Accounting & Auditing

Reading for Lifelong Learning and Leadership: A PICPA Blog Series

Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade

By James J. Caruso, CPA (inactive), CGMA

On Oct. 1, 2015, the cargo ship El Faro sailed into the eyewall of Hurricane Joaquin and sank off the Bahamas. All 33 crew members were lost. Aided by 26 hours of audio from the El Faro’s data recorder and investigations conducted by the U.S. Coast Guard and National Transportation Safety Board, two books have been written about the disaster: Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade. I have always enjoyed true tales of marine disaster, and, apparently, I am not alone. As Slade writes, “Nothing captivates the American imagination like a shipwreck.” The El Faro tragedy is more than the story of a sinking ship; it is a cautionary tale for all leaders, whether at sea, on land, or high up in the C-suite.

The loss of the El Faro was blamed primarily on Captain Michael Davidson’s failure of leadership and faulty decision-making. Other factors included over-reliance on imperfect technology, corporate culture, and poor maintenance/inspection practices.  

Slade concedes that “taking risks and living to boast about them” is kind of in a captain’s DNA. However, Davidson was overconfident in his ability to thread a needle relative to Hurricane Joaquin’s path. Concern was evident in conversations among crew members, but any communication with Davidson was tempered by maritime traditions of deference to the captain. Davidson discounted his crew’s worries and was absent from El Faro’s bridge for eight hours, during a critical time when he might have been able to see for himself why his crew was becoming increasingly alarmed.  

Like sea captains, business leaders must project their own brand of confidence and optimism. Without humility and self-awareness, though, they are prone to the same hubris as Davidson. Leaders can rely on their teams to “tell it like it is” only if they create a safe environment for that to occur. Leaders must respond to the issues and risks brought to them, accepting reality as it is and not as they wish it to be. Leaders must actively participate with their teams to find solutions. A leader that stays the course, offering little more than bluster and optimism, comes off as disconnected and dismissive of the team’s perspectives. Slade sums it up this way: It is “important to foster good communication that respects the hierarchy while allowing room for debate … . (Davidson’s) lack of engagement communicated apathy which, in turn, undermined his authority … . A weak leader can provoke defiance or complacency.”  

Davidson’s decision-making was at least partially influenced by job insecurity, attributable to the culture created by TOTE Maritime, owner of the El Faro. In the trade-off between safety and profit, TOTE’s scale had tipped toward profit. Davidson elected not to take a safer route that would delay his arrival because it would cost TOTE money and potentially damage his own position. A delay resulting from being in bad weather would be verifiable, but a delay resulting from a choice to avoid bad weather compels a captain to defend his decision based on hypotheticals as to what might otherwise have happened.  

Much of leadership concerns managing trade-offs. Justifying an action that avoids or mitigates risk sometimes puts a leader in the untenable position of having to prove a negative. A leader’s courage is most tested when forced to choose between two bad options.

Davidson was also cited for overreliance on imperfect technology. The Bon Voyage System (BVS) plotted El Faro’s course relative to Joaquin’s projected path. Davidson relied almost exclusively on this application because of its visual output. However, he lacked awareness of a significant lag time in its storm position update and failed to reconcile the BVS forecasts to those from the National Hurricane Center (NHC). As Slade says, BVS implied that “the future was fixed and knowable” and that there was just one right answer, contributing to Davidson’s misplaced conviction that he could navigate around Joaquin. Davidson’s dependence upon BVS is an example of an anchoring bias, allowing for no ambiguity or uncertainty. As Slade tells it, “Davidson refused to consider the idea that the BVS report was simply wrong … . Davidson dismissed anything that countered his faith in it, including the NHC’s reports … and his own colleagues.”  

