Pike River management ‘blind’ to risks

Failures of coal mine management focus of PhD research.

The Pike River Mine disaster was due to three kinds of management “blindness” in not considering potentially catastrophic events.

That is the conclusion of Te Herenga Waka—Victoria University of Wellington PhD graduate Dr Richard Logan.

In his thesis, Dr Logan investigated the decision-making styles of key players in the coal mining disaster and how their blindness led to ‘black swan’ events.

The explosion at the Pike River Mine near Greymouth in November 2010 killed 29 mine workers. Their bodies have never been recovered.

Black swan events are consequential, surprise occurrences.

Dr Logan says the three crucial decision-makers at Pike River Coal Ltd (Pike) were “completely blindsided” by the potential for a fatal methane explosion.

The failings of Pike’s management can be studied in detail because the decision-making of chief executive Peter Whittall, his predecessor Gordon Ward and chairman John Dow were reflected in the 6000 pages of transcripts from the Royal Commission on the Pike River Coal Mine Tragedy.

Dr Logan’s assessment also used witness accounts published in Rebecca Macfie’s book Tragedy at Pike River Mine.

“What we’re really talking about,” he says, “is why do clever people act so blindly?

“My study is of organisational blindness, and it’s always not the whole organisation but the key decision makers and their support group. There’s often going to be an outgroup of those who hold different or even the polar opposite view.”

Between 2007 and 2010, when the mining company was publicly listed, it had been focused on its belief it was going to safely and economically extract the highest-possible quality coal, Dr Logan says.

“As we learnt at the royal commission, there were various people at different stages, academics, consultant geologists, who had been saying to the company [it] appeared to be overstating the quality and quantity of coal reserves and understating methane levels. And former Solid Energy chief executive Dr Don Elder also said he thought Pike was going to have problems economically and operationally.”

The three blind spots he found among management were the illusion of certainty, inductive cognitive biases, and a single, unquestioned top-down organisational mindset.

“The illusion of certainty is all to do with your attitude towards uncertainty. Because most people hate uncertainty, there's inherent bias to move away from it. And you do that by various simplifications, you just narrow your view down.

“Extreme avoidance of uncertainty is basically short-termism. Obviously, the shorter the term that you're looking at it, the more certain you can be. Take weather forecasting—if you’re only looking at one or two days away, you always get good accuracy.”

With inductive cognitive biases, people take into account only what they know and the evidence they have, leading to overconfidence and misplaced optimism.

“These biases are not a problem most of the time, but in situations of high uncertainty, surprise events can occur, which are outside of what they expected. This is called the ‘problem of induction’ and it affects all decision-making,” Dr Logan says.

The top-down world-view from management and the board is one that others cannot effectively question.

“They think they know the answers. It’s all great and they agree with each other that it is smart, brilliant, robust, and they get everyone to follow it, with little consultation and it has next to no flexibility.

“If they were more sensitive they might realise that today’s narrative or mindset is only the best you can do today. And tomorrow, when something changes, you have to update it.”

Dr Logan says his study could be applied to Russian President Vladimir Putin and his war with Ukraine.

“With hindsight we can look back a few months and see how the collective view of Putin and his entourage, the top people, was that they are just going to race through Ukraine. It’s like a mental image or mindset—it’s their world view.

“We are already seeing that some of the assumptions they had are flawed, like they could conquer Ukraine in three weeks. If you extrapolate, there’s a potential black swan that the Russian military could collapse. And there's a potential, if you go forward in time, that their economy could collapse, especially if the Germans turn the gas pipeline off.

“If you've got a poor economy, you're going to have a poor reinforcement of your armour. Therefore the army drains all your money, then you get a poorer economy, then there's a potential of a third black swan, which is consequential, having a political collapse.

“That would be a complete black swan surprise to President Putin.”

Dr Logan completed his PhD in management at the University’s Te Kura Whakahaere–School of Management. His research was supervised by Associate Professor Ian Yeoman, Dr Bronwyn Howell and Adjunct Professor Bob Cavana.