to calculate exactly where and when an accident will happen in the future. An accident occurs through a combination of factors that are difficult to predict in advance. For example, if there is aging pipework throughout an industrial plant, it is impossible to judge exactly which sections are most likely to fail and how soon without a very thorough ultrasonic inspection of the entire infrastructure. Therefore, it is very difficult for field staff to rank risks accurately and pinpoint critical areas of potential failure. After all, it is impossible to eliminate all risks: there simply would not be enough resources for this, nor would it be justified. As a result, production staff do not inform managers of every deviation in the equipment they are running. If they did, it would create an unmanageable flood of information from the production site to headquarters.

The HSE director of a mining company states that some employees are gambling on the basis that the risks they have been aware of for many years ago have never led to serious incidents. The people operating the equipment come to believe that deviations in the way the operation is running are the norm, and that there is no need to report them to the management.

The safety manager of a nuclear power plant believes that subordinates will delay communicating certain risk information to managers, for a short period of time, if they believe that the likely impact of the risk on the operation of the enterprise is not serious. By constantly postponing the communication of observed risks from day-to-day, subordinates become used to tolerating and coexisting with these risks. This situation soon becomes the norm, and it becomes habitual for them not to report any risks to their superiors.

• 7. EMPLOYEES FEEL IT IS POINTLESS TO REPORT RISK INFORMATION BECAUSE MANAGERS FAILED TO RESPOND TO SIMILAR MESSAGES IN THE PAST

21% of respondents point out that some employees see little point in informing their superiors about problems or risks, because there has been no response to previous warnings and the problems have remained unsolved. Frustrated by this lack of action, some employees simply stop telling their superiors about problems, assuming that their efforts will be futile.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

The vice president of a gas pipeline construction and repair company says that sometimes an organization lacks the resources to maintain and repair equipment properly. In this case, when employees approach senior management with a list of problems that will require funding to address, they may be told that there is simply not enough money to cover all the requests, so the list will have to be drastically reduced. The next time there is a problem, the employee will have learnt that there is little point contacting the management because their organization does not have the resources to prevent and mitigate risks. Making another request will only serve to put the boss in the uncomfortable position of having to admit that there is nothing management can do.

This is how the HSE manager of a mining company describes it. Employees have tried on many occasions to inform the company hierarchy about critical problems. What happened when they did? At best, nothing. No one reacted and no one allocated resources to rectify critical problems. At worst, employees were punished for revealing this information. When workers see another potentially dangerous situation, this information will no longer be sent upstairs. As a result, problems inevitably accumulate, increasing the likelihood of a serious accident.

The HSE head of a metallurgy company believes that existing corporate cultures, built on decades of silence on risk information, often make it impossible for employees to go to the management with complaints or disclose information about risks. There is a widespread assumption that “nothing will change” and even if they report serious safety issues, none of the bosses will do anything about it.

The HSE head of a gold mining company gives another example. Sometimes, there are design flaws or errors in the construction of technological facilities, which cost a lot of money to correct. Employees hesitate to make aware managers of these shortcomings, thinking that they are unlikely to allocate resources to rectify the situation, especially for low probabilities of a catastrophic event: “If nothing will be done anyway, what’s the point of bothering the management?”.

An HSE consultant shares the experience of how senior managers sometimes respond to suggestions from employees on how a company’s processes and efficiency can be improved. There are a significant number of employees who frequently offer innovative ideas in their area of competence. Some companies have competitions from time to time where they invite employees to submit proposals for possible improvements. Often, proactive employees participate in and win these competitions. However, after the competition the winner has to face the reality of the company’s internal bureaucratic systems, which means trying to get their proposal implemented becomes a massive headache, frustrating the winner’s initiative and enthusiasm. After such encounters, innovative employees are less likely to offer their ideas again.

• 8. FEAR OF BEING SEEN AS DISLOYAL TO A COMPANY, OR AS A REBEL WHO WANTS TO “ROCK THE BOAT” OR LABELED AS A “BAD NEWS GUY”

20% of respondents believe that when employees start to “ring the alarm bells” and draw attention to problems, they will be perceived by their superiors as rebels, “black sheep”, troublemakers who want to “rock the boat” or “go on the rampage”. Most managers are afraid of such potential disruption, which could lead to earlier management mistakes coming to light. As a consequence, they will often berate would-be whistle-blowers: “All your colleagues are quite happy, but you always seem to have a problem with something. You think you’re special and you want to wash our dirty linen in public”.