Although most business leaders are not making life-or-death decisions, we can be as guilty as Davidson in how we use technology. We rely on models and forecasts that imply too much precision and fail to understand that the nature of the system being predicted may, like the weather, be governed by chaos theory. We resist thinking in terms of probabilities and neglect the human impacts that make most systems even less predictable than the weather. Today's leaders are expected to be comfortable with ambiguity; this requires demonstrating intellectual humility by considering uncertainty and being aware of their own biases.  

Foy’s narrative highlights the inherent vulnerability of complex systems, with their infinite variables and nonlinear dependencies. All catastrophes start with small failures that cascade and compound toward a tipping point of disaster. Only in hindsight, Foy notes, does it become obvious that a particular factor “might have halted the chain reaction of accident.”  

Any ship – which includes the physical vessel, its owner, captain, and crew – is a complex system (as is a business). Leadership, culture, and tradition are a part of the system; so, too, is the human element, which is embedded in design, creation, maintenance, and execution. Like ships, all organizations have vulnerabilities, many of which are typified by human error. The best systems, processes, and technologies can fail due to complacency or the hubris of poor leadership and culture.  As Slade writes, “The tragic loss of El Faro and her crew serves as a dire warning against complacency … . Every voyage … requires strong situational awareness and a vigilant helmsman.”  

The demise of the El Faro is a warning to all leaders to remain humble and vigilant as they navigate stormy seas.

James J. Caruso, CPA (inactive), CGMA, is a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at Jim_Caruso@outlook.com.

Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.  

Ethics

Reading for Lifelong Learning and Leadership: A PICPA Blog Series

Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade

By James J. Caruso, CPA (inactive), CGMA

On Oct. 1, 2015, the cargo ship El Faro sailed into the eyewall of Hurricane Joaquin and sank off the Bahamas. All 33 crew members were lost. Aided by 26 hours of audio from the El Faro’s data recorder and investigations conducted by the U.S. Coast Guard and National Transportation Safety Board, two books have been written about the disaster: Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade. I have always enjoyed true tales of marine disaster, and, apparently, I am not alone. As Slade writes, “Nothing captivates the American imagination like a shipwreck.” The El Faro tragedy is more than the story of a sinking ship; it is a cautionary tale for all leaders, whether at sea, on land, or high up in the C-suite.

The loss of the El Faro was blamed primarily on Captain Michael Davidson’s failure of leadership and faulty decision-making. Other factors included over-reliance on imperfect technology, corporate culture, and poor maintenance/inspection practices.  

Slade concedes that “taking risks and living to boast about them” is kind of in a captain’s DNA. However, Davidson was overconfident in his ability to thread a needle relative to Hurricane Joaquin’s path. Concern was evident in conversations among crew members, but any communication with Davidson was tempered by maritime traditions of deference to the captain. Davidson discounted his crew’s worries and was absent from El Faro’s bridge for eight hours, during a critical time when he might have been able to see for himself why his crew was becoming increasingly alarmed.  

Like sea captains, business leaders must project their own brand of confidence and optimism. Without humility and self-awareness, though, they are prone to the same hubris as Davidson. Leaders can rely on their teams to “tell it like it is” only if they create a safe environment for that to occur. Leaders must respond to the issues and risks brought to them, accepting reality as it is and not as they wish it to be. Leaders must actively participate with their teams to find solutions. A leader that stays the course, offering little more than bluster and optimism, comes off as disconnected and dismissive of the team’s perspectives. Slade sums it up this way: It is “important to foster good communication that respects the hierarchy while allowing room for debate … . (Davidson’s) lack of engagement communicated apathy which, in turn, undermined his authority … . A weak leader can provoke defiance or complacency.”  

Davidson’s decision-making was at least partially influenced by job insecurity, attributable to the culture created by TOTE Maritime, owner of the El Faro. In the trade-off between safety and profit, TOTE’s scale had tipped toward profit. Davidson elected not to take a safer route that would delay his arrival because it would cost TOTE money and potentially damage his own position. A delay resulting from being in bad weather would be verifiable, but a delay resulting from a choice to avoid bad weather compels a captain to defend his decision based on hypotheticals as to what might otherwise have happened.  

