As demonstrated with the Fukushima Nuclear Disaster and the Deepwater Horizon Disaster, a poor understanding of risk can contribute to large scale disasters. By looking at organizational decision-making after the 1984 Bhopal disaster, we can further understand how organizations react to disasters – a pattern typical of corporate behavior following low-probability, high-impact events. Prior to an accident, the firm focuses on a probability threshold (p*) and assumes that any event whose estimated probability (p) is less than p* will effectively have a zero chance of occurrence. Hence, no consideration is given to ways of reducing the risk of such events. After a catastrophic accident in its own plant or in the industry, the firm emphasizes ways of avoiding such events in the future even if p<p*. In summary, organizations typically shift their focus onto worse-case scenarios and strive to reduce the chances of such events to as close to zero as practicable even if it means sacrificing other organizational goals. In effect, the worse-case scenario becomes a new reference point for the organization.
In addition to being surprising in content, unusual events can also alter entrenched organizational rhythms. Such events can change perceptions of time pressures and time horizons, the sense of competing time demands, the sense of control over time and, ultimately, the way time is understood. These time changes may present themselves as:
- Triggers – experiences may help shift organization attention from present routines to future possibilities, reflection and reassessment
- Resources – time and attention that is not precommitted to routine activities may be refocused on reassessment and change
- Coordinating Mechanisms – events may grab the attention of the diverse groups needed to undertake change and help ensure that stakeholders are focused on the need for change at the same time
- Symbols – schedule changes may indicate a need and commitment to change more forcefully than any simple pronouncement would have done
Organizational reaction to disasters demonstrates the importance of jolts, either external or internal to the firm, to stimulate innovation or change. Patterns of change are rarely steady, but rather irregular and ad-hoc, and are often preceded by previously unseen or unanticipated events. Punctuated equilibrium, in which neither stability nor change is an abnormal state, suggests that recurring improvement is more likely than continuous improvement and that the ability to harness random events to drive change is quite valuable.