Normalising deviance in construction project organizations: a case study on the collapse of Carillion

This paper explored the collapse of the UK construction and facilities company Carillion from the perspective of the Normalisation of Deviance (NOD).

Too much to cover in this, so I’ve skipped large sections.

Providing background:

·???????? NOD was first introduced by Diane Vaughan in her Challenger Launch Decision book

·???????? It occurs when “individuals within an organisation become gradually insensitive to deviant practice so that it no longer feels wrong”

·???????? NOD is typically the result of “a series of deliberate choices that have become institutionalised over time” and thus reflects “gradualism and the accumulation of (and organisational acclimatisation to) a series of decisions that individually, may not signal disasters but taken collectively, and applied continuously, will eventually, lead to serious repercussions”

·???????? NOD requires three specifications: 1) deviations are human based, 2) the deviation occurs repeatedly over time and 3) the deviation doesn’t cause an immediate undesired effect

·???????? Not all organisational deviations, like conflicts, represent NOD. NOD specifically arises when “generally unacceptable behaviours become culturally embedded and counter-productive but remain viewed as a normal part of organisational processes”

·???????? More generally, deviance in organisations can be both constructive or destructive

·???????? Deviance can include political deviance, personal deviance, illegal corporate behaviour, production deviance, property deviance, lying or misbehaviour

·???????? It’s said that to become deviant, an action 1) must be contrary to norms, 2) the action must find support in the new norms of a given group, 3) the action must be known and supported, 4) new members must be socialised to participate in this new action or belief

·???????? Also, what constitutes normalised deviance isn’t simply some departure of norms itself, but “repeatedly violating defined and established standards, rules and norms, without being frowned upon thus becoming the usual way of doing things”

·???????? Moreover, people involved in this process will “typically not consider this to be wrong, but rather an evolution of practice that occurs as organisations and their practices change and develop over time”

·???????? NOD isn’t wrong-doing

Results

Overall, this analysis found that:

·???????? NOD was observed in the collapse of Carillion

·???????? While in hindsight “these practices can be viewed as unacceptable, their development was a gradual process that took place over a course of multiple years, indicating that normalising deviance is likely to be difficult to detect in the initial stages of its emergence”

·???????? Normalising deviance is triggered by discrepancies in internal and the external environment of organisations

·???????? The nature of the construction industry, with high competitive pressure, low profit margins, complex and uncertain undertakings, contracting arrangements etc “probably all contributed to the emergence and sustainment of [NOD]”

The study identified three core factors that, in hindsight, drove NOD in Carillion:

1)????? Payment of high dividends to shareholders despite the poor financial performance of the firm, its increasing pension deficits and reduction in cash from operations

2)????? Transferring the consequences of its weak financial position to suppliers, by delaying payments

3)????? Aggressive accounting practices that made the financial position look better than what is was and hid increasing financial responsibilities and problems.

They provide an overview of key findings leading to NOD in this study:

I’ve skipped most of the discussion around these factors and skipped to the final discussion and conclusions. Below they also provide a timescale of the key failure lifecycle.

It’s noted that while financial difficulties arose back in 2015, these warning signs were not acted upon internally.

[** This paper describes how the warning signs were ignored, but earlier work from Barry Turner suggested that many warning signs aren’t even recognised as such, since something catastrophic reasonably occurring isn’t on the perceptual horizon of most people to begin with.]

External actors were also found to contribute to NOD. Although a range of parties, like supply chain and investors were implicated, auditors and the government were also implicated. For one, the government kept awarding high value contracts to Carillion despite and transferring high levels of financial risk.

Auditors were implicated in the collapse by “claiming the company’s accounts were clean, while in hindsight it was proven that this was not the case”.

They note that while irregularities in the business were mainly due to internal deviance, external factors “contributed to the process of normalising deviance by simply overlooking the warning signs and putting the firm in a position to adapt to the new normal”.

In concluding, they argue some key steps may help avoid or identify NOD in businesses. Two are below:

1)????? Having an effective early warning system where it’s feasible to detect the emergence of NOD. This can include whistleblowing systems

2)????? ?Since many of the deviances identified in this study involved relationships between the “focal firm” and its external stakeholders, the mechanisms for voicing concerns and whistleblowing shouldn’t be limited to a single organisation

However, countering NOD is difficult because of the gradual accumulation over time. Thus “Once deviation is entrenched, rooting it out is challenging”.

They argue that other industries like aviation have succeeded in turning deviance around, in part by moving towards highly reliable organising. [** Personally, I’m more sceptical that HRO is a robust enough claim for countering NOD, but it’s an interesting suggestion nevertheless.]

Of course, the study had limitations. One is that a “fine-grained analysis of the practices which can potentially become normalised over time requires longitudinal research within the organisation over an extended period of time”; something this study couldn’t do.

Link in comments.

Authors: Hajikazemi, S., Aaltonen, K., Ahola, T., Aarseth, W., & Andersen, B. (2020). Construction Management and Economics, 38(12), 1122-1138.