Much of leadership concerns managing trade-offs. Justifying an action that avoids or mitigates risk sometimes puts a leader in the untenable position of having to prove a negative. A leader’s courage is most tested when forced to choose between two bad options.

Davidson was also cited for overreliance on imperfect technology. The Bon Voyage System (BVS) plotted El Faro’s course relative to Joaquin’s projected path. Davidson relied almost exclusively on this application because of its visual output. However, he lacked awareness of a significant lag time in its storm position update and failed to reconcile the BVS forecasts to those from the National Hurricane Center (NHC). As Slade says, BVS implied that “the future was fixed and knowable” and that there was just one right answer, contributing to Davidson’s misplaced conviction that he could navigate around Joaquin. Davidson’s dependence upon BVS is an example of an anchoring bias, allowing for no ambiguity or uncertainty. As Slade tells it, “Davidson refused to consider the idea that the BVS report was simply wrong … . Davidson dismissed anything that countered his faith in it, including the NHC’s reports … and his own colleagues.”  

Although most business leaders are not making life-or-death decisions, we can be as guilty as Davidson in how we use technology. We rely on models and forecasts that imply too much precision and fail to understand that the nature of the system being predicted may, like the weather, be governed by chaos theory. We resist thinking in terms of probabilities and neglect the human impacts that make most systems even less predictable than the weather. Today's leaders are expected to be comfortable with ambiguity; this requires demonstrating intellectual humility by considering uncertainty and being aware of their own biases.  

Foy’s narrative highlights the inherent vulnerability of complex systems, with their infinite variables and nonlinear dependencies. All catastrophes start with small failures that cascade and compound toward a tipping point of disaster. Only in hindsight, Foy notes, does it become obvious that a particular factor “might have halted the chain reaction of accident.”  

Any ship – which includes the physical vessel, its owner, captain, and crew – is a complex system (as is a business). Leadership, culture, and tradition are a part of the system; so, too, is the human element, which is embedded in design, creation, maintenance, and execution. Like ships, all organizations have vulnerabilities, many of which are typified by human error. The best systems, processes, and technologies can fail due to complacency or the hubris of poor leadership and culture.  As Slade writes, “The tragic loss of El Faro and her crew serves as a dire warning against complacency … . Every voyage … requires strong situational awareness and a vigilant helmsman.”  

The demise of the El Faro is a warning to all leaders to remain humble and vigilant as they navigate stormy seas.

James J. Caruso, CPA (inactive), CGMA, is a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at Jim_Caruso@outlook.com.

Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.  

Leadership

Reading for Lifelong Learning and Leadership: A PICPA Blog Series

Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade

By James J. Caruso, CPA (inactive), CGMA

On Oct. 1, 2015, the cargo ship El Faro sailed into the eyewall of Hurricane Joaquin and sank off the Bahamas. All 33 crew members were lost. Aided by 26 hours of audio from the El Faro’s data recorder and investigations conducted by the U.S. Coast Guard and National Transportation Safety Board, two books have been written about the disaster: Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade. I have always enjoyed true tales of marine disaster, and, apparently, I am not alone. As Slade writes, “Nothing captivates the American imagination like a shipwreck.” The El Faro tragedy is more than the story of a sinking ship; it is a cautionary tale for all leaders, whether at sea, on land, or high up in the C-suite.

The loss of the El Faro was blamed primarily on Captain Michael Davidson’s failure of leadership and faulty decision-making. Other factors included over-reliance on imperfect technology, corporate culture, and poor maintenance/inspection practices.  

Slade concedes that “taking risks and living to boast about them” is kind of in a captain’s DNA. However, Davidson was overconfident in his ability to thread a needle relative to Hurricane Joaquin’s path. Concern was evident in conversations among crew members, but any communication with Davidson was tempered by maritime traditions of deference to the captain. Davidson discounted his crew’s worries and was absent from El Faro’s bridge for eight hours, during a critical time when he might have been able to see for himself why his crew was becoming increasingly alarmed.  

