TSB’s leaders did not expect their IT upgrade to become a
reputational disaster. No-one was more
surprised than the trustees of the Presidents Club when it imploded. Philip Green was preparing an upbeat message
to markets only five days before announcing Carillion’s £845m profit warning. Bell Pottinger’s leaders seemed blind to
their firm's impending disintegration.
The pattern repeats endlessly. In ‘Deconstructing failure’, we found that in over 80%
of the crises we analysed, the board seemed to be taken by surprise. What is going on?
Anthropologists have observed that social groups develop
shared mental maps. These aren’t just a
common world view. They define who is a
group ‘insider’ and who is not. They influence
how the outside world is perceived, what is discussed and what is not - leaving
what group ‘outsiders’ see as crucial subjects undiscussed. As Gillian Tett, a Financial Times commentator and trained social
anthropologist, put it, these topics “become
labelled as dull, taboo, obvious or impolite”. The result is that a social group - such as a
board or leadership team - can’t or won’t see, let alone discuss, things that
well-informed outsiders - such as their subordinates - know are important.
If we feel we know little, we can learn easily. But when we are presented with information
that contradicts our world view, we face what psychologists call ‘cognitive
dissonance’. This is stressful. I have pinned to my wall words from the Tao Te Ching: “A [leader] considers those who point out his
faults/ as his most benevolent teachers.”
Yet I still feel discomfort when someone is considerate enough to tell
me I may be wrong.
Most people become defensive when faced with cognitive
dissonance. They turn over the
page. They hear but do not listen. They bully the bearer of bad news. So doing, leaders lose the opportunity to
discover that something is not as they hoped or believed. In failing to assimilate dissonant
information, we deprive ourselves of the opportunity to fix incubating, often
systemic, weaknesses before they cause crises.
Shutting our eyes, blocking our ears and shouting are not
our only responses to uncomfortable truths.
We tend to seek information to confirm our world view, rather than to
challenge it, because of our confirmation bias.
Faced with information that a particular weakness probably affects ‘us’,
overconfidence and our egocentric bias lead us to believe we are immune. Optimistic bias leaves us believing that bad
things are less likely to afflict us. The
Ikea Effect makes us disproportionately proud of what we have produced.
Biases like these and more make it harder to
accept the idea that even ubiquitous weaknesses, such as leaders’ blindness to
important information - which obviously apply to ‘them’ - also apply to
‘us’. As Daniel Kahneman put it, “We’re blind to our blindness. We have very little idea of how little we
know. We're not designed to know how
little we know.”
Behaviours and biases such as these leave us predictably
vulnerable. The phenomenon is so widespread that we named it the “unknown
knowns” problem: There are things leaders need to know, that
are widely known to others in the organisation, that they cannot discover until
it is too late. Many can be seen by
analytical outsiders, including investors, who are able to see through
corporate PR, market groupthink and their own psychological biases.
Zen philosophy has an answer to the problem: the cultivation
of ‘Beginner’s Mind’. Shunryu Suzuki
summarised it as “Wisdom which is
seeking for wisdom”. The challenge for a
leader is to be as open-minded and inquisitive as a novice with no vested
interest in the way things are. Few achieve
this state of mind.
Most of us need outsiders to our group with access to corporate
knowledge to uncover these uncomfortable truths. Once found, bringing truth to power needs
courage and social skills: courage because powerful leaders forced to confront
dissonant information can be aggressive; social skills because unwelcome news
needs to be presented in a way that helps leaders to change their world view,
overcoming dissonance and their cognitive biases.
Research shows that leaders should expect to face a major
crisis during a period as short as five years.
By overcoming social and behavioural tendencies that affect everyone,
including themselves, leaders can search for and fix unknown knowns before they
cause trouble. Prevention comfortably
beats having to deal with a reputational crisis and face public vilification.
Anthony Fitzsimmons is Chairman of Reputability LLP and,
with the late Derek Atkins, author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin YourBusiness, Your Reputation and You”
This article was first published in Management Today in September 2018.
