Handing Denial

HBS Working Knowledge has an interesting conversation with Richard S. Tedlow who has written a new book, Denial: Why Business Leaders Fail to Look Facts in the Face-and What to Do About It.

As he says:

Sigmund Freud referred to denial as a combination of "knowing with not knowing," a phrase that has been defined as a "state of rational apprehension that does not result in appropriate action." In her brilliant study of the disastrous decision to launch the space shuttle Challenger in 1986, sociologist Diane Vaughan used a similar phrase, "seeing but not seeing."

It is often middle managers who are best acquainted with new realities. As Andy Grove has noted, these are the people who are out on the front lines while top management is ensconced at the home office, cushioned from the daily reality of the rough-and-tumble of the marketplace. "Snow," he wrote in Only the Paranoid Survive, "melts first at the periphery." Problems, in other words, appear initially at the borders.

Unfortunately, when middle managers actually raise these problems—especially those that contradict the firm's prevailing assumptions and conventional wisdom—they are often ignored, or worse. Henry Ford, for example, fired the executive who dared "speak truth to power" about Ford's Model T myopia—and this man, Ernest Kanzler, was his relative! (He was the brother-in-law of Ford's only child, Edsel.)

You don't necessarily need an outsider to provide an outside perspective, however. Occasionally a creative, clear-headed insider can break free of both his company's and his own preconceptions by adopting a novel point of view.

This was demonstrated by Andy Grove in 1985, when he and his boss, Gordon Moore, were fighting what appeared to be a losing battle against an impossible business dilemma. In the midst of their aimless wandering, Grove asked Moore, "If the board kicked us out and brought in new management, what do you think they would do?" Suddenly the answer to Intel's dilemma became clear to both men. Grove's deceptively simple question stripped the blinders of denial from their eyes.

The A&P was not destroyed by fire. It rusted. This is the same process, but less dramatic, slower, and therefore easier to deny. "This is the way the world ends," T.S. Eliot wrote in "The Hollow Men." "Not with a bang but a whimper."

Lesson for Organizational leaders? It's not enough to invest in the KM and IT systems or even analytics. People who have invested energies in the past must be "ruthlessly realistic" and listen to different opinions from middle managers/ outsiders and act on the data.

Read the full interview here