Like sea captains, business leaders must project their own brand of confidence and optimism. Without humility and self-awareness, though, they are prone to the same hubris as Davidson. Leaders can rely on their teams to “tell it like it is” only if they create a safe environment for that to occur. Leaders must respond to the issues and risks brought to them, accepting reality as it is and not as they wish it to be. Leaders must actively participate with their teams to find solutions. A leader that stays the course, offering little more than bluster and optimism, comes off as disconnected and dismissive of the team’s perspectives. Slade sums it up this way: It is “important to foster good communication that respects the hierarchy while allowing room for debate … . (Davidson’s) lack of engagement communicated apathy which, in turn, undermined his authority … . A weak leader can provoke defiance or complacency.”  

Davidson’s decision-making was at least partially influenced by job insecurity, attributable to the culture created by TOTE Maritime, owner of the El Faro. In the trade-off between safety and profit, TOTE’s scale had tipped toward profit. Davidson elected not to take a safer route that would delay his arrival because it would cost TOTE money and potentially damage his own position. A delay resulting from being in bad weather would be verifiable, but a delay resulting from a choice to avoid bad weather compels a captain to defend his decision based on hypotheticals as to what might otherwise have happened.  

Much of leadership concerns managing trade-offs. Justifying an action that avoids or mitigates risk sometimes puts a leader in the untenable position of having to prove a negative. A leader’s courage is most tested when forced to choose between two bad options.

Davidson was also cited for overreliance on imperfect technology. The Bon Voyage System (BVS) plotted El Faro’s course relative to Joaquin’s projected path. Davidson relied almost exclusively on this application because of its visual output. However, he lacked awareness of a significant lag time in its storm position update and failed to reconcile the BVS forecasts to those from the National Hurricane Center (NHC). As Slade says, BVS implied that “the future was fixed and knowable” and that there was just one right answer, contributing to Davidson’s misplaced conviction that he could navigate around Joaquin. Davidson’s dependence upon BVS is an example of an anchoring bias, allowing for no ambiguity or uncertainty. As Slade tells it, “Davidson refused to consider the idea that the BVS report was simply wrong … . Davidson dismissed anything that countered his faith in it, including the NHC’s reports … and his own colleagues.”  

Although most business leaders are not making life-or-death decisions, we can be as guilty as Davidson in how we use technology. We rely on models and forecasts that imply too much precision and fail to understand that the nature of the system being predicted may, like the weather, be governed by chaos theory. We resist thinking in terms of probabilities and neglect the human impacts that make most systems even less predictable than the weather. Today's leaders are expected to be comfortable with ambiguity; this requires demonstrating intellectual humility by considering uncertainty and being aware of their own biases.  

Foy’s narrative highlights the inherent vulnerability of complex systems, with their infinite variables and nonlinear dependencies. All catastrophes start with small failures that cascade and compound toward a tipping point of disaster. Only in hindsight, Foy notes, does it become obvious that a particular factor “might have halted the chain reaction of accident.”  

Any ship – which includes the physical vessel, its owner, captain, and crew – is a complex system (as is a business). Leadership, culture, and tradition are a part of the system; so, too, is the human element, which is embedded in design, creation, maintenance, and execution. Like ships, all organizations have vulnerabilities, many of which are typified by human error. The best systems, processes, and technologies can fail due to complacency or the hubris of poor leadership and culture.  As Slade writes, “The tragic loss of El Faro and her crew serves as a dire warning against complacency … . Every voyage … requires strong situational awareness and a vigilant helmsman.”  

The demise of the El Faro is a warning to all leaders to remain humble and vigilant as they navigate stormy seas.

James J. Caruso, CPA (inactive), CGMA, is a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at Jim_Caruso@outlook.com.

Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.  

