ORGANISATIONAL CULTURE | Corporate Governance & Risk: Titanic, Costa Concordia and Grenfell Tower Fire: Lessons that save lives (part 1 of 3 – Titanic)
This case study – Titanic, is part 1 of 3 articles about improving corporate and public governance. Part 1 describes all the crucial events and decisions leading to Titanic’s sinking and part 2 and 3 show the similarities with the Costa Concordia disaster and the Grenfell Tower fire in London. We also introduce the concepts of Materiality Analysis and Visionary Governance® as crucial components for improving decision making, reducing risk and anticipating future events. The case studies are part of our Smarter Culture® Workshop to design better corporate cultures and organisations.
TELEGRAM FROM THE FUTURE PAST – 9th of April 1912
“Hi, I am Nicolas De Santis advisor to White Star Line, owners of RMS Titanic. I was hired by J. Bruce Ismay, the chairman of the White Star Line because he feels that existing international maritime standards are not up to scratch and wants the company to lead the industry and be ahead of the game. This process is part of a new corporate vision strategy for growth that requires a new culture and corporate values to focus all stakeholders on safety, customer service, transparency and performance. It is now 10 a.m. and I am aboard the RMS Titanic, a day before our departure for New York. My meeting with Captain Smith and the Officers of RMS Titanic has gone very well. I have presented to them my concerns for the trip, including a materiality analysis of crucial issues and we all have now agreed on the critical priorities and potential dangers to focus on during the trip. Everyone in the team is on the same page and we all have agreed on the need for new corporate policies and contingency plans for this voyage and future ones. The issue of icebergs was quickly identified and discussed. As we are in 1912, we do not have technologies on board, beyond the sailors on the Crow’s Nest, to detect ‘bergs’ at night with precision. For this reason, speed during night navigation will be reduced to safe levels and if any icebergs are sighted or if we are warned by other ships of any icebergs in the area during night navigation, the ship will stop for the night. This way, we will never hit the iceberg five days from now. The ship will not sink. No one will die. We did our job. The integrity of the ship and the safety of the passengers is guaranteed. This is the beginnings of a new White Star Lines Culture that has sustainable thinking at its core.“
Of course the above story and the meeting with Captain Smith on RMS Titanic never took place but I have many times imagined how such a story would have saved Titanic. I imagine similar stories happening before other great disasters occur due to obsolete cultures and how to prevent them. These articles and case studies are part of our Smarter Culture methodology to diagnose the current state of corporate cultures and how to prepare them for the future. The focus of the 3 articles in the series is Governance, ethics and Material issues analysis.
A materiality analysis of the White Star Lines (owner of Titanic) could have surfaced cultural and governance ‘invisibilities’ (things that are crucial but that are not on the radar, are taken for granted or simply ignored). Such analysis would have changed corporate mindset, values and behaviors in time to focus on critical priorities, making the first voyage of RMS Titanic a total success. Proper corporate governance would have aligned the owners, the crew, the passengers and international maritime authorities on the one thing that was crucial for that maiden voyage: PASSENGER SAFETY. Titanic sank on 15 April 1912 with the loss of 1,503 passengers. As we will see from the other 2 articles in this series, the lessons of Titanic are yet not entirely learnt.
WHAT IS VISIONARY GOVERNANCE?
Visionary Governance® is our holistic management philosophy, toolbox and suite of services for World Leaders, CEOs, C-SUITE and Boards to supercharge leadership, governance and teams performance by integrating future oriented skills, sustainable thinking and innovation in organisations and cultures. Visionary Governance provides skills to better anticipate and prepare for the future, including concepts such as MATERIALITY and MATERIALITY ANALYSIS described below.
WHAT IS MATERIALITY?
We live in an uncertain and constantly changing world. Materiality helps us identify and prioritise the sustainability (long term) issues that matter most to a business and its stakeholders. An issue is material if it meets two conditions. Firstly, it impacts a business in terms of growth, cost, risk or reputation. Secondly the material issue has to be important to key stakeholders (internal and external). In deciding if an issue is material, other consideration come into play, including whether the ‘material issue’ is aligned with the strategic vision, corporate values (ethics) or mission. Now, if the existing strategic vision, values and mission of a company are misaligned or outdated, the company will not be able to identify critical material issues or new priorities. In such cases the company and its stakeholders are at great risk.
