Chapter 21: Building the Coffin

My senior business symposium professor was a pilot. He’d never flown passenger airliners, but did a lot of freight transport and rose to management in a major shipping company before he retired to take up teaching. It was one of the cool things about the School of Business at the University. The professors were mostly people who had risen to senior management in firms that were successful. At least that were successful at the time the professor retired from it. Some professors shook their heads over the demise of their businesses after they had retired or sold their interest.

Paul Amber was one who had a lot of experience and a lot of interesting stories as well. It was my favorite class when I officially became a senior in the fall of 1996. Yes, it was my fifth year in college, but I was drawing a substantial income from the business I had built and was plotting my own withdrawal from it.

It was October and we were busy winterizing our home. There were all kinds of deals that we could get, including virtually free electric, if we did all the things the power company told us to do. We’d had to install all new appliances when we remodeled the kitchen anyway, so we got all energy efficient models. Score a 20% reduction in our power use and a 40% reduction in our bill. We had the entire house insulated. I was pissed that the company left unpainted patches for all the holes in the stucco where they’d blown in foam insulation, but painting the house would have to wait until next spring. The proof of insulation gave us another 20% off the power bill. High efficiency new furnace. New argon gas-filled double-pane windows through the entire house. Six inches of insulation blown into the attic. Resealing the basement. By the time we were done, we had almost no electric or gas bill at all.

I sat in class for the lecture and listened to Professor Amber as he talked about an airline accident.

“Vnokovo Airlines Flight 2801crashed at Operafjellet, Svalbard, Norway on August 29th, just three months ago. All 141 people aboard were killed. You probably didn’t read about it in the newspaper. That would be because no American newspaper reported it. After all, it was a Russian-made aircraft. It was a charter flight. It was transporting Russian and Ukrainian miners from Moscow to Norway. Why would anyone in America care about the deadliest aviation accident ever in Norway? Why should we care?” he asked. I shrugged. I had no idea what his point was, but I assumed it would be an interesting story anyway. He continued his lecture.

An accident never has just one cause. Business failure is never because of one single thing either. In aviation, we call it ‘building the coffin.’ There are six sides to the coffin. Let’s look at them. The airplane crashed two and a half miles short of the runway while attempting to land in poor weather. Side one: Poor weather. In business, we might interpret this as the economic environment our business is operating in. Markets fluctuate. Wars drive prices up and supplies down. Politics gives breaks to some businesses and penalizes others. The first thing you have to consider is the business climate. Pilots fly through bad weather all the time and land planes safely. Businesses can survive bad economic conditions as well. They are not fatal.

Side two: The pilot did not use the usual approach which includes a turn over the ocean, but rather took a route that led through a narrow valley. In other words, they chose a risky time to try a different approach. Dozens of airplanes each day landed using the usual approach. The pilot on this flight had used the ocean-side approach before. But here, in the midst of a storm, they decided to use an approach that looked safer than the one they knew. Businesses, too, in a time of crisis are tempted to throw out the business plan and latch onto something new in a desperate hope that this will save them. It seldom works that way. Instead, they find they are not only fighting the storm itself, but the new environment, as well.

Side three: Inadequate planning. Evidence indicates that the crew members were still trying to figure out the details of what they were going to do while they needed to be doing it. In other words, they treated it as an emergency and depended on reaction rather than planning. I cannot tell you how many businesses are managed by emergency. In business, an emergency is almost always the result of poor planning.

Side four: The crew was inadequate and poorly managed. They had never flown together before. They had no confidence in each other. They had no central management that they respected. No one was watching. An effective business manager sees to it that he or she has the resources necessary to do the job, both material and personnel, and sees to it that those resources are applied appropriately. This crew simply wasn’t capable of functioning in the environment they had to work in. We see incompetence among managers and employees in nearly every business failure we have studied.

Side five: They did not discontinue their approach when procedural uncertainties existed. It’s the old saw. ‘Floggings will continue until morale improves.’ If what you are doing isn’t working, then it is the wrong thing. You don’t keep investing money, time, effort into procedures that aren’t working. The biggest problem we see here is that businesses do not maintain enough data nor can they adequately interpret the data they have to know when something is working or not working. The pilot had ample opportunity to pull up and go around. Instead he continued on.

Side six: The lid on the coffin. The pilot and crew had limited knowledge of both the airspace and the language. The universal use of English for flight control is only adequate for normal flight instructions. Pilots are tested to understand when they are being given landing clearance, told to change altitude, or have to change vectors. The concept of asking “What should I do” or of receiving an answer to that question, simply doesn’t exist. And how often do we see that in business? In the final analysis of a business failure, the management did not know how to ask for help.

Once you have the six sides of the coffin complete, there is really nothing you can do to save the airplane.

It was a heady lesson. Seeing a business failure in the same light as an airplane crash was something that would take some time to sink in. 141 lives were lost. How many lives would be lost when Enron crashed? That was an aspect of that disaster that I’d never considered in my other life. I couldn’t remember the exact year, but I knew it was coming. It was part of what was going to drag the economy of the whole country down.