Practice Management

Reading for Lifelong Learning and Leadership: A PICPA Blog Series

Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade

By James J. Caruso, CPA (inactive), CGMA

On Oct. 1, 2015, the cargo ship El Faro sailed into the eyewall of Hurricane Joaquin and sank off the Bahamas. All 33 crew members were lost. Aided by 26 hours of audio from the El Faro’s data recorder and investigations conducted by the U.S. Coast Guard and National Transportation Safety Board, two books have been written about the disaster: Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade. I have always enjoyed true tales of marine disaster, and, apparently, I am not alone. As Slade writes, “Nothing captivates the American imagination like a shipwreck.” The El Faro tragedy is more than the story of a sinking ship; it is a cautionary tale for all leaders, whether at sea, on land, or high up in the C-suite.

The loss of the El Faro was blamed primarily on Captain Michael Davidson’s failure of leadership and faulty decision-making. Other factors included over-reliance on imperfect technology, corporate culture, and poor maintenance/inspection practices.  

Slade concedes that “taking risks and living to boast about them” is kind of in a captain’s DNA. However, Davidson was overconfident in his ability to thread a needle relative to Hurricane Joaquin’s path. Concern was evident in conversations among crew members, but any communication with Davidson was tempered by maritime traditions of deference to the captain. Davidson discounted his crew’s worries and was absent from El Faro’s bridge for eight hours, during a critical time when he might have been able to see for himself why his crew was becoming increasingly alarmed.  

Like sea captains, business leaders must project their own brand of confidence and optimism. Without humility and self-awareness, though, they are prone to the same hubris as Davidson. Leaders can rely on their teams to “tell it like it is” only if they create a safe environment for that to occur. Leaders must respond to the issues and risks brought to them, accepting reality as it is and not as they wish it to be. Leaders must actively participate with their teams to find solutions. A leader that stays the course, offering little more than bluster and optimism, comes off as disconnected and dismissive of the team’s perspectives. Slade sums it up this way: It is “important to foster good communication that respects the hierarchy while allowing room for debate … . (Davidson’s) lack of engagement communicated apathy which, in turn, undermined his authority … . A weak leader can provoke defiance or complacency.”  

Davidson’s decision-making was at least partially influenced by job insecurity, attributable to the culture created by TOTE Maritime, owner of the El Faro. In the trade-off between safety and profit, TOTE’s scale had tipped toward profit. Davidson elected not to take a safer route that would delay his arrival because it would cost TOTE money and potentially damage his own position. A delay resulting from being in bad weather would be verifiable, but a delay resulting from a choice to avoid bad weather compels a captain to defend his decision based on hypotheticals as to what might otherwise have happened.  

Much of leadership concerns managing trade-offs. Justifying an action that avoids or mitigates risk sometimes puts a leader in the untenable position of having to prove a negative. A leader’s courage is most tested when forced to choose between two bad options.

Davidson was also cited for overreliance on imperfect technology. The Bon Voyage System (BVS) plotted El Faro’s course relative to Joaquin’s projected path. Davidson relied almost exclusively on this application because of its visual output. However, he lacked awareness of a significant lag time in its storm position update and failed to reconcile the BVS forecasts to those from the National Hurricane Center (NHC). As Slade says, BVS implied that “the future was fixed and knowable” and that there was just one right answer, contributing to Davidson’s misplaced conviction that he could navigate around Joaquin. Davidson’s dependence upon BVS is an example of an anchoring bias, allowing for no ambiguity or uncertainty. As Slade tells it, “Davidson refused to consider the idea that the BVS report was simply wrong … . Davidson dismissed anything that countered his faith in it, including the NHC’s reports … and his own colleagues.”  

Although most business leaders are not making life-or-death decisions, we can be as guilty as Davidson in how we use technology. We rely on models and forecasts that imply too much precision and fail to understand that the nature of the system being predicted may, like the weather, be governed by chaos theory. We resist thinking in terms of probabilities and neglect the human impacts that make most systems even less predictable than the weather. Today's leaders are expected to be comfortable with ambiguity; this requires demonstrating intellectual humility by considering uncertainty and being aware of their own biases.  

