- Aug 2, 2017
How and why did so many U.S. based businesses not anticipate the 2008 financial crisis – an event that eliminated $17 trillion in net worth in just 15 months, wiping out more than the $14.5 trillion of GDP created in 2007? The signals were there, but most financial institutions simply missed them. A related question: why are many organizations not responding to climate change, even though it poses enormous risks to their operations? Ivey’s Tima Bansal and former students want to know why organizations fail to notice latent issues, even though these issues could have disastrous impacts on the organization. They argue that some issues are of such fine grain (the financial crisis) or such large extent (climate change) that the organizational processes and routines don’t ‘see’ them. For example, observing daily share prices or quarterly reporting makes it difficult for organizations to see issues that may have long-term impact. Or, many organizations look at coarse data, such as macroeconomic indicators, when the answers lie in talking to people. In their theoretical analysis of the problem, Professor Bansal and her colleagues propose that organizations don’t often think about the scale of the processes related to issues, such as climate change or the financial crisis. An important conclusion they reach is that organizations need to be aware of their attentional biases, and deliberately think about a range of data that will offer both micro-level, on-the-ground insights, as well as macro, long-term global insights. This ability to analyze data of fine grain and broad extent will help to deflect risks and expose latent issues.
Bansal, Pratima, Anna Kim, and Michael O. Wood, “Hidden in Plain Sight: The Importance of Scale on Organizational Attention to Issues” Academy of Management Review.