IDENTIFYING MATERIAL ISSUES IS HIGHLY COMPLEX
I want to stress the point that identifying ‘material issues’ involves a high degree of complexity and ‘complex systems methods’ must be used in order to be effective. This is because many of the key stakeholders might not have identified the issues themselves. Some material issues are not obvious or clearly visible and can only surface with a proper methodology, careful analysis and experience.
MATERIALITY ANALYSIS
In the two charts below, we show the actual materiality position of the White Star Line company that led to its disaster compared to the one that should have governed all management decisions of White Star Lines, before, during and after construction of their ships. The materiality charts cover two aspects of governance. On the vertical axis we see the STRATEGIC IMPORTANCE OF A MATERIAL ISSUE FOR CORE STAKEHOLDERS (Management of White Star Lines, Captain and Crew, Passengers and Maritime regulatory bodies). On the horizontal axis we see the STRATEGIC IMPORTANCE FOR THE BUSINESS (White Star Lines) of material issues. By comparing both materiality charts (A, what happened and B, what should have happened) we can see how critical priorities were taken for granted and we can see why Titanic was doomed. All stakeholders took for granted that safety was a priority on a ship of such scale. They were all wrong.
For RMS Titanic these were the core Materiality issues at play that we have identified:
1. PASSENGER SAFETY & CREW TRAINING
2. PROPER INTERNATIONAL STANDARDS FOR SHIP SAFETY
3. LUXURY BRAND EXPERIENCE – IMAGE OF TITANIC AND THE WHITE STAR LINE
4. GET TO NEW YORK IN RECORD TIME
5. EFFECTIVE ON BOARD COMMUNICATIONS AND DECISION MAKING
A. MATERIALITY POSITION ON TITANIC THAT LED TO DISASTER
B. MATERIALITY POSITION ON TITANIC THAT WOULD HAVE SAVED THE SHIP AND PASSENGERS
1. PASSENGER SAFETY & CREW TRAINING
In the materiality chart of the ACTUAL TRIP (Chart A) we can see how critical issues such as passenger safety become non important. Everyone on board (passengers and crew) assumed that Titanic was ‘unsinkable’ and took safety for granted. ‘Safety’ was not a core value of the White Star Line organisation. No passenger safety drills were carried out on Titanic. The crew had not been trained adequately in carrying out an evacuation. Worth mentioning that Titanic’s Captain, Edward Smith, was about to retire and that he had been involved in a major maritime accident, a year before Titanic’s sinking. While commanding White Star Lines ship Olympic, the ship collided with a British Warship. Smith was put in charge of Titanic at retirement age and despite such a recent accident.
2. PROPER INTERNATIONAL STANDARDS FOR SHIP SAFETY
At the time of the sinking of Titanic, international safety shipping regulations were antiquated. Ship safety regulations were changed and improved after the Titanic disaster inquiries. Today we can still see in many industries and sectors that, until disaster strikes or positions are untenable, where many policies and regulations continue to be maintained even if they are obsolete. These obsolete policies, ‘the status quo’, are maintained even when the government and industry are aware of its dangers and potential catastrophic results on safety, society, the environment and the economy. We will see this fact also in the Costa Concordia and Grenfell Fire case studies.
3. LUXURY BRAND EXPERIENCE – IMAGE OF TITANIC AND THE WHITE STAR LINE
In a competitive oceanic shipping market, Titanic’s brand image and reputation of luxury was crucial in order to attract its elite clientèle. This reputational brand component of LUXURY first, dramatically impacted decision making and relegated passenger and ship safety to the back of priorities.
