Baldrige, Black Swans, and Long-Term Sustainability:
Go Beyond the Criteria to Ensure Success
We recently did some work with an insurer that suffered catastrophic losses as a
result of Hurricane Katrina; this organization was forced to pay out more in claims
in one year than it had taken in through premiums over the previous three
decades. And yet, from a Baldrige perspective, the "levels", "trends", and
"comparative" results data for this organization would have been impressive right
through August 28, 2005, the day before Katrina made landfall.
This got us thinking and reflecting. Focus on the Future is a Baldrige Core Value.
As defined in the 2008 Criteria, this means that "your organization's planning
should anticipate many factors, such as customer's expectations, new business
and partnering opportunities, workforce development and hiring needs, the
increasingly global marketplace, technological developments, changes in
customer and market segments, new business models, evolving regulatory
requirements, changes in community and societal expectations and needs, and
strategic moves by competitors." Hmm, a long list, but no provision for Hurricane
Maybe the glossary will help. Sustainability is a glossary term in the Criteria;
"sustainability refers to your organization's ability to address current business
needs and to have the agility and strategic management to prepare successfully
for your future business, market, and operating environment." The glossary
definition concludes with the note that "sustainability has a component related to
preparedness for real-time or short-term emergencies." Closer, but...
The point is, an organization can adhere closely to the Baldrige Criteria and still be
swept away by a "black swan" event. A black swan? According to the
groundbreaking work of Nassim Nicholas Taleb, a "black swan" is a large-impact,
hard-to-predict, and rare event beyond the realm of normal expectations.
September 11 and Katrina are obvious recent examples of black swan events, but
also, more subtly, the internet, globalization, peak oil, food shortages, etc., should
also be viewed through this lens.
Taleb sees three pervasive, destructive fallacies in how we think about risk and
uncertainty. First, we believe future events can be predicted by examining past
events. Second, we underestimate uncertainty, and, finally, we overestimate our
ability to rationally explain past events. This is the condensed version; visit
http://www.fooledbyrandomness.com to learn more. The bottom line for a leader of
an organization seeking performance excellence? It is impossible to conceive of
"sustainability" without specifically addressing your ability to survive an encounter
with a black swan. Further, faithful adherence to the Baldrige Criteria will not
ensure that you have this perspective in your organization. We normally do not like
to go "beyond" the Criteria with our clients, but the presence of black swans
means that you need to think deeply and creatively about the gaps that may exist in
your current approach to risk and uncertainty if you are to truly achieve the goal of a