Foy’s narrative highlights the inherent vulnerability of complex systems, with their infinite variables and nonlinear dependencies. All catastrophes start with small failures that cascade and compound toward a tipping point of disaster. Only in hindsight, Foy notes, does it become obvious that a particular factor “might have halted the chain reaction of accident.”  

Any ship – which includes the physical vessel, its owner, captain, and crew – is a complex system (as is a business). Leadership, culture, and tradition are a part of the system; so, too, is the human element, which is embedded in design, creation, maintenance, and execution. Like ships, all organizations have vulnerabilities, many of which are typified by human error. The best systems, processes, and technologies can fail due to complacency or the hubris of poor leadership and culture.  As Slade writes, “The tragic loss of El Faro and her crew serves as a dire warning against complacency … . Every voyage … requires strong situational awareness and a vigilant helmsman.”  

The demise of the El Faro is a warning to all leaders to remain humble and vigilant as they navigate stormy seas.

James J. Caruso, CPA (inactive), CGMA, is a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at Jim_Caruso@outlook.com.

Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.  

Technology

Reading for Lifelong Learning and Leadership: A PICPA Blog Series

Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade

By James J. Caruso, CPA (inactive), CGMA

On Oct. 1, 2015, the cargo ship El Faro sailed into the eyewall of Hurricane Joaquin and sank off the Bahamas. All 33 crew members were lost. Aided by 26 hours of audio from the El Faro’s data recorder and investigations conducted by the U.S. Coast Guard and National Transportation Safety Board, two books have been written about the disaster: Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade. I have always enjoyed true tales of marine disaster, and, apparently, I am not alone. As Slade writes, “Nothing captivates the American imagination like a shipwreck.” The El Faro tragedy is more than the story of a sinking ship; it is a cautionary tale for all leaders, whether at sea, on land, or high up in the C-suite.

The loss of the El Faro was blamed primarily on Captain Michael Davidson’s failure of leadership and faulty decision-making. Other factors included over-reliance on imperfect technology, corporate culture, and poor maintenance/inspection practices.  

Slade concedes that “taking risks and living to boast about them” is kind of in a captain’s DNA. However, Davidson was overconfident in his ability to thread a needle relative to Hurricane Joaquin’s path. Concern was evident in conversations among crew members, but any communication with Davidson was tempered by maritime traditions of deference to the captain. Davidson discounted his crew’s worries and was absent from El Faro’s bridge for eight hours, during a critical time when he might have been able to see for himself why his crew was becoming increasingly alarmed.  

Like sea captains, business leaders must project their own brand of confidence and optimism. Without humility and self-awareness, though, they are prone to the same hubris as Davidson. Leaders can rely on their teams to “tell it like it is” only if they create a safe environment for that to occur. Leaders must respond to the issues and risks brought to them, accepting reality as it is and not as they wish it to be. Leaders must actively participate with their teams to find solutions. A leader that stays the course, offering little more than bluster and optimism, comes off as disconnected and dismissive of the team’s perspectives. Slade sums it up this way: It is “important to foster good communication that respects the hierarchy while allowing room for debate … . (Davidson’s) lack of engagement communicated apathy which, in turn, undermined his authority … . A weak leader can provoke defiance or complacency.”  

Davidson’s decision-making was at least partially influenced by job insecurity, attributable to the culture created by TOTE Maritime, owner of the El Faro. In the trade-off between safety and profit, TOTE’s scale had tipped toward profit. Davidson elected not to take a safer route that would delay his arrival because it would cost TOTE money and potentially damage his own position. A delay resulting from being in bad weather would be verifiable, but a delay resulting from a choice to avoid bad weather compels a captain to defend his decision based on hypotheticals as to what might otherwise have happened.  

