FCPA Compliance and Ethics Blog

February 11, 2014

More Lessons From Workplace Safety for the Compliance Practitioner

Trapped Under The SeaI have long believed that the compliance discipline has quite a bit to learn from the area of safety in the workplace. This is not only because I believe that the changes in corporate attitudes about safety presage many of the current debates about how to ‘do compliance’ but also because many of the processes and procedures that a safety professional utilizes can be translated into a process for the compliance professional. In a recent Compliance Week article, entitled, “Risk-Management Lessons From The Depths” Richard M. Steinberg reviewed the newly released book Trapped Under the Sea, by Neil Swidey, which is about a catastrophic accident that occurred during the construction of a waste treatment plant in Boston Harbor.

Steinberg’s article focused on the risk management issues, which led to the deaths of men working on a tunnel, dug far beneath Boston Harbor that transported waste out to sea before its release. Steinberg began by looking at the pre-operation factors which laid the “seeds of disaster” leading to the tragedy. (1) There were tight deadlines to be met, “with a federal judge ready to impose huge fines and penalties if they were not”; (2) An inexperienced executive director of the governmental water resources authority overseeing the project, who was suffering from a stress condition his doctor said was off the charts, who was most critically “clearly intimidated by the prime contractor’s chief executive”; and (3) The prime contractor was already in the red on the project, behind schedule and incurring millions of dollars in penalties, rising every day.

With the project, and many jobs on the line, the stress level on the management team grew. Swidey noted that as “organizational behavior research shows that, “As trust levels go down within a group, group members’ creativity and willingness to seek new options also decreases. When intense time pressures are added to the mix, opposing sides tend to become even more fixed in their positions, relying more on cognitive shortcuts. They’re unable to work collaboratively to solve a problem because they have become locked in an adversarial contest: if you win, I lose.”” The actual planning of the key event which led to the catastrophic failure “fell to sub-contractors, with two men calling the shots: Roger Rouleau, who relied on the technical capability of the other man he was to oversee, Harald Grob. The subs needed to please the prime contractor, or risk ruin. Ultimately, those overseeing the project ended up relying on these two men to make some critical final decisions.” As Steinberg noted, “although there was a major general contractor, several sub-contractors, the governmental water resources authority, and the Occupational Safety and Health Administration involved, with a number of smart and seasoned people, the key decisions were left to one sub-contractor, who wasn’t even properly supervised by his boss.”

Steinberg said that the post accident analysis discovered the following:

  • There were a series of small, bad decisions, none of which on its own would have been enough to produce a disaster, but together elevated risk to new heights.
  • There was a dangerous cocktail of time, money, stubbornness, and frustration near the end of an over-budget, long-delayed project. The major players desperately needed the project to be concluded. They closed their eyes and hoped the plan made sense.
  • Serious failings tend to happen late in projects, when confidence runs high and tolerance for delay dips especially low.
  • Another factor at play here is EQ, or emotional quotient, which is differentiated from IQ. EQ is the ability to read, process, and manage the emotions of people around you, as well as your own.
  • Executives with real authority put a higher value on Grob’s “fresh eyes and can-do attitude” than on their own intimate knowledge of the project and common sense. And doing so afforded them distance from the risks associated with the project.
  • It turns out there was a much safer and better approach that wasn’t even considered until much later. Why? The battling parties became so fixed in their positions they could no longer trust the other side’s intentions. They fell prey to the “availability bias” where decisions are based on what was most available to them—in this case, Grob’s plan.

For the anti-corruption practitioner, the lessons from this disaster and Swidley’s book are myriad. Beyond the simple ‘just get it done’ prescription that a Chief Compliance Officer (CCO) often hears about business deals are some clear and direct markers. The first and foremost is that when something is high reward, there is generally a high risk involved. In the case of the Boston Harbor disaster, the high risk was the technology used to supply air to the men working in the tunnel that collapsed, however it had never been adequately tested. In fact the technology was not even understood.

From this the next lesson is to always understand the complete parameters of the transaction. If a party’s role is not set out or well explained, you must make the appropriate inquiries to determine the role. If you have a third party, you should know its role and that role should be specified in its contractual duties so that any compensation payable to the third party can be assessed against some type of standard.

If someone will not answer the direct questions that you pose, you need to have the authority to get those answers. The sub-contractor involved, Grob, refused to brook any criticism of his clearly outlandish plan by refusing to even answer questions about it. Steinberg wrote, “Grob’s bristling when the men raised concerns about his plan, and stressing his rank in the organization chart, made matters much worse.” This means, as a compliance professional, if you cannot get the necessary answers, you have to be able to say No.

As a project moves towards its end, it sometimes takes on a life of its own, which seems to have happened here. This is the time that a compliance professional must remain ever vigilant; dotting every ‘i’ and crossing every ‘t’, to make certain that the company’s internal compliance protocols are followed. As Steinberg noted, “The more people do something without suffering a bad outcome, the harder it becomes for them to remain aware of the risks associated with that behavior.”

I have previously written that there are many lessons to be learned by the compliance discipline from the field of workplace safety. While I still believe that the biggest lesson is that an entire corporate culture can change, just as I have seen safety now become priority Number 1 in the energy industry; there are significant process lessons to be garnered from the study of catastrophic safety system failures. Steinberg’s article and Swidey’s book make an excellent starting point.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2014

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