Mismanagement of Human Capital Risk : A Major Leadership Issue

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Mismanagement of Human Capital Risk : A Major Leadership Issue

We are aware that a binary principle already operates in this arena: either individuals were at fault or the system is the problem.


Two important elements of leadership which are radically dependent upon the particular theoretical approach used: The extent to which uncertainty could and should be eliminated from the appraisal system through recourse to various forms of allegedly objective approaches, and the extent to which one’s theoretical perspective on organisational autonomy alters the role of leadership. 

It has been suggested that under conditions, uncertainty - which seems to be the norm for most organisations- tends to be located in the hands of individual leaders, even if their power to control the organisation is extremely limited. 

In this piece I will attempt to take the uncertainty problem one stage further by examining whether we are likely to be able to fall back upon the utility of scientific knowledge in a situation of extreme organisational uncertainty and risk. In other words, if we are going to experience greater uncertainty and environmental turbulence in the future, can we assume a more scientific approach will necessarily help managers to manage?

Thus, in the case of mad cow disease, science can gradually dispel our ignorance and provide a solid foundation for managers to take rational decisions. Once we are certain that we know all about the problem, we can also address the issues of culpability and prevention: who or what was to blame, and how can we eradicate  the problem?

We are aware that a binary principle already operates in this arena: either individuals were at fault or the system is the problem. The former assumption is examined through an ‘action approach’, whilst the latter through a ‘structural approach’; and within each, the alleged party (individual or system) is either guilty or innocent.

The former action approach suggests a high degree of individual choice; the structural approach suggests a high degree of determination. What can a fuzzy approach offer us here? Keith Grint has clearly mentioned that constructivism asserts that the critical issue is epistemological- how we know things to be as they are claimed to be. It is rooted in a skepticism of ‘truth claims’, but has significant practical consequences.

The entire debate hinges around modernist notions of science and technology and proffers an alternative route into the complex issues that confront all those engaged in the ‘environmental debate’.  (ref: Bansal & Howard, 1997) 

But why and where do mad cows fit into conventional management? One can easily understand that this is either a biological or a political problem; but, perhaps, not really a managerial issue. We have noticed that one of the points raised by the approaches that are critical of Conventional Theories is the whole idea of categorisation and creation of boundaries. In this instance, by categorising mad cow disease as a biological problem, we immediately divest ourselves of any responsibility for it; and look to biological scientists to solve it for us. But does this approach really absolve us from the responsibility of commercial success or failure? The answer is ‘no’. It does raise a serious issue with regard to the method of Categorisation.   

If we consider the extent to which farm animals form an important element in the agro-industry, and that the agro-industry is a major industry in all countries, then what happens to ‘mad cows’, and why they are ‘mad’, becomes a business problem as much as anything else.

If, for example, as Keith Grint has mentioned, a certain famous ‘natural’ water-bottling company suddenly found its water supply contaminated, then an ‘environmental’ problem becomes a major business issue. In other words, not only can managerial problems in allegedly marginal areas prove enlightening for all kinds of apparently unrelated problems, but the very categorisation of problems as ‘relevant’ or ‘irrelevant’ is part of the technique by which agendas are set and power deployed. There is another point to be noted by all organisations in that they need to be careful about the power of boundary construction. 

The apparent absence of leadership and responsibility mirrors that which transfixed Exxon when the Exxon Valdez oil tankers ran aground in 1989 and no senior executive talked publicly for a whole week after the disaster. In contrast, when the Piper Alpha rig blew up in 1988, Occidental’s Head, Hammer, flew straight to the scene of the disaster and minimised the damage to the company through his public appearances. It, therefore, transpires that unless those responsible for similar environmental disasters take immediate action that exceeds expectations, and unless mistakes are admitted, it then seems unlikely that the crisis will wither away quietly. 

The conclusion that any leadership must draw from this, and which they will have to keep in the back of their minds is that, the choice of people and delegation of authority must be undertaken judiciously and with conviction, otherwise the organisation will continue to suffer to the peril of its existence.

The writer is former Member in the Board of Directors of Standard Chartered Bank Nepal Ltd.

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