Tetra Tech EC & Risk Case Study

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[. . .] This was assessed as a risk, and dealt for accordingly -- by deciding to use a long hose to pump up the toxic sludge. One can imagine that in many climates, the risk assessment process would have been hampered when capable engineers felt silenced by that fact that management's focus on pitching the lowest bid possible (cost wise) had supplanted management's ability to recognize simple facts which would be the first question of a competent engineer with experience in the field.

It says a lot about the shortsightedness of management strategies in the first place that looking at the mechanical facts of the situation was not until very recently a factor in assessing its risk. This suggests management was out of touch with the physical realities of the risks assessed: like one of those tragic stories from Vietnam or World War One where the grunts on the ground knew exactly how bad things could get, but the military brass was incapable of understanding it (not having experienced it in any meaningful or hands-on fashion).

c. How has this process been included into the firm's culture?

The de-facto crowdsourcing (to its larger community of employees) of Tetra Tech's risk assessment strategy has been included into Tetra Tech's "culture" insofar as the climate of speaking one's mind is encouraged. Because of the mean-minded militaristic emphasis on hierarchy and discipline -- the so-called "chain of command" -- in so many management strategies, most of which exist purely to glorify the managerial class of apparatchiks at the expense of the proletariat and intelligentsia alike. It sounds like Tetra Tech is learning to follow the model of information technology companies which have learned how to get engineers and designers to voice their concerns, precisely because their engineers are the only people who can assess the size of any given project. It seems like you need to allow them a sort of veto power over management for precisely this reason, but psychologically speaking it places management in a better position to spin this as a process of crowdsourcing the assessment of risks rather than giving intellectual labor any kind of veto power over the decisions of management. I feel like these things are obvious to anyone who has considered seriously the rise of Microsoft but maybe this sort of thing trickles down more slowly in the waste management industry.

d. Is there evidence of an ethical tone at the management level of the company? If so please describe.

As far as the authors of the study are concerned, they are impressed by management's emphasizing (at the moment of employment) to employees that "you would be in more trouble with us if you didn't stop and plan and made the target than if you did stop and plan and didn't make the target" (Fletcher and Newell, p. 5) One executive is quoting as telling a long story which ends with the helpful note: "We didn't fire the person who raised the flag" (p. 5) -- he might have added "or blew the whistle," since this is a distinct attempt to demonstrate ethical tone by making operations more transparent (at least to those within the company).

If planning is taken to be synonymous with ethical behavior in the toxic-sludge-hauling business -- which I daresay it is, because toxic sludge is not so toxic if handled according to the correct procedures, but those procedures require government legislation above and beyond what would be called for if Tetra Tech was merely selling widgets -- then I think the study intends to paint management at Tetra Tech as attempting to implement a sort of ethical honor code in which employees are made to feel remiss for not speaking their minds.

What could be seen as creating a climate of internecine squabbling and endless gridlock is here instead seen as a happily communitarian ideal, in which employees are actively encouraged to point out flaws in everything they see. This is presumably why, when the policy was first implemented, it was viewed by employees as being "nasty," "contentious," "unpleasant," and "no-value-added" (p. 7).

"No-value-added" seems (among other things) to be a critique of the conscious re-branding effort involved in calling the newfound risk-assessment protocols a "TIP," which is clearly meant to involve the idea of added value (a pourboire such as one would leave for a waitress) and also increased knowledge (as a racetrack tout would offer you a "hot tip" by way of his superior knowledge of the strength of the horses and the condition of the racetrack on that particular day). The employee who suggested this particular "TIP" had "no-value-added" was thus suggesting that the obnoxious aspects of the procedure (from the standpoint of an employee) were not offset by any increase of added economic or informational value.

2. Elaborate on risk assessment in the Task Initiation Procedure (TIP)and oversight processes. Link your analysis to Don Roger's feeling about Tetra Tech's risk appetite.

Of course Don Rogers thinks that Tetra Tech finds no risk too big to swallow, provided that their TIP oversight processes -- and the attendant change to contract terms, for what is essentially a waste-contracting firm (subject to increased EPA oversight, although the level of oversight has changed over time).

I suspect the unique reason why Tetra Tech is able to swallow even the most sizable risks lies in the contractual necessity for renegotiating the contract upon discovery of new problems -- which is merely one feature of their procedural overhaul in the wake of two disastrously risky projects gone wrong -- moreso than due to the Task Inititation Procedure itself, as defined by the flowchart in Exhibit 2.

In terms of Tetra Tech's compliance with the terms of Sarbanes-Oxley Section 404, they seem to be within the terms of the SEC's interpretive guide to SOX compliance for management (published in June of 2007). The SEC requires management to assess any company top-down for risk, especially for risks such as fraud, controls to guard against fraud, and to scale all assessments granting due importance to factors like the size and complexity of the company itself.

Tetra Tech seems to have a remarkably open climate of conversation at the corporate level, by design, as part of their TIP procedures. But as far as the goals of Sarbanes-Oxley are concerned, it's hardly like the TIP procedures described could prevent (say) accounting fraud. The TIP procedures seem best understood as a hedge against hubris on the part of a corporate managerial structure with an appetite for (supposedly creative and Schumpeterian) destruction.

3. What has Tetra Tech done to overcome the difficulties associated with Enterprise Risk Management (ERM) implementation?

Enterprise Risk Management (or ERM) is largely a tactic or series of tactics whereby a company can understand its risks by assessing them in terms of statistic probability of occurrence, potential magnitude of consequences as a result of occurrence, and additionally by identifying potential strategic responses to hypothesized risks, and offering a yardstick whereby progress in achievement of objectives can be measured against potential risk.

From Tetra Tech's perspective, they were able to proactively determine risk for the customer and accordingly include that in their marketing plan. "We like to say we plan our work and work our plan" is reported as being the "mantra" at Tetra Tech's corporate headquarters (Fletcher and Newell, p. 4). This presumably tells the client that while Tetra Tech may cost more, they provide a better way of buffering the client from continuing to hemorrhage money on a protracted spree of unanticipated additional costs. But it mostly seems that Tetra Tech's internal system of TIP procedures is greater at the portion of ERM which deals with assessing the magnitude of consequences associated with risks.

In part this is necessary because Tetra Tech deals in the clean-up of dangerous or risky products: if members of the general public start giving birth to flipper-babies the way they did in Love Canal, then that is a much more serious potential consequence for the offending polluter than merely having to pay for a few extra trucks because there's more toxic ooze than anticipated. As noted before, if Tetra Tech's business involved widgets rather than poisonous chemicals, it would probably not be subject to such onerous regulation (nor might it seem so urgent to aim for full compliance with the more burdensome and ambiguously-worded provisions of Sarbanes-Oxley).

The story of Tetra Tech is, however, mercifully free of easy libertarian sneering at the burdensome nature of SOX 404, probably because a business like Tetra Tech that started out (and faced no market barrier to entry while starting) solely because of the government's willingness to legislatively mandate (and financially guarantee) the total clean-up of hazardous toxic waste is not so unwise as to bite, ideologically speaking, the invisible, if Keynesian, hand that feeds it.

In their study of Tetra Tech, Fletcher and Newell tell a revealing anecdote in which Tetra… [END OF PREVIEW]

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