28 Jul 2014  Research & Ideas

Eyes Shut: The Consequences of Not Noticing

In his new book The Power of Noticing: What the Best Leaders See, Max Bazerman explains how and why many executives fail to notice critical information in their midst.

 

Editor's note: Behavioral economist Max H. Bazerman decided to pursue the subject of noticing after realizing that he wasn't very good at it himself. "The truth is that I was truly terrible at noticing," says Bazerman, the Jesse Isidor Straus Professor of Business Administration at Harvard Business School. "Marla, my spouse, would see all kinds of things going on that I would simply miss. Why? Perhaps this was due to my tendency to focusing, and in my case, narrowly."

In his forthcoming book The Power of Noticing: What the Best Leaders See, scheduled to be published on August 5, Bazerman documents a decade of research showing how and why many leaders fail to detect critical information in their midst. "This book will help you recognize when to seek more useful information and apply it to your decisions," he writes. "It will provide you with the tools you need to open your eyes and truly notice for the first time—and for the rest of your life.

The book analyzes a bevy of real-world examples, ranging from Bernie Madoff's Ponzi scheme to problematic university admissions policies. In the following excerpt from Chapter 10, Bazerman discusses how leaders often fail to notice when their decisions indirectly hurt people—and how people often fail to hold organizations accountable for indirectly causing harm.

The Power of Noticing: What the Best Leaders Seebook excerpt

Failing to Notice Indirect Actions

From The Power of Noticing: What the Best Leaders See

By Max Bazerman

Consider two hypothetical fires. A garment factory in a Third World country with minimal governmental regulatory oversight burns down, killing half of the three hundred women and children employed there; it subsequently becomes clear that the factory's owner failed repeatedly to spend money on meeting minimum safety standards. A second fire kills a suburban dad who filled his lawn mower with gas too close to a recently tossed cigarette; the fire raced up the flow of gas and into the can, which exploded. Who is to blame for these deaths?

Let's shift our focus. If you live in the United States, you probably have shopped at Walmart at least once or twice, and you likely are aware of their "Everyday low prices" tagline. Have you ever thought about the connection between their everyday low prices and the safety of the products Walmart sells, or the connection between their everyday low prices and the safety of the employees who make the goods that the retailer sells? No need to feel awkward if your answer is no. Most people do not think about the harms created by indirect actions, that is, behaviors that hurt others indirectly, such as buying a low-price product from a company that skimps on safety. But perhaps armed with more data, you will.

Blitz USA was once the largest manufacturer of gas cans in the United States, with approximately 80 percent of the gas can market. Cy Elmburg, the chairman of Blitz USA, has testified that in July 2006 he sent a letter to the CEO of Walmart asking Walmart to get involved in a national consumer awareness campaign aimed at protecting consumers from gas can explosions. Elmburg felt he needed Walmart's cooperation because the gas cans produced by Blitz and sold through Walmart had been connected to dozens of explosions, serious burn injuries, and deaths. In their contracts with Walmart, suppliers must agree to accept any financial or criminal liability resulting from the sale of their products. Elmburg felt that Walmart, given its size and as the point of purchase, had an ability to influence consumers in a way that Blitz could not. Perhaps because it was protected from liability, Walmart failed to act on Elmburg's proposal. The explosions continued.

The basic problem with the Blitz gas cans is that when gas is poured from them, there is a risk that gasoline vapors will connect with an ember or other fire source, and the fire will run up the gas flow into the can and explode. (While all of the data that I am using about the Walmart stories are from publicly available sources, it should be noted that I served as an expert witness in the case of Melvin v. Walmart, Inc.) This had occurred in many dozens of cases, and a large number of lawsuits against Blitz had followed. A former Blitz employee has testified that Blitz presented a revised gas can design to Walmart that would prevent the burn injuries by installing an "arrestor," a device that would prevent a flame from flowing into the can, at a cost of between 80 cents and $1 per can. According to this testimony, Walmart rejected Blitz's design on the basis of the price increase, and Blitz halted its redesign project because it would be difficult to launch a national product that Walmart refused to purchase.

