Posted: November 2000
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Article SummaryThis short overview was written for public utilities – sewage treatment plants, water companies, power companies, etc. The focus is especially on the benefits of sharing control … or even abandoning control altogether. Includes a sidebar article: Managing Outrage: A Primer.

Risk = Hazard + Outrage:
Coping with Controversy about Utility Risks

Engineering News-Record, October 4, 1999, pp. A19–A23

Assume that people are worried about some risk posed by your operations. They’re worried about heavy metals in sewage sludge (okay, biosolids) … or a possible chlorine explosion … or emissions from your power plant … or CO or THMs or EMFs.

Every utility – sewerage, water, power, gas – has a full portfolio of such risks. Some are chronic, some acute; some concern your neighbors, some your customers; some are genuinely dangerous, some technically trivial. All represent potential sources of risk controversy.

If you’re a public utility leader, the buck will ultimately stop on your desk. How you manage risk will, in part, define your tenure and shape your ultimate success.

Risk Equals…

Let’s divide the “risk ” people are worried about into two components. The technical side of the risk focuses on the magnitude and probability of undesirable outcomes: an increase in the cancer rate, a catastrophic accident, dead fish in the river, even a decline in property values. Call all this “hazard.”

The non-technical side of the risk focuses on everything negative about the situation itself (as opposed to those outcomes). Is it voluntary or coerced, familiar or exotic, dreaded or not dreaded? Are you trustworthy or untrustworthy, responsive or unresponsive? Call all this “outrage.”

First Principles

Given these definitions, here is the First Law (maybe the only law) of Risk Communication: outrage, not hazard, drives reputation. Even significant hazards are usually tolerated when outrage is low, and even insignificant hazards are usually rejected when outrage is high.

Of course whenever hazard is high, you have to manage it right – for legal and regulatory reasons as well as ethical and technical reasons. But whether hazard is high or not, and whether you manage it right or not, if outrage is high you’re going to be in reputational trouble. So you have to manage outrage right, too.

Most fundamentally, the hazard-versus-outrage distinction is just a special case of the distinction between substance and process. In any controversy (a proposed rate increase, an odor problem, a contract re-negotiation with the union, even a dispute with an individual customer), how hot the battle gets depends more on process than on substance.

And of course, increasing competition means these battles matter all the more, since customer loyalty can be heavily damaged by a high-outrage controversy.

A Key Skill

Preventing and managing outrage, in short, will be a key skill for utility leadership in the new millennium. There are two points here. First, communication is more important than many utility managements seem to think.

And second, the kind of communication that matters most isn’t placing puff pieces in the media about a job well done; it’s anticipating and responding to worries and grievances, to outrage. Risk communication, not conventional public relations, is the key.

The typical risk controversy comes when the hazard is low and the outrage is high. Captivated by the high outrage, the public insists the problem is serious; lulled by the low hazard, the utility insists it isn’t

The utility is right about the hazard and wrong about the outrage. The public is right about the outrage and wrong about the hazard. And of course until the utility does something to reduce the outrage, it has very little chance of persuading the public that the hazard is low.

The Progression of Controversy

Here is the “natural history ” of a typical risk controversy, in four stages. The controversy begins when some group complains that something is dangerous. You investigate the hazard and determine to your satisfaction that it is low.

So you ignore the complainers. But people do not respond well to being ignored. They get more angry, more frightened. They also gain more momentum: more members, contributions, media coverage. That propels you into the second stage.

In Stage Two, having failed to ignore your critics into oblivion, you try to bury them in the data. You collect all the evidence you can that you’re right and they’re fools, and you dump it all on them in the hope that it will make them happy.

This works about as well on the job as it would at home. People are not pleased to be called fools. They get more angry and more frightened, more momentum and more power … and now you’re in the third stage.

In Stage Three, having failed to ignore them into oblivion, having failed to bury them in the data, you now look for a way to attack their motives. If they’re professionals you call them mercenaries; if they’re amateurs you call them ignorant. If they’re on the right you call them fascists; if they’re on the left you call them radicals. If they’re men you call them macho; if they’re women you call them hysterical.

People don’t like having their motives attacked. Once again, anger, fear, momentum, and power escalate. Welcome to the fourth stage.

In Stage Four you get a telephone call from top management. “This is getting serious,” you are told. “These people used to be just a minor irritant. But now regulators are asking awkward questions, newspapers are running embarrassing stories, politicians we thought were on our side are putting some distance between us and them. I don’t care what you have to do, get these people off our backs!”