Much of leadership concerns managing trade-offs. Justifying an action that avoids or mitigates risk sometimes puts a leader in the untenable position of having to prove a negative. A leader’s courage is most tested when forced to choose between two bad options.

Davidson was also cited for overreliance on imperfect technology. The Bon Voyage System (BVS) plotted El Faro’s course relative to Joaquin’s projected path. Davidson relied almost exclusively on this application because of its visual output. However, he lacked awareness of a significant lag time in its storm position update and failed to reconcile the BVS forecasts to those from the National Hurricane Center (NHC). As Slade says, BVS implied that “the future was fixed and knowable” and that there was just one right answer, contributing to Davidson’s misplaced conviction that he could navigate around Joaquin. Davidson’s dependence upon BVS is an example of an anchoring bias, allowing for no ambiguity or uncertainty. As Slade tells it, “Davidson refused to consider the idea that the BVS report was simply wrong … . Davidson dismissed anything that countered his faith in it, including the NHC’s reports … and his own colleagues.”  

Although most business leaders are not making life-or-death decisions, we can be as guilty as Davidson in how we use technology. We rely on models and forecasts that imply too much precision and fail to understand that the nature of the system being predicted may, like the weather, be governed by chaos theory. We resist thinking in terms of probabilities and neglect the human impacts that make most systems even less predictable than the weather. Today's leaders are expected to be comfortable with ambiguity; this requires demonstrating intellectual humility by considering uncertainty and being aware of their own biases.  

Foy’s narrative highlights the inherent vulnerability of complex systems, with their infinite variables and nonlinear dependencies. All catastrophes start with small failures that cascade and compound toward a tipping point of disaster. Only in hindsight, Foy notes, does it become obvious that a particular factor “might have halted the chain reaction of accident.”  

Any ship – which includes the physical vessel, its owner, captain, and crew – is a complex system (as is a business). Leadership, culture, and tradition are a part of the system; so, too, is the human element, which is embedded in design, creation, maintenance, and execution. Like ships, all organizations have vulnerabilities, many of which are typified by human error. The best systems, processes, and technologies can fail due to complacency or the hubris of poor leadership and culture.  As Slade writes, “The tragic loss of El Faro and her crew serves as a dire warning against complacency … . Every voyage … requires strong situational awareness and a vigilant helmsman.”  

The demise of the El Faro is a warning to all leaders to remain humble and vigilant as they navigate stormy seas.

James J. Caruso, CPA (inactive), CGMA, is a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at Jim_Caruso@outlook.com.

Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.  

Tax

Reading for Lifelong Learning and Leadership: A PICPA Blog Series

Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade

By James J. Caruso, CPA (inactive), CGMA

On Oct. 1, 2015, the cargo ship El Faro sailed into the eyewall of Hurricane Joaquin and sank off the Bahamas. All 33 crew members were lost. Aided by 26 hours of audio from the El Faro’s data recorder and investigations conducted by the U.S. Coast Guard and National Transportation Safety Board, two books have been written about the disaster: Run the Storm by George Michelsen Foy and Into the Raging Sea by Rachel Slade. I have always enjoyed true tales of marine disaster, and, apparently, I am not alone. As Slade writes, “Nothing captivates the American imagination like a shipwreck.” The El Faro tragedy is more than the story of a sinking ship; it is a cautionary tale for all leaders, whether at sea, on land, or high up in the C-suite.

The loss of the El Faro was blamed primarily on Captain Michael Davidson’s failure of leadership and faulty decision-making. Other factors included over-reliance on imperfect technology, corporate culture, and poor maintenance/inspection practices.  

Slade concedes that “taking risks and living to boast about them” is kind of in a captain’s DNA. However, Davidson was overconfident in his ability to thread a needle relative to Hurricane Joaquin’s path. Concern was evident in conversations among crew members, but any communication with Davidson was tempered by maritime traditions of deference to the captain. Davidson discounted his crew’s worries and was absent from El Faro’s bridge for eight hours, during a critical time when he might have been able to see for himself why his crew was becoming increasingly alarmed.  