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

According to the HSE manager of an oil company, for some middle managers hitting certain production and financial indicators is an absolute priority as their careers depend on it. If these targets cannot be reached, then questions will be raised about their competence. To prevent this, middle managers have to try to find a balance, choosing between hitting production targets and operating safely. However, this balance is often impossible to achieve, and it is the production and financial targets that usually come out on top. It is difficult for managers to make a successful career if they keep bringing bad news. Senior management might perceive them as troublemakers, who are always bothering managers with problems. If middle managers tell their seniors that the production and financial indicators they have set are unrealistic or unsafe within the limits of the condition of current equipment and allocated resources, they are effectively saying that senior management have made a mistake. This looks as if they are being disloyal to senior management, and trying to go against their decisions. If middle managers create that impression with their bosses, then their career in a company will be compromised. Senior managers are looking to promote subordinates who are ambitious but loyal and willing to take responsibility for getting results, even if that means taking risks and discreetly violating production safety regulations. So in order not to jeopardize their careers, most middle managers simply do not mention risks to senior management. They believe it is more important, and certainly more advantageous, to tell senior management the news that they want to hear about steadily improving production and financial indicators, for which they know they will be rewarded. No middle manager can expect to earn praise and promotion for saying: “We can’t hit these targets without jeopardizing production safety”. Therefore, they dutifully accept the production and financial indicators imposed from above, striving to meet them without a corresponding increase in injuries or accidents. However, they are trying to achieve the impossible. Sooner or later, the situation will catch up with them, resulting in accidents.

The HSE manager of a metallurgy company ties this in with the punitive system operating in many companies, where there is an ambitious production plan and employees will be punished if they do not deliver. This creates pressure to violate safety rules, as this is the only way to hit the targets. If these strictly enforced, over-ambitious production targets are followed for many years, a culture of tolerating safety violations will inevitably develop in an organization. In such a climate, an employee who objects to violations will become an outcast in the eyes of both management and colleagues. Most workers prefer not to stand out like this, so they go along with the prevailing practice of negligence towards safety matters.

The HSE head of an oil company says that many organizations have created a corporate culture in which any criticism of the system or discussion of problems will lead to dismissal. Hence, no employee dares even consider going over the head of their immediate supervisor to complain about a problem to a more senior manager. This kind of system demands unconditional loyalty to senior management, and anybody who expresses the slightest doubt about the current course, or tries to initiate a discussion about problems, is immediately ostracized. Even in companies that have set up a direct hotline expressly for workers to communicate problems directly to senior management, any employee who actually uses the hotline can expect their line managers to get rid of them. It does not matter how well-intentioned they are or how serious is the risk they have raised: they are deemed to have demonstrated disloyalty by daring to suggest that a company with such wise leadership could be making a serious safety error.

The HSE head of a petrochemical company perfectly sums up the system of absolute loyalty that is fostered in some industrial companies. Senior managers generally like those who defer to them. Those who stand out, who are independent and have their own opinions, will be ostracized and removed from the company. In this context, loyalty to the company does not mean loyalty to what the company stands for, to its genuine long-term mission and values, but loyalty to its current leaders and senior management—demonstrated by implicitly endorsing a company’s management policy. It is “loyal” employees in this sense who survive in large corporations; indeed, they may never have made a significant contribution to the development of a company, but their compliant attitude at least makes life more comfortable for the executives.

The HSE head of a production company which uses hazardous chemical processes explains that employees are often too afraid to challenge or contradict their superiors. He gives the example of the head of the construction department of his company, who was asked by the owners and senior management about the possibility of building a chemical plant for US $1 billion. This head of the department replied that he could build the plant with the funds allocated. Senior management then came back to him to ask about the possibility of building a plant for $500 million. The construction director confirmed that this would also be feasible. In doing so, he was meekly falling in line with the management proposal—despite the fact that many safety systems would have to be scaled back or removed, only the cheapest building materials could be used and other corners would have to be cut, which over the longer term would lead to very high costs to keep the plant operating safely. In reality, to build a high-end chemical plant that will operate reliably for decades would cost $2 billion. Many subordinates are not ready to volunteer such information unless specifically asked to do so, because they are afraid to put the superiors in an uncomfortable position by telling them their chosen course of action cannot be safely implemented.

