The CEO as a Top-Level Hazard

 

 

Bob Baron, Ph.D

 

 

 

 

 

We all know that safety starts at the top. That can be a good thing. It can also be a bad thing. As such, the CEO can set an exemplary standard for ensuring the delicate balance between productivity and safety. Or—as history has shown—can create the biggest safety risks an airline will ever face.

 

Let’s take a look at a hypothetical airline (NotReal Airlines) and its hypothetical management team. For simplicity, the management team will consist of three people in the airline’s highest management positions. These are the Chief Executive Officer (CEO), Chief Operating Officer (COO), and Chief Financial Officer (CFO). Meet the team:

 

The Chief Executive Officer (CEO)-

Came from a business background. Made a large sum of money on Wall Street as the CEO of an investment bank. Admits his knowledge of aviation is rather limited but has “complete faith” in his operational management team to “get the job done” and “make money the way we did on Wall Street.” 

 

The Chief Operating Officer (COO)-

Was hired from a defunct airline. She had a very supportive safety culture and always made safety a priority. The airline maintained an impressive balance of profitability and safety; but eventually, increased competition took its toll on the airline. Nonetheless, the COO still believes that safety is a high priority and that philosophy should resonate throughout the entire organization.        

 

The Chief Financial Officer (CFO)-

Was hired from a major airline. This particular CFO is very much liked by the NotReal CEO because of not only his extensive airline experience, but also his commendable track record for maximizing profits while reducing costs. However, there is some question about the CFO’s methods for achieving his goals. In fact, he firmly believes that “safety is a cost rather than an investment” and uses that philosophy in the course of his duties.

 

This is a management team with a diverse background, and not completely preposterous when juxtaposed with a real management team in any aviation organization.

 

The CEO, in the highest position in the company, clearly has the experience (track record) to make a significant amount of money, both for himself and certainly for the company where he had previously worked. His attitude regarding “complete faith in his team to get the job done” may be perceived in different ways; some positive, some negative. However, his attitude regarding “making money the way we did on Wall Street” can immediately raise some eyebrows. It is clear that the CEO not only lacks any experience in the very challenging world of airline operations, but he also seems to be the type of CEO that would be overly focused on profit at the expense of safety. This is the type of CEO that could potentially be a significant safety hazard. Among other things, this would likely be the CEO archetype that focuses strictly on reactive safety (only fix it if it breaks). This could be a big problem.

 

The COO, on the other hand, appears to be the only one of the three that “gets it.” Here you have someone with airline experience who also understands the importance of being both profitable AND safe. Understandably, however, the COO may find herself in a precarious situation, since she has to report directly to the CEO. In other words, advocating safety improvements on a proactive or predictive level may fall on deaf ears. Her safety philosophies may also clash with the CFO, since the CFO appears to be more aligned with the CEO’s values and beliefs. This could be a problem.

 

The CFO, as mentioned above, may become part of the problem, rather than part of the solution. The CFO’s attitude that “safety is a cost rather than an investment” is certainly in line with the CEO, but is diametrically opposed to the COO. It’s two against one. The odds are very favorable that, on the whole, upper management is not going to allocate many financial resources to safety. This could be a problem.

 

Overall, it’s pretty clear that this could be a setup for management failures (latent systemic safety threats) that can—and will—have a trickle-down effect to the lower levels of the organization. The scales are weighted too heavily on the production side.

 

 

 Management overly weighted on production versus protection.

From ICAO Doc 9859.

 

           

Let’s now switch from hypothetical to real CEOs who were a clear and present danger to not only flight safety, but also to the overall solvency of their respective airlines. One such CEO was Frank Lorenzo, former CEO of the Texas Air Group. Here is an abbreviated timeline of Lorenzo’s airline tenure:

 

 

The second CEO example is Udom Tantiprasongchai, former CEO of Orient Thai Airlines and its wholly owned subsidiary, One-Two-GO Airlines. Tantiprasongchai was CEO when One-Two-GO Airlines Flight 269 crashed in Phuket, Thailand, in 2007, killing 90 people. The crash was attributable to Tantiprasongchai’s lack of concern about safety and his heavy emphasis on production versus protection. The accident investigation also revealed that there was ongoing misconduct, negligence, and collusion before (and after) the accident. I have developed a full presentation on this accident which can be viewed here.

 

Both Tantiprasongchai and Lorenzo were CEOs with agendas that were clearly focused on profit at the expense of safety. The end result of this type of management style is a pathogenic (or non-existent) safety culture that can lead to fatal accidents. The accident may not happen today…or next month…or in two years. But it will. Unless things change at the top.  

 

Changing Things At The Top

 

And now the interesting part; how to mitigate the significant safety hazard associated with a CEO. Your airline by now probably has a Safety Management System (SMS), which is a top-down, formal, business-like approach to safety that permeates the entire organizational hierarchy. One of the elements of the SMS is safety risk management (SRM). SRM includes the Management of Change (MOC). MOC is used to manage significant changes that might introduce new safety risks, such as new aircraft, new routes, or mergers. It also includes changes to management personnel—such as a new CEO. And this is where it gets interesting.

