Strategy must not depend on denial

2010

The enormous financial and economic upheavals through which we have all recently lived must result in lasting changes of massive importance. The problem lies in identifying those changes and understanding the nature of what has happened so far.

That problem, of course, besets all thinkers. Managers have the need, not only to read the runes as accurately as they can, but to take effective action. The analogy is with waging wars: however clever the staff officers might be, they don't send the troops into battle. The commander must both plan and execute, think and lead.

The unfortunate truth is that most commanders get set in roles and routines in which they feel most comfortable. This is understandable, but apt to end in tears. Management has much need for discomfort, because circumstances change. If strategy and tactical thought lag behind, setbacks and struggles can't be far away.

This isn't a matter of sophistication. Take Toyota. The problem was fundamental. The company was pursuing the right aims, more or less, but in the wrong way. It's impossible to disagree with this verdict…

"A failure to deal with obvious problems was its biggest problem... First, when it comes to crisis management, the company stinks. Second, when it comes to manufacturing automobiles, Toyota isn't what it was cracked up to be."

Any observant manager knows that similar faults are by no means rare. The author of the above quote is Richard Tedlow, who teaches management at Harvard. He spotted the vital, stark truth. The mistakes at Toyota were in no way special to that company; nor were the board reactions:

"If Toyota's products were as fatally flawed as they were, that would be too awful to be true. Therefore that awful truth was brushed away."

Tedlow found this deadly denial to be so general in so many companies that he felt compelled to write a book on Denial (Why Business Leaders Fail to Look Facts in the Face), reviewed in Business Week in April.

Avoiding painful facts is effective as far as it goes. It saves face and hides shame, making it easier to protect jobs, and it sweeps crazy errors under the carpet. But that protection doesn't go very far, as Wall Street is finding out.

These are the questions you should always ask in moments of threatened danger:

  • What happens to the bearer of bad news? Does the company shoot Cassandra, instead of listening and acting on what it hears?
  • Does the management avoid serious investigation of the risks in troubled situations?
  • Is the competitive threat real and is the subject taken into regular review and action?
  • Is the company living off false pride?
  • Would the firm rather be conventionally wrong than unconventionally right?

Reality is the cure for self-delusion. But self-delusion is much easier than grasping an unpalatable truth. It was only revealed sins discovered outside the company that brought Toyota's crimes to attention inside the company.

Even so, the management remained in foolish denial, as if defective accelerators and brakes could be kept secret. Denial is a matter of emotion, not reason. The emotions are very powerful. If the denials are accepted, the company can avoid all manner of deeply unpleasant outcomes - above all, the need to accept that its goodness and behaviour are wonders that cannot be doubted.

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About The Author

Robert Heller
Robert Heller

Robert Heller, who died aged 80 in August 2012, was Britain's most renowned and best-selling author on business management. Author of more than 50 books, he was the founding editor of Management Today and the Global Future Forum. About his latest title, The Fusion Manager, Sir John Harvey-Jones wrote: "The future lies with the thinking manager, and the thinking manager must read this book".