The Iceberg Theory
How to deal with risks you can’t see
One of the great challenges of managing business risk is how much of it we, as executives, cannot see. Like the iceberg that sank the Titanic, the visible portion of a threat is often its smallest part. Part of my work advising and coaching CEOs is helping them see under the surface to manage these hidden risks, using the three tenets of what I’ve come to call “The Iceberg Theory.”
Bad news travels up the chain of command slowly.
When bad news arrives, beware what is still unknown.
Never punish or discourage the messenger.
A personal connection
I grew up in the small town of Hannibal, Missouri on the banks of the Mississippi River. In addition to Mark Twain, our town boasted a more minor celebrity -- The Unsinkable Molly Brown. Brown, who was a playmate of my great-grandmother, became famous for surviving the sinking of the Titanic. Starting from this small connection, I carried a fascination with the Titanic into adulthood and a business career that, ironically, included serving as the CEO of a shipyard.
Thus, the three tenets that became the Iceberg Theory were born.
How could this disaster happen?
One of the great mysteries of the RMS Titanic’s sinking is why on a clear though moonless night in calm seas, the lookouts – who knew to be alert to icebergs in the North Atlantic – missed seeing the fatal one until it was too late.
Really? They missed it? … What chain of events could possibly trigger this result?
Subsequent investigations discovered:
Last minute changes were made in the ship’s officers.
The lookouts were not using binoculars.
The lookouts requested binoculars but never received them.
The ship had binoculars on board.
One of the departing officers “may” have left the ship with the keys to the cabinet containing said binoculars.
The ship was steaming at its maximum speed. And,
Once the iceberg was spotted, news was passed through multiple hands before action was taken. Of course, it was too late.
No single one of these events was sufficient to sink the ship. However, a cascade of issues and miscommunications doomed the ship. With the benefit of hindsight, let’s look at those fatal events through the lens of the Iceberg Theory.
Bad news travels up the chain of command slowly
The lookouts in the crow’s nest knew they needed binoculars, but lacked the power to make someone in authority get the devices to them. Instead of status quo, imagine a crew member delivering this bad news:
“The lookouts need binoculars, they are locked in a cabinet, we have no key, and we have to break the cabinet. I need your approval.”
Most organizations are designed to slow the flow of this sort of bad news. How about yours?
Beware of what is still unknown
Once the iceberg was sighted, the damage done to the Titanic was not done by the ice that could be seen. But by the ice that could NOT be seen – the ice below the surface of the water. This is both a literal and figurative example that demonstrates that by the time bad news reaches you, you cannot assume that ALL of the bad news has arrived. A wise reaction when receiving bad news should be to look for more.
Tenets 1 and 2 reinforce each other. If you know that bad news travels up the chain slowly, there is even more reason to beware of unknown bad news. It may still be trying to reach you! And it may need your help getting there. Is your organization designed to speed the delivery of bad news, or to suppress it from reaching you at all?
Never punish or discourage the messenger.
While information traveled slowly, the ship itself traveled at top speed. Those on watch knew the danger this presented. However, they also knew that slowing down Titanic’s initial voyage would disappoint those in charge. Would they be accused of timidity? Scolded? Demoted?
Yet, imagine how different the outcome could have been if a subordinate had felt free to highlight the risk and make a recommendation to reduce it.
“Captain, it’s April in the North Atlantic and there is a risk of ice. The slower we go, the greater our time window to avoid a collision. I request we back off steaming at maximum speed until daylight. I need your permission to slow to __ knots until then.”
All feedback is a gift, especially from those brave enough to deliver negative information. Executives expose themselves to even greater danger when they discourage the delivery of bad news. Clearly it is in your self-interest to receive the facts, whatever they may be.
Navigating what lies beneath
Every executive can improve their ability to navigate hidden risks. As you develop your organization and culture, remember these key principles:
Bad news travels up the chain of command slowly.
Beware what is still unknown.
Never punish or discourage the messenger.