Like sea captains, business leaders must project their own brand of confidence and optimism. Without humility and self-awareness, though, they are prone to the same hubris as Davidson. Leaders can rely on their teams to “tell it like it is” only if they create a safe environment for that to occur. Leaders must respond to the issues and risks brought to them, accepting reality as it is and not as they wish it to be. Leaders must actively participate with their teams to find solutions. A leader that stays the course, offering little more than bluster and optimism, comes off as disconnected and dismissive of the team’s perspectives. Slade sums it up this way: It is “important to foster good communication that respects the hierarchy while allowing room for debate … . (Davidson’s) lack of engagement communicated apathy which, in turn, undermined his authority … . A weak leader can provoke defiance or complacency.”  

Davidson’s decision-making was at least partially influenced by job insecurity, attributable to the culture created by TOTE Maritime, owner of the El Faro. In the trade-off between safety and profit, TOTE’s scale had tipped toward profit. Davidson elected not to take a safer route that would delay his arrival because it would cost TOTE money and potentially damage his own position. A delay resulting from being in bad weather would be verifiable, but a delay resulting from a choice to avoid bad weather compels a captain to defend his decision based on hypotheticals as to what might otherwise have happened.  

Much of leadership concerns managing trade-offs. Justifying an action that avoids or mitigates risk sometimes puts a leader in the untenable position of having to prove a negative. A leader’s courage is most tested when forced to choose between two bad options.

Davidson was also cited for overreliance on imperfect technology. The Bon Voyage System (BVS) plotted El Faro’s course relative to Joaquin’s projected path. Davidson relied almost exclusively on this application because of its visual output. However, he lacked awareness of a significant lag time in its storm position update and failed to reconcile the BVS forecasts to those from the National Hurricane Center (NHC). As Slade says, BVS implied that “the future was fixed and knowable” and that there was just one right answer, contributing to Davidson’s misplaced conviction that he could navigate around Joaquin. Davidson’s dependence upon BVS is an example of an anchoring bias, allowing for no ambiguity or uncertainty. As Slade tells it, “Davidson refused to consider the idea that the BVS report was simply wrong … . Davidson dismissed anything that countered his faith in it, including the NHC’s reports … and his own colleagues.”  

Although most business leaders are not making life-or-death decisions, we can be as guilty as Davidson in how we use technology. We rely on models and forecasts that imply too much precision and fail to understand that the nature of the system being predicted may, like the weather, be governed by chaos theory. We resist thinking in terms of probabilities and neglect the human impacts that make most systems even less predictable than the weather. Today's leaders are expected to be comfortable with ambiguity; this requires demonstrating intellectual humility by considering uncertainty and being aware of their own biases.  

Foy’s narrative highlights the inherent vulnerability of complex systems, with their infinite variables and nonlinear dependencies. All catastrophes start with small failures that cascade and compound toward a tipping point of disaster. Only in hindsight, Foy notes, does it become obvious that a particular factor “might have halted the chain reaction of accident.”  

Any ship – which includes the physical vessel, its owner, captain, and crew – is a complex system (as is a business). Leadership, culture, and tradition are a part of the system; so, too, is the human element, which is embedded in design, creation, maintenance, and execution. Like ships, all organizations have vulnerabilities, many of which are typified by human error. The best systems, processes, and technologies can fail due to complacency or the hubris of poor leadership and culture.  As Slade writes, “The tragic loss of El Faro and her crew serves as a dire warning against complacency … . Every voyage … requires strong situational awareness and a vigilant helmsman.”  

The demise of the El Faro is a warning to all leaders to remain humble and vigilant as they navigate stormy seas.

James J. Caruso, CPA (inactive), CGMA, is a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at Jim_Caruso@outlook.com.

Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.