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Over the last 6 months, we’ve borne witness to one of the most precipitous drops in the world’s core commodity—oil. At the time of this draft, a barrel of crude is off 45% from its 2014 high. Applying the rear-view mirror technique, the arithmetic seems rather straightforward. The U.S. shale boom is putting millions of barrels of supply into a global economy that is slowing. Prices were bound to drop.

What is particularly surprising to us is the sheer number of leaders and investors who were caught flat-footed by the plunge. There is a lesson to be learned here, though, and that’s the importance of scenario planning. Those that accounted for Brent Crude at $50 a barrel will survive; those that didn’t and borrowed heavily assuming $95 per barrel of crude are in jeopardy. As the initial draft of this newsletter is being handcrafted in an airport, we couldn’t help but acknowledge that the airline industry may just be best-in-class when it comes to scenario planning—both on tactical levels (e.g., geese fly into an engine) and strategic levels (e.g., adjusting to swings in jet fuel prices).

Here are 4 points to consider regarding scenario planning:

First, devote time. At least once per quarter, leadership should mandate time to engage in scenario planning exercises. These exercises don’t need to last long—90 minutes or fewer is fine. However, it is important to cordon off time on the calendar and to do it quarterly. The reason is that the world changes rapidly, and doing scenario planning once or twice each year is hardly enough given the amount of environmental turbulence and change.

Second, imagine the unimaginable. Once we program the time, we must allow the brainstorming to be unprogrammed and unstructured. This means drastically challenging assumptions and the rate and direction of trends. Read Michael Lewis’s The Great Short in which he details the story of an unheralded money manager, John Paulson, who made billions by conducting a variant of scenario planning. He simply challenged the assumption that home prices don’t always go up; they can also go down. Until then, the dominant logic was that homes always appreciate in value. He shorted the U.S. housing market while everyone else was piling in, bidding prices up. He made billions. While everyone now is asking, “What about oil at $35 a barrel?” who is asking, “What if oil returns to $105 a barrel?”

Third, write your thoughts down—even if it is only on one page. Talking about differing scenarios is fun, but talk can be forgotten—the written word, less so. Simply, jot your thoughts down and draft up an executive summary of no more than 2-3 pages of how you and your team would react to some differing scenarios. At a minimum, you should have three options to discuss: 1) things get better for our business, 2) things get worse for our business, and 3) things stay the same for our business. When things get antsy, you can always go back to the written document when cooler heads were discussing the possibility of different events.

Lastly, engage some close stakeholders, such as your Board of Directors, in this scenario planning process. Not only are you keeping them informed, they can also provide nuance and a healthy challenge to your perspective.

The reason why we don’t naturally gravitate toward scenario planning, very plainly, is that we are afraid to purposefully imagine a place or an event that could cause harm or threaten our survival. It is much, much easier to assume that the current trend line will continue. This mental safety is an illusion. World events (i.e., Ebola) and industry disruptors (i.e., Apple’s iPhone) change the calculus of the game. Scenario planning provides a head start, sometimes just seconds, to prepare. This preparation can be the difference between survival and demise. So, go ahead, and change your oil. If you need someone to help with the scenario planning, we can facilitate that here at ELP. Give us a call today.

One of the hallmarks of nuclear operations is the mandate to exercise clear and concise communication. It is a refrain heard over and over. At ELP, we challenge this orthodoxy. Clear and concise communication is not enough—never enough—and could be dangerous if left at this threshold. Instead, communication must be clear, concise, and precise. Without precision, clear and concise communication could be harmful.

Let us tell you what we mean here. During a recent outage at a large nuclear power station, a HIT team was formed to help with procedure adherence and to reduce human performance errors. HIT is a moniker for High Intensity Training/Team or, sometimes, High Impact Training/Team. In this case, at a major meeting at the end of the day, the HIT Team Leader announced to the entire leadership team, “We found three cases yesterday of personnel failing to wear their PPE (Personal Protective Equipment).” At 12 words, it was certainly clear and concise, but it wasn’t precise. Three cases out of how many observations, 100 or five? The sample size makes all the difference. Was it just gloves or eye gear or head cover? What was it? Were the observations found at night, during the day, in maintenance or operations?

The sample size issue, alone, may influence leaders to enter into bad decisions. If it is three cases out of 100 observations, I’m not sure that demands organization-wide initiatives. However, if it is 85 cases out of 100, then we may have a problem. If leaders are supposed to go after problems with a laser-like focus, how could one even approach that mandate without knowing which PPE was left out and what department or division was the key violator? From this one statement, everyone in the room felt that they had a problem—when it may have been only three cases isolated to a single team. A wild goose chase to attack a problem that never even existed could have ensued.

Bottom line, leaders must demand all three legs of the stool. Communication should be clear and easy to understand. It should not be wordy; it must be concise. However, make sure that the drive to be concise does not detract from the imperative to be precise. All three must be present to ensure optimum performance.

Coach K recently visited West Point with Team USA. A West Point graduate and basketball player under legendary Bobby Knight, Coach K is famous for many things—one of which is his leadership approach to mistakes and sub-par performance. Another academy graduate, this time from the U.S. Air Force Academy, Captain Chesley “Sully” Sullenberger, the leader and pilot who safely landed on the Hudson River in Manhattan in 2009, shares similar views regarding mistakes and errors. Namely, mistakes can be good.

To Coach K and Sully, mistakes become opportunities to coach and learn. This, of course, requires humility and patience and some level of tolerance. Make no mistake, mistakes are tough. They are often embarrassing especially when in the public purview. They are expensive and can result in the loss of capacity, energy production, or cargo transport, just to name a few. Nobody likes to make mistakes.

Errors and mistakes have two components, and one usually dominates. The first component is accountability. A mistake, by its very nature, is a violation of a standard. When standards are violated, we know from Leadership 101 that accountability demands a response to this violation. Many leaders stop with accountability. Elite leaders move quickly to the second component of mistakes, the learning opportunity. The world’s best leaders embrace mistakes as a chance to revisit assumptions, re-think processes, and to engage in reflection on how things may be done differently or better to avoid such mistakes in the future. Leaders that take this approach are less likely to repeat mistakes.

At ELP, we’ve come to see that the most pioneering and remarkable leaders somehow do both. If forced, they tend to lean a bit more towards the learning aspect as opposed to the accountability aspect. When certain employees continually make the same or similar mistakes, the pendulum, of course, swings back to accountability. However, by and large, sensational leaders build the capacity to engage both components of a mistake to drive two important lessons—accountability, which is an immediate lesson, along with learning, which is a lasting lesson.

So, next time a clock reset occurs, a train derails, or a turnaround goes late by two days, reflect on how you approach this mistake, this faulty performance, and this error. By focusing exclusively on accountability, we build an organization of fear. By focusing on both, we have an organization aligned around standards, and more importantly, learning.

At ELP, we know how to do this. We’ve done it in our leadership development programs, our leadership of Root Cause Evaluations (RCEs), and in our best-in-class strategic planning initiative—Strategic Performance Management. So, don’t make a mistake! Engage us. Visit our website at or call one of our original founders and principals, Robin Bichy, at 703.999.5676 to learn more.