 

Let’s say you are the Safety Manager of an airline (we’ll call it NotReal Airlines). Your SMS is up and running and you are doing a great job identifying hazards and mitigating risks on a daily basis. Then…you get the news that a new CEO will be joining the airline in the next few months. The new CEO, unfortunately, is known to have a similar management style as the hypothetical and real CEOs that have been previously mentioned. Your job, as the Safety Manager, is to conduct an MOC case and mitigate the risk(s) to as low as reasonably practicable (ALARP). That’s going to be challenging. Similarly, your airline may have an incumbent (long-term) CEO that has, and continues to be, a significant threat to flight safety. Risk mitigation for the latter is going to be even more challenging. Either way, the process will be the same. You begin your MOC and come up with something like this:

 

Top-Level Hazard

 

  • The CEOs demonstrated history of putting profit ahead of safety.

Associated Hazards (just a few examples)

 

  • Inadequate maintenance.

  • Suppressed safety information/communication.

  • Employee fatigue.

  • High employee turnover rate.

As the Safety Manager, you are now faced with an interesting scenario. The CEO, the highest-level person in your organization, is a significant safety hazard, and you need to either eliminate that hazard, or reduce its associated risks to where they are ALARP. Now let’s say that your CEO is someone like Udom Tantiprasongchai (discussed earlier). How would you handle this MOC process? Where do you think your risks would fall on the risk matrix?

 

 

 
Risk Matrix & Management Criteria Indices

 

 

Your assessment reveals that the risks are in the range of red (Unacceptable) and dark yellow (risk control/mitigation requires management approval). You are now faced with quite a conundrum. How do you manage these risks associated with your CEO, who is literally your top-level hazard? To complicate matters even further, your risks might require “management decisions” if there are financial resources that need to be allocated to mitigating the risks. That management approval may very well have to come from the CEO that is the source of the risks; the same CEO that doesn’t want to spend money on safety. Vicious circle.  

 

Risk management is all about managing the likelihood and consequences of identified risks. To manage a risk, we can either reduce the likelihood of the risk outcome(s), reduce the consequences of the risk outcome(s), or a combination of both. Better yet, if the top-level hazard can be eliminated, that would mitigate many of the safety risks associated with that particular hazard. In the cases of CEOs Lorenzo and Tantiprasongchai, removal from their positions would have been the best option. Both were safety hazards that presented unmitigable, unacceptable risks that compromised safety—and in Tantiprasongchai’s case—led directly to an accident that killed 90 people due to corporate greed, negligence, and a total disregard for safety.

 

What Can Be Done?

 

This brings us to a critical juncture. If your CEO is truly an unmitigable safety hazard, then what can be done, if anything?

CEOs are powerful people. They have risen to their position because of hard work and dedication. In most cases, there is no malice intended when a CEO tries to make an airline profitable. They “get it.” However, there are a few CEOs, as demonstrated, that weigh the scales disproportionately toward production at the expense of safety, which can put the airline in a region of unacceptably high-risk. Or, to put it another way—an accident waiting to happen.

So how do you, as the Safety Manager, address the CEO who is a significant safety hazard? Basically, you have three options:

 

Option 1: Do Nothing

 

Addressing the CEO about this is a precarious situation. It’s awkward and it’s uncomfortable. Thus, a Safety Manager may hesitate to go into action, or may just ignore the problem completely, perhaps hoping it will go away or work itself out. Perhaps a “kick the can down the road” mentality sets in. Either way, the Safety Manager may have to deal with cognitive dissonance as a side effect of inaction. If something catastrophic happens later on, the Safety Manager may have been considered part of the problem rather than part of the solution.  

 

Option 2: Educate

 

This is the most preferred solution. That is assuming the CEO is open to education about the critical balance between production and safety. In this case, it is also a good opportunity to explain that safety is an investment rather than an expense. It sounds cliché, yes, but it really is true. A safe airline will be a more profitable airline.

On the other hand, if the CEO is recalcitrant, none of this education or elucidation will matter. It’s only a matter of time before the holes in the Swiss cheese start to line up, if they have not already.

 

 

 

Option 3: Oust

 

That’s right. Fire the CEO. Get the CEO out of there. It’s not a good match. I know what you’re thinking—easier said than done. You are absolutely right. And very rarely is an airline CEO removed for safety-related performance. Typically, CEOs are removed for things such as poor financial performance, misguided/ineffective leadership, or even inappropriate behavior (which has been a common theme in the United States as of late).

 

Ousting a CEO may be very difficult. A safety argument will probably not carry as much weight as a bad financial quarter (unless of course the losses were due to an accident—that will get much more scrutiny).

Also, depending on the organization structure, such as if it’s a private or public company, firing a CEO may only be possible through a Board vote. Or, it could get a lot more complicated. In some business structures, there is no legal way to fire a CEO. In that case, Option 2 may be the only chance of averting significant safety events.   

 

Summary

 

Most CEOs do an exceptional job of balancing the scales between production and safety. However, as shown in the examples in this paper, there are some CEOs that clearly put profit ahead of safety, and by doing that, they themselves become one of the biggest threats an airline will ever face. A threat that no Safety Management System will be able to defend against.

 

 

 

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