4. GET TO NEW YORK IN RECORD TIME
There are many stories about Titanic trying to break an Atlantic crossing speed record but Titanic was not designed for high speed. There is no evidence to suggest that Ismay, the White Star Line Chairman who was on board, put pressure upon Captain Smith to increase speed or that he told passengers that the Titanic was out to “make a speed record.” But John Thompson, a fireman on board the Titanic and a witness at a senatorial investigation, asserts that the Titanic was out to beat all records for its maiden trip and that they kept maintaining full revolutions in the furnace rooms to maintain full speed. The top speed of the Titanic was 23 knots (more than 26 miles per hour). The fact remains that Titanic was at almost full speed when it hit the iceberg, whilst traveling at night amid iceberg laden waters. It hit the iceberg at a speed of 22.5 knots, just .5 knots below the top speed of 23 knots. FIRE ON BOARD: Was a fire on board the reason why Titanic was speeding during night navigation? Read more on this recent theory below in the article.
5. EFFECTIVE ON BOARD COMMUNICATIONS AND DECISION MAKING
Based on the above materiality points, Titanic was already highly vulnerable and unsafe to travel, but the lack of effective leadership and communications during transit doomed the ship. There was no real ‘boss’ on board the Titanic on its maiden voyage. The Captain, Edward Smith, was old and retiring, J. Bruce Ismay, the bossy chairman of the White Star Line, was a passenger possibly influencing Captain and crew decisions with his presence. Titanic had received several radio messages and warnings from other ships of drifting ice in the area. Ice warnings were being ignored or not passed properly up the chain of command in order for crucial safety decisions to be debated and action taken. The SS CALIFORNIA, only a few miles away from Titanic, had warned Titanic by radio of a pack of ice on its own path and that it had decided to stop for the night for safety reasons. Nevertheless, Titanic continued to steam at full speed. These warnings did not seem to deter the Captain or officers to reverse navigating strategy, reducing speed or stopping for the night. Their mindset was fixed on ‘unsinkable’. This ‘mental image’ might have made ‘information flow’ of crucial safety data (radio warnings, informal and verbal communications) less important (not a priority or urgent).
TITANIC OFFICIAL INQUIRIES
Two official inquiries investigated the Titanic disaster. One took place in the United States and one in the UK. The two inquiries reached broadly similar conclusions: the regulations on the number of lifeboats that ships had to carry were out of date and inadequate, Captain Smith had failed to take proper heed of ice warnings, the lifeboats had not been properly filled or crewed, and the collision was the direct result of steaming into a dangerous area at too high a speed.
The recommendations from both Titanic inquiries included strong suggestions for major changes in maritime regulations to implement new safety measures, such as ensuring that more lifeboats were provided, that lifeboat drills were properly carried out and that wireless equipment on passenger ships was manned around the clock. An International Ice Patrol was set up to monitor the presence of icebergs in the North Atlantic, and maritime safety regulations were harmonised internationally through the International Convention for the Safety of Life at Sea; both measures are still in force today. The area where Titanic sank is now known as Iceberg Alley.
Titanic Fire Theory
While the cause of the disaster has long been attributed to the iceberg, fresh evidence has surfaced of a fire in the ship’s hull, which researchers say burned unnoticed for almost three weeks leading up to the collision. Officers on board were reportedly under strict instruction from J Bruce Ismay, chairman of the company that built the Titanic, not to mention the fire to any of the ship’s 2,500 passengers. In 2004, the Geological Society Of America and Ohio State University engineer Robert Essenhigh said attempts to control the coal fire in the bunker could have been the reason why the Titanic sailed so quickly at night through an area littered with icebergs. If this recent theory is true, it would confirm that the management of the White Star Lines did indeed put safety at the bottom of their agenda.
On the Author
Nicolas De Santis is the CEO of Corporate Vision® and the President of Gold Mercury International, the global governance think tank and international award. A business theorist, author, consultant and entrepreneur, Nicolas is widely recognised as a visionary change agent, advising corporations, global brands, start-ups and governments on visionary governance, strategy, global branding, business model innovation, cultural alignment and the future direction of our world. De Santis advises international organisations, corporations and governments on national strategy, strategic visioning, cultural transformation, business model innovation & global brand strategy. As an internet entrepreneur, Nicolas De Santis was one of the founding management team of OPODO, the European online travel portal and of BEENZ.com, the first digital global internet currency.
For Part Two of this case study, the Costa Concordia Disaster, click here. For part Three, Grenfell Tower Fire, click here.
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