The HSE manager of a metallurgy company offers his own simple test, by which a senior manager can measure the safety culture at an industrial facility in just a few minutes. It is sufficient for senior managers to enter a production workshop without personal protective equipment and walk around, unprotected, next to dangerous equipment. If a company has a strong safety culture, an ordinary employee will immediately approach the senior managers and warn them that they are violating safety regulations. If a company has a weak safety culture, nobody will dare challenge the senior managers and everyone will ignore the violation. If employees challenge bosses when they see them flagrantly violating safety rules, it shows that they will not overlook unsafe practice in an organization. Hence, if a serious risk is discovered, management can feel confident that their employees will not be afraid of drawing the issue to their attention. However, if employees ignore a relatively minor violation of safety regulations by senior management, then they are hardly likely to challenge their managers about serious safety and technological problems.

A safety consultant with managerial experience in oil and gas, chemicals and mining believes that the last thing employees want is to become known as a “bad news guy” in an environment where the bosses tell the workforce: “Your job is to fix problems, not create them”.

• 9. INDUSTRIAL SAFETY PERFORMANCE INDICATORS AND REWARD SYSTEMS ENCOURAGE CONCEALMENT

Corporations use many key performance indicators (KPIs) to manage their productivity. 15% of respondents point out that some of these metrics can incentivize employees to downgrade an incident, and under-report equipment problems or anything else that could stand in the way of hitting ambitious corporate targets. When executives set almost unreachable goals and KPIs, they put pressure on employees to distort risk information in their reports. How else can they possibly hit all their targets?

©Dmitry Chernov, Ali Ayoub, Giovanni Sansavini, Didier Sornette, All rights reserved

The head of an oil production facility gives the following example. If we look at the common corporate KPIs in the field of safety, most relate to the number of industrial incidents. Naturally, employees will therefore do their best to reveal as few incidents as possible, to achieve the best possible ratings. Again, the answer to the question of why employees hide information about risks at work is that it comes down to overall company targeting, where management have set performance criteria that motivate their employees to hide the real state of things. Industrial site managers know that the more incidents happen at work, the smaller their annual bonus will be. This hardly motivates them to give management the real picture of industrial safety at their facility. On the contrary, it is directly—and financially—in their interest to embellish the situation. If injury statistics were not included as part of their bonus structure, then managers would be more likely to report them accurately. It is not at all straightforward to create an effective bonus structure, one that motivates all employees to work towards a real world decrease in injury and accident rates, without tempting them to falsify reports and statistics on the safety situation.

The HSEQ director of an international oil company gives the following example. The president of the oil company has a significant part of his bonus linked to safety performance. This means that safety is an important concern for both the president and the entire management team. The problem with this approach is that subordinates are aware that a safety mistake on their part can affect the size of the senior management bonus. Therefore, subordinates may try to hide mistakes so as not to upset their superiors by reducing their reward. In this company, the bonuses of all employees and managers are partially linked to safety performance. The presence of rewards for progress in the field of safety helps to show everyone in the company how important this issue is for senior management. However, because of this reward system, employees have begun to conceal certain safety problems as they know they could create problems for executives of the company.

The HSE head of a chemical company ascribes many of the problems in their organization to its ambitious goals. When directors set almost unreachable goals and KPIs, they put pressure on employees to distort risk information in their reports. In order not to spoil their KPIs, employees will downplay cases of work-related injuries, accidents, and incidents as less significant events—anything to make sure that they and their team continue to be seen to be delivering good results.

A senior HSE advisor and human factors specialist in the oil and gas industry also confirms that cover-ups can occur in more than just health and safety matters. Distortion can affect several KPIs that are set by senior management to evaluate the work of production units. In order to achieve these, people on the ground are liable to underestimate the criticality of any incident and distort information about errors and equipment failures.

The head of the sustainability and systems department of an international electricity company believes that current executive bonus systems are often closely tied to accident and safety statistics. This may motivate executives to underestimate these figures. This reward system has also a negative impact on honest and open intra-corporate communication about risks, failures and negative incidents. To correct the situation, the respondent recommends replacing these inaccurate and under-reported figures with leading indicators, such as the number of events identified where prompt action prevented an incident occurring (near misses) and the number of safety improvement proposals and new initiatives.

