Pub. 4 2015 Issue 3

The CommunityBanker 12 n 1864, two ships wrecked a few months apart on Auck- land Island, a remote, desolate place in the South Pacific, approximately halfway between Australia and Antarctica. The Grafton had a crew of five and all five made it to shore. The Invercauld had a crew of 25, 19 of which made it ashore. Neither of the crews ever knew of the other’s existence. The fact that these two ships grounded on the same island in roughly the same conditions, allows us to draw a stark contrast between the decision-making and leadership of the two captains. Captain Musgrave of the Grafton had carefully selected his crew and outfitted the ship for a four-month journey. Yet, the budgeted money from his investors ran out and he wound up purchasing only about 20 percent of the chain he needed for his two anchors. Captain Dalgarno of the Invercauld had plenty of chain, but he ordered his anchors lashed to the deck of the ship. When both ships got into trouble near Auckland Island neither was able to use their anchors to keep the ships from crashing on the rocks. Those two separate but related decisions directly caused their ships’ respective de- mise. From the time of the shipwreck onward, the actions By David Peterson, i7strategies Can You Tame the Black Swan? I of the captains could not have been more different. Captain Musgrave acted in the best interest of his men, instituted a de- mocracy for decision-making, organized the men in searching for food and water, and almost immediately starting holding nightly education sessions when each man taught his expertise to the other men. Captain Dalgarno, from the moment he reached shore, of- fered nothing that would assist his men to survive. He made no effort to organize the men for finding food or building a shelter. He ordered the two ship’s boys who survived the wreck to get him food and water (until they both died!). He allowed everyone to do their own thing, which for several of the Invercauld survivors meant cannibalism. In short, although he was ultimately rescued, Captain Dalgarno’s weak leadership and poor decision-making directly brought about the loss of sixteen of the nineteen surviving crew members. In contrast, due to Captain Musgrave’s outstanding leadership and superior decision-making, he and the other four Grafton crew members were rescued. Musgrave and two of the men sailed in a makeshift boat from Auckland Island to New Zea- land and then came back in a proper ship to rescue the other two castaways. How we deal with adversity is not just about the innate character that exists within us. We can plan ahead to effec- tively deal with disasters, but we don’t know when we will be hit with a crisis. Your institution may suffer a big loss on an account due to a company defalcation. A key member of your team may suddenly pass away. The economy may tank, and the country may be thrown into a recession. (Oh wait, that actually already happened.) Negative events thrust upon you out of the blue are also called Black Swan events. So, how can you plan for a Black Swan event that you cannot predict? 1 First, start by brainstorming how the elements of your business you assume to be absolutely immune to any negative event could be wrecked. Once you stop thinking “nothing bad could ever happen to that,” it’s amazing how quickly you can come up with a list of potential Black Swan events. Once you have a list of potential Black Swans that could reasonably happen, you can prioritize these from most to least probable and develop a mitigating strategy. 2 Carefully examine the crew that you have on your jour- ney. Outside of the specific job skills their job descrip- tions require, what other skills would be beneficial in a time of crisis? Do you have these skills available to you as a part of the employees you currently have? By executing a skills assessment of your existing staff and then looking at the types of negative events that may occur, you can extrapolate the types of skills you may need to mitigate a disaster. The delta between the skills your employees already have and the skills you might reasonably need should be the target of your upcoming hires. Or you could identify existing employees who can upgrade their skills to acquire those desired. Either