And so you end up spending millions of dollars fixing the hazard that you decided at Stage One was too trivial to be worth fixing.

Would a Simple Apology Suffice?

And that doesn’t work either. Your problem was an outrage problem, not a hazard problem. Your critics needed an apology and a Community Advisory Panel, not a $40 million piece of equipment. They’re still outraged. The only change is now you also are outraged, because you’ve just wasted $40 million on a useless piece of equipment.

So here is the bottom line. The proper response to a serious hazard is to mitigate the hazard. The proper response to a serious outrage isn’t to ignore it (as in Stages One, Two, and Three), and isn’t to mitigate the hazard (as in Stage Four). The proper response to a serious outrage is to mitigate the outrage.

The sidebar (see Managing Outrage: A Primer) summarizes five basic guidelines for managing outrage. If you’re typical of my clients, you will find these principles simultaneously very obvious and very counterintuitive.

Companies and agencies usually try to win their battles with critics. Instead, I help my clients look for profitable ways to settle, sometimes even to lose.

Understanding the principles of outrage management and making them work isn’t the challenge. The challenge is overcoming the constraints of individual psychology and organizational culture that keep you from even wanting to make them work.

Sharing Decisions, Sharing Control

All five principles are important, but when I advise utilities, I tend to put particular emphasis on sharing control. In fact, I sometimes take the more radical position that utilities should think about abandoning control altogether.

Suppose you’re the water company. Your job is to provide the safest, cheapest, most plentiful water you can. But there are tradeoffs here. Safer, for example, may mean more expensive and less plentiful.

Who should decide these difficult tradeoffs? Why not your customers? It is, after all, their water, their money, and their health. (And your profits often have almost nothing to do with how these competing goals are compromised.)

Similarly, should the electric power supplier be the one to decide what to do about EMFs? Should the sewerage authority be the one to decide how much treatment is enough treatment? If you think so, see if an example from outside your field changes your mind. Should the Pentagon be the one to decide which new weapons systems we need to build?

The Tables Turn

Note that when you abandon control, you experience an immediate compensating increase in influence. This is one of many examples of what I sometimes call “the seesaw of risk communication.”

Whichever side of the seesaw the utility rides, its publics are likely to choose the empty seat and end up on the other side. “ It’s not really up to us, ” you say. “We’ll tell you what we think the pros and cons are of each option. And once there is consensus on which one to do, we’ll implement it as efficiently as we know how. But the choice is yours.”

In no time stakeholders are taking you out for a beer, and asking, “Yes, but confidentially, which one do you think is best?” You may have as much impact on the outcome this way as holding onto the control … without the outrage.

But that’s the advanced course. Most of my utility clients can’t quite imagine themselves abdicating control altogether, defining themselves as analysts and implementers rather than as decision-makers.

If you can share control over important matters and delegate control on unimportant matters, you’ll have made progress enough on the fifth of our five guidelines for managing outrage.

Cost Versus Risk

There are actually two seesaws in action here. The one I’ve talked about is power dynamics, where abandoning control paradoxically increases your influence. The other seesaw is cost versus risk.

Utilities usually advocate cost control, leaving regulators, activists, and customers to demand more protective risk management. But suppose you came out in favor of spending more money to achieve higher health and environmental standards?

Stakeholders would soon move to the other seat on the seesaw and complain that you were being too profligate with their money. Assume for the moment that the low-cost outcome is inevitable. Which way of getting there is better for your utility? Winning the fight to protect your customers less, or losing the fight to protect them more?

A Vital Tool for the New Millennium

Why add outrage management to your to-do list? When people are outraged, it costs your utility money and the ability to get things done. Preventing outrage now is a lot cheaper than responding to it later. And outrage management doesn't come naturally.

Like most organizations, utilities are accustomed to selling when there are no problems and fighting when there are problems. The key strategies of outrage management run counter to both of these traditions. They’re hard enough to do when you’ve decided to, impossible when you haven’t.

More and more utilities are deciding to implement outrage management strategies. No, that’s too strong: starting to decide to. I don’t know any utility, municipal or investor-owned, that has integrated outrage management totally into its culture, that implements the five strategies without hesitation and without fail.

But I know more and more utilities that are well-launched, struggling, and making real progress. And I am confident that in the early years of the new millennium, many more utilities will discover the need to focus on outrage management.

Sidebar article:

Copyright © 1999 by Peter M. Sandman

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