"Most people do not think about the harms created by indirect actions"

The flip side of Walmart's policy of providing everyday low prices to its customers is its goal of securing everyday low costs for Walmart. The guideline given to Walmart buyers is to achieve low costs, a motto that its buyers are encouraged to live and breathe. Court testimony provides extensive evidence that Walmart places extreme price pressures on its suppliers. This can translate, as it is claimed to have with Blitz, to a supplier realizing that adding commonsense safety features to a product can prevent it from acquiring Walmart's business. My wife, Marla Felcher, is a product safety expert, and we have a shared interest in what keeps safer products from reaching the market and what keeps less safe products on store shelves. In 2002 she wrote:

As the world's largest retailer and the nation's largest toy seller, Wal-Mart could take the lead in ensuring the products we buy for our kids are safe. But the company does not require manufacturers of toys, carriers, high chairs or other children's products to demonstrate the products are safe before they wind up on a Wal-Mart shelf. The retailer does, however, flex its market power to insist that manufacturers cut costs. . . . Wal-Mart has enormous clout with manufacturers. The retailer should use this clout not only to insist its suppliers cut costs, but also to insist that manufacturers safety-test their products. A solid first step would be for Wal-Mart to require manufacturers of children's products to certify that their goods have been safety tested by a truly independent third party, and that the products comply with meaningful safety standards. For the world's largest retailer to take a bold position on safety would set a strong precedent for other retailers to follow. It is time for Wal-Mart to be part of the solution, rather than part of the problem.

More than ten years later, not only has Walmart failed to lead on product safety but the Blitz cases indicate that little has changed.

Based partially on legal fees and settlements with plaintiffs from exploding gas can lawsuits, Blitz went bankrupt. Consequently many of the plaintiffs turned their attention to Walmart and sued the retailer as a causal agent in the deaths and injuries. Given that more than one party was involved in Walmart's sale of unsafe gas cans, who is to blame?

A logical strategy for analyzing the role of different possible causal agents in gas can injuries would be to assess what the likely outcome would have been if one of the agents didn't exist. Consider the counterfactual in which Blitz did not exist as a company during the years in question. Without Blitz, would Walmart likely have sold a gas can without an arrestor? Without Blitz, would Walmart have engaged in an effective communication campaign on the safe use of gas cans? My assessment is that Blitz would have been replaced by an alternative manufacturer, that Walmart would not have engaged in a safety campaign, and that little would have been different in terms of the safety of gas cans sold at Walmart.

Consider the alternative counterfactual, namely, that Walmart did not exist during this time. Would Blitz have created a safer gas can to sell to other buyers? Based on Blitz's behavior, there is evidence that Blitz was concerned about improving the safety of its gas cans. Thus it is quite likely that Blitz would have brought a safer gas can to the marketplace.

This comparative analysis of these two counterfactuals suggests that Walmart was the driving force in unsafe gas cans being sold to consumers. While I believe this is the correct analysis, Walmart has yet to be found guilty in any such product liability suit.

A similar indirect effect of Walmart on safety—this time, the safety of those who make products sold by Walmart—can be found in the case of the 2012 garment factory fire in Bangladesh. On November 24, 2012, a fire broke out in the Tazreen Fashions factory in Dhaka, the capital of Bangladesh. At least 117 people died and at least another two hundred were injured, making this the deadliest factory fire in Bangladesh's history. Subsequent analyses document that the factory failed to meet any reasonable set of safety standards.

Who is to blame? The owners of the factory, or the retailers that demand price levels that cannot be met if reasonable safety standards for factory workers are in place?

Let's step back and consider this account of an interaction between garment manufacturers and more than a dozen Western retailers, including Gap Inc., Target, and JCPenney, that took place just a year and a half before the fire:

At the meeting in Dhaka, the Bangladesh capital, in April 2011, retailers discussed a contractually enforceable memorandum that would require them to pay Bangladesh factories prices high enough to cover costs of safety improvements. Sridevi Kalavakolanu, a Wal-Mart director of ethical sourcing, told attendees the company wouldn't share the cost, according to Ineke Zeldenrust, international coordinator for the Clean Clothes Campaign, who attended the gathering. Kalavakolanu and her counterpart at Gap reiterated their position in a report folded into the meeting minutes, obtained by Bloomberg News.

My argument is not intended to acquit factory owners of running unsafe facilities in order to generate greater profits. But like the gas can story, the root of the problem is that price pressure from Walmart and other retailers can lead to unsafe decisions by gas can manufacturers and factory owners. This pattern is being repeated across product categories in many nations.

