Organizational Behavior Problem Solving Approach Discussion

Question Description

Following the 3-Step Problem-Solving Approach, analyze the issues prevalent in the Problem-Solving Application, “Overconfidence Bias Partly to Blame for California Wildfire,” in Chapter 11.

Overconfidence Bias Partly to Blame for California Wildfire In late November 2018, a wildfire took hold in a dangerously dry area of California’s Sierra Nevada foothills. Possibly sparked by the malfunction of an electrical power line that initially affected a single customer, it soon burst out of control. Later known as the Camp Fire, the blaze became the deadliest and most destructive in California’s history. Before being contained two weeks later, it had roared through 154,000 acres of land and destroyed the entire town of Paradise. At least 85 people were killed, and hundreds left homeless; nearly 16,000 buildings were burned.43 Biases on the part of PG&E’s management team contributed to the disastrous Camp Fire in California that killed 85 people, left hundreds homeless, and destroyed the entire town of Paradise.

Justin Sullivan/Getty Images The malfunctioning tower, left in place 25 years longer than intended, belonged to Pacific Gas & Electric (PG&E), a utility company with a history of safety problems. According to the New York Times, “Five of the 10 most destructive fires in California since 2015 have been linked to PG&E’s electrical network. Regulators have found that in many fires, PG&E violated state law or could have done more to make its equipment safer.” The company’s interim CEO admitted errors and promised change, but Governor Gavin Newsom told an interviewer that the company, which recently filed for bankruptcy under the burden of responsibility for tens of billions of dollars of damage from the fire, could not be trusted.44 State investigators probing earlier disasters that implicated PG&E, including many hundreds of fires, heard from employees that the company routinely looked the other way when they complained about outdated equipment and flawed reports. Finding the company had spent millions of dollars less on operations and maintenance than authorized, California’s Public Utilities Commission concluded it was prioritizing the bottom line over safety. PG&E was also accused of undertaking repairs and improvements only after a fire or explosion had occurred, instead of conducting needed maintenance on a timely basis.

“Some people believe that you run equipment to failure,” said one former state regulator. “They believe ‘run to failure’ to save money. This [the Camp Fire] is the danger of run to failure.” The company had earlier announced some steps to incentivize safety but they were short-lived, and at the time of the Camp Fire it was in court, pushing back against legal principles that would hold the utility liable for damage caused by its equipment even when it acted properly.45 PG&E, which has already come through one bankruptcy proceeding, was also fighting to expand the protection of a new law allowing utilities to pay for the costs of fires by raising fees to customers.

The company and other utilities claim that their rates will increase anyway because banks will be less willing to lend them money, and that climate change and increased development of remote areas have made fires more likely and harder to Page 435 fight. Meanwhile the company’s stock dropped 60 percent, its credit rating was downgraded, and it may face criminal charges relating to the fire if it is found to have behaved in a “reckless” manner. It is now seeking new directors and advice on preventing future disasters.46 Apply the 3-Step Problem-Solving Approach

Step 1: Define the problem in this example.

Step 2: Identify the causes. How did overconfidence and any other biases contribute to this disaster?

Step 3: Make your recommendations about what PG&E should do differently in the future to avoid such disasters.

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