• 10. SOME EMPLOYEES ARE CONFIDENT THAT THEY CAN SOLVE THE PROBLEM ON THEIR OWN

13% of respondents note that employees can sometimes be overconfident in their own capacity to solve a problem. However, when it comes to assessing risks in the operation of equipment, there is a blurred line between where an employee’s competency zone ends and that of managers begins. Sometimes in their efforts to make a good impression, employees can be tempted to tackle higher-level issues beyond their competency and pay-grade that should really be the responsibility of their superiors. If subordinates have a strong sense of ownership, they will be tempted to solve problems by themselves and then report their success, rather than reporting the problem to the manager and waiting for them to come up with a solution. In doing so, they may overestimate their capabilities and convince themselves that there is no immediate need to inform their superiors about it. This can lead to an accident at a production site that takes senior management completely by surprise.

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The head of risk management at a renewable energy producer believes that some subordinates are overconfident, convincing themselves that they can solve a serious problem on their own, so there is no immediate need to inform the authorities about it.

The head of HSE at a nuclear power plant believes that when subordinates are competent and responsible, they should be encouraged and supported to try and solve problems independently in their area of expertise. This way they can gain credit by reporting their success to their superiors, rather than immediately reporting the problem to their manager and waiting until they come up with a solution. The respondent recalls a situation like this at the nuclear power plant where he works. The plant had a skilled specialist in the field of ventilation system maintenance. It was only when he left for another position that managers and other employees realized just how many problems there were with the ventilation system, and how reliant they had been on him for his expertise in carrying out repairs, all without bothering his superiors. Some subordinates keep their managers ignorant of many problems because they take professional pride in their abilities and draw satisfaction from dealing with issues that they have the skill to put right, quickly, efficiently and without a fuss.

OTHER REASONS

Subordinates do not want to create extra problems for managers (9%)

Some respondents believe that employees who bring negative news will cause emotional stress for managers, and negatively affect their well-being. Leaders are people like everyone else, and most subordinates do not want to upset or burden them by putting them under any avoidable extra pressure.

In many companies, there is an unspoken culture among subordinates not to create problems for their managers. Employees will do anything to avoid the anxiety and distress that can arise if they communicate bad news to their superiors. They will keep quiet until they can bring them some good news. They would rather try to solve problems themselves and then come to the head with a positive result.

Lack of trust between superiors and subordinates (9%)

Problems will be concealed when there is little trust between superiors and their subordinates. Naturally, if employees on the shop floor do not have confidence in their line manager, they will not feel safe to share difficult information in an open and honest way. Instead, they will hide things to try and make sure they are seen in a good light.

In order to have frank conversations about new or existing problems in the workplace, subordinates must have trust in the integrity of their superiors and be confident that they will not face sanctions or punishment if they bring bad news about a production risk or problem to their manager.

Wrong ideology for investigating incidents (8%)

Several respondents point out that some state and internal corporate investigations into incidents tend to focus on the search for specific perpetrators—usually rank-and-file employees—instead of trying to identify systemic flaws in an organization or holding senior managers accountable for the bad decisions they made which meant ordinary employees were forced to violate the regulations.

One interviewee describes the situation as follows. In some countries there is a state policy concerning labor protection and industrial safety, which aims to punish specific employees instead of revealing the systemic or root causes of incidents. Safety regulators send inspectors to industrial facilities to assess the state of labor protection. Most of these inspections are not actually aimed at improving labor protection practices at all, but rather at finding fault with the performance of individual workers who are then blamed and faced with a range of possible punishments. All workers and managers are subject to the requirements of labor protection legislation. The emphasis of regulators on identifying specific perpetrators, rather than systemic flaws in occupational safety issues, leads employees and managers at all levels to take a common approach to hide information about shortcomings in organizational operations. This state ideology, therefore, has a major negative impact on the corporate culture of many industrial companies, discouraging the open transmission of risk information and compromising the safe operation of their facilities. In this regard, another respondent gives the example of an oil company from such country. If they have an incident, in order to conduct an investigation that will actually provide some useful conclusions about how to improve the safety of their operations, the company prepares two incident reports. One, for the regulators, identifies a specific culprit and documents the disciplinary procedure and punishment, as required by local legislation. The other is an internal report, establishing the systemic or root causes of an incident, and setting out measures to exclude the system errors that led to an incident so as to prevent its recurrence.