When a company refuses to accept price increases to create a safer product, to educate consumers about product safety, and to pay extra to participate in making factories safe, it is a causal actor in creating harm. But as we will see throughout this chapter, people fail to hold organizations accountable when they are the indirect cause of harm. By definition, indirect harm often goes unnoticed and is particularly hard for people—manufacturers, retailers, and consumers—to see.

Reprinted with permission from The Power of Noticing: What the Best Leaders See, by Max Bazerman. 2014 by Simon & Schuster. All rights reserved.

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Comments

    • Martha Oruku
    • university lecturer, National open University of Nigeria.

    It is rather unfortunate the organizations are more profit oriented than being safety conscious, forgetting the fact that when the damage is done , it would not only result in a colossal losses but may damage the image of the organization that maybe difficult to redeem.I would rather appeal that safety is more important than excessive profit making.With good quality product and good safety measures put in place the sky remains the limit for such organizations.

     
     
     
    • JTG
    • Consultant

    We failed to notice that it was the consumer who was ultimately responsible for all that had happened. I liked the WWF slogan "when the buying stops, the killing stops". It does not seem directly relevant but when we stop demanding for cheaper and cheaper goods, perhaps manufacturers can start to pay more attention to what they are making. Manufacturers are rushing products to the shelf at the lowest costs and updating the products while they are being manufactured. Version 2, version 3 and so forth. There is no incentive to think about what they are putting on the shelf. Given the short shelf life of most products, there is no disincentive for not worrying about what they put on the shelves. The likes of Walmart are conduits to meet our desires for everything new and cheap. We forgot to ask the question do we really need these 'new things' and why are they so affordable? When we start to think about what we are buying, the manuf acturers will start to think about what they are making and retailers will start to think about what they are selling. So long as we are the zombies in this consumerism world, suckers for low costs, the world will continue to be flooded with these inferior and unsafe merchandise.

    Our focus is what blinded us.

     
     
     
    • Ian
    • Risk Manager

    This article is really about the disruption in efficient market forces resulting from oligopolies and the lack of regulation to control the unnatural market forces created.

     
     
     
    • Cindy Solomon
    • President, CSA, Inc.

    This topic was thoughtfully and amazingly analyzed in Margaret Heffernan's 2011 book Willful Blindness. The book is not only well written, but it compiles an enormous amount of data into masterful stories that help you understand why we are willfully blind to so much. The author weaves data from businesses, neuroscientists and leaders from around the world to paint a truly profound picture of that which makes us prefer ignorance in so many areas.

     
     
     
    • Nance Hellmrich
    • Writer/Editor

    I read Heffernan's Willful Blindness too and found it very insightful. Glad to see the concept is finally making its way into mainstream academia.

     
     
     
    • John Weinmann

    How do you convince workers in Bangladesh to take a larger portion of their compensation in better working conditions rather than higher wages? Presumably they are working in the factory in the first place because, even with the safety issues, it was a better deal for them than whatever they were doing prior to taking that job. For the worker it's a trade off between current wages and increased safety. Workers in developing markets throughout history (including the U.S.) have made that choice by choosing wages and absorbing workplace risk - at least until the country has sufficiently developed such that wages are high enough for workers to trade some upside in wages for better working conditions.

    For the users of gas cans, would they be willing to pay more for a can that was safer? For you and me the answer is most certainly yes. But consumers are not often in the position to make determinations of product safety at the point of purchase, so in the U.S. we outsource that function either to government regulators (e.g. the federal Consumer Product Safety Commission, the FDA, etc.), or to the reputation of the retailer. If the retailer sells poorly made products consumers can take their business elsewhere. This can work for product failures where the result does not impact life or health, but in those instances the consequences of a product safety issue are sufficiently dire to require government regulation. Should we really blame Walmart for not providing a "good example" to other retailers when doing so could put them in a position of losing legitimate business to competitors? And when does the blame for the gas can user enter into the equation? Shouldn't society exp ect them to know they are using an inherently dangerous product and to use due care? And apparently no one is suing the gasoline provider, and it is, after all, the gas, not the can, that explodes.

    I am not saying that Walmart should not be a good corporate citizen. But isn't the real issue here how to get the value of safety integrated into market prices? Is it moral for us to say to a worker in Bangladesh that they should make a different trade off between wages and working conditions because we don't like the risk they take? Or to lose their job lower cost competitors if they demand higher than market compensation? Or for Walmart to lose sales because they are selling products above market prices? All of this might make us feel good, but violating the laws of supply and demand has never worked on a sustainable basis.