May Day

"First of May, first of May
F%#&ing outdoors starts today."
--James Taylor

Although it snowed briefly yesterday, the weather is still beautiful and I stick to my contention that Spring has arrived in Lausanne. People are coughing and sneezing a great deal in class so once again I am trying to remain physically and mentally fit to ward off any virus that may be going around. The last thing I want is to let my team down during this weekend's integrative exercise because I am sick.

Today in Accounting we studied cases of rogue traders who were able to cause the collapse of healthy, established banks by incurring huge losses unchecked. In each case there was a combination of factors (ethics, controls, ignorance, bureaucracy, communication, etc.) that contributed to the crisis, in each case the industry claimed it had learned its lessons after the fact, and in each case there was another, almost identical event relatively shortly thereafter.

What interested me most about this discussion was that this was not the first time we discussed cases about management ignoring blatant warning signs due to group dynamics, misaligned incentives, and individual psychologies. For example, in our Organizational Leadership class (the continuance of LPO, taught by Australian professor Ben Bryant) we studied the case of the Space Shuttle Challenger accident and the management decisions that led to it.

Irrational human behavior is something that has not changed and probably will not change. The key challenge is preventing it from translating into irrational organizational behavior. How can a leader address that? Culture change? Control mechanisms? Moreover, how can one address it while not causing drastic consequences, e.g., stifling innovation with too much control? Clearly there is no universal answer but we are learning more each day about how at least to identify such situations, their symptoms, and their causes.

And speaking of irrational organizational behavior, IPE is about to start. Today's topics: China-US trade relations and the Chinese Olympics. Heated debate, here I come!