A risk management consultant in the oil and gas industry has an example of how a company’s good intentions in the field of accident investigation can still encourage employees to hide information about incidents. The respondent cites the experience of one oil company with a large fleet of trucks. When an incident occurred on any of their sites, all drivers were automatically checked for drugs and alcohol. There were several cases at one oil refinery when, after even minor road incidents, the company’s security guards physically removed all the drivers from their cabs and escorted them across the site in front of all the other employees, to a medical unit, where over the course of half an hour, a nurse tested them for drugs. None of the drivers tested positive. However, the result of this over-the-top and unwarranted procedure was that no employees were willing to report any further road incidents at the refinery because there was an understandable reluctance among the workforce to be subjected to such humiliating and unpleasant treatment. As a result, the management of the oil company eventually changed the criteria for mandatory drug tests and excluded minor incidents from this list.

Lack of official channels for reporting risks and problems (8%)

One of the respondents believes that few companies have an official channel for shop floor workers to communicate directly with management about risks. Any employee who does have the moral courage to report something dangerous is forced to find more informal channels to do so, which may well create a threat to their job security.

It is natural for people to try and make themselves look better and avoid blame (8%)

Several managers express the view that a factor motivating employees to hide information about risks in their area of competence, or when incidents are being investigated, is simply human nature. One of the respondents said that the problem of withholding important risk information exists at all levels of an organization, because it is in human nature to lie. Like many people, some employees habitually lie in small ways. When talking to management, they instinctively distort and massage the facts to make themselves look better. During an investigation into an incident, managers and employees at a site will often manipulate their account of events to avoid implicating themselves so they cannot be blamed for what happened. Another manager who mentioned this tendency described it as a common human practice of “self-censorship”.

The head of risk management at a renewable energy producer believes that people naturally prefer to share happy and cheerful things in conversation with others. If someone does say something negative, the other person may feel distressed, discouraged or criticized. People feel they should not burden others with troublesome or difficult issues, and this can mean employees avoid sharing risk information with managers.

Social stereotypes (6%)

An HSE consultant suggests that social stereotypes influence employee behavior. Most people involved in the management of critical infrastructure are men. In general, men are taught from childhood to control and hide their emotions, not to show weakness, not to admit defeat. When they make mistakes or encounter problems, their instinct is to try to deal with the challenge alone, without asking for help from their colleagues or superiors. Many employees are reluctant even to acknowledge that a problem might exist in their area of responsibility—to do so would detract from their aura of male strength, resourcefulness and competence. Managers also praise employees who try to solve problems on their own. This male social stereotyping fosters machismo and a brave attitude at all levels of the hierarchy within critical infrastructure companies. The respondent cites the example of an oil company where there is a long-term problem with workers putting themselves at serious risk in their efforts to try and save expensive equipment—up to the point where an employee died attempting to save a tanker truck which had fallen into an icy river or lake. For employees like this, their sense of themselves as strong and honorable men simply cannot allow them to admit—to their superiors or themselves—that they have failed to look after the equipment entrusted to them. They see themselves as hardcore professional men, and all-action heroes. It took a great deal of time for HSE executives to convince ordinary employees there that the company valued their lives far above any piece of equipment.

Human laziness, or slackness in responding to observed risks (4%)

Some employees are simply too lazy to act: they do not want to take any initiative. They are always very reluctant to tackle any risks in their area of responsibility, regardless of the seriousness or how easily the problem might be rectified.

Belief that the problem will somehow solve itself (3%)

The head of risk management at a renewable energy producer believes that some subordinates are very good at convincing themselves that a problem will eventually solve itself, so there is no need to take any action and they can put off telling their superiors indefinitely.

The sad fate of previous whistleblowers (2%)

Many employees in large industrial companies have seen how a corporation will use a variety of tactics to destroy the careers of workers who are brave and principled enough to disclose risks to senior management or board directors, even when it is against the wishes of their teammates and immediate supervisors. Not wishing to suffer the same sad fate, it is understandable that employees prefer not to risk their futures by going over the head of their own managers, and divulging risk information to the leaders of a company.

There is no monitoring of the actions of employees (1%)

One mid-level manager of an oil company points out that the lack of employee monitoring systems can encourage the concealment of industrial incidents. For example, if there is no video monitoring system installed on an oil rig, the entire team can easily hide minor incidents and even some work-related injuries from their superiors, and so maintain good safety statistics. Wherever production processes are not properly monitored, inappropriate behavior or dangerous working practices are more likely to become the norm.

Shift work (1%)

Some employees believe the most important thing is that nothing untoward happens during their shift, so that they cannot be held personally responsible for any incidents. If something goes wrong at the facility on someone else’s shift, then that is someone else’s problem.