Monday, May 7, 2018

What the boss wants to hear ...

According to David Halberstam in his outstanding history of the war in Vietnam, The Best and the Brightest, a prime cause of disastrous decision-making by Presidents Kennedy and Johnson was an institutional imperative in the Defense Department to come up with a set of facts that conformed to what the President wanted to hear. Robert McNamara and McGeorge Bundy were among the highest-level miscreants in Halberstam's account; they were determined to craft an assessment of the situation on the ground in Vietnam that conformed best with their strategic advice to the President.

Ironically, a very similar dynamic led to one of modern China's greatest disasters, the Great Leap Forward famine in 1959. The Great Helmsman was certain that collective agriculture would be vastly more productive than private agriculture; and following the collectivization of agriculture, party officials in many provinces obliged this assumption by reporting inflated grain statistics throughout 1958 and 1959. The result was a famine that led to at least twenty million excess deaths during a two-year period as the central state shifted resources away from agriculture (Frank Dik├ÂtterMao's Great Famine: The History of China's Most Devastating Catastrophe, 1958-62).

More mundane examples are available as well. When information about possible sexual harassment in a given department is suppressed because "it won't look good for the organization" and "the boss will be unhappy", the organization is on a collision course with serious problems. When concerns about product safety or reliability are suppressed within the organization for similar reasons, the results can be equally damaging, to consumers and to the corporation itself. General Motors, Volkswagen, and Michigan State University all seem to have suffered from these deficiencies of organizational behavior. This is a serious cause of organizational mistakes and failures. It is impossible to make wise decisions -- individual or collective -- without accurate and truthful information from the field. And yet the knowledge of higher-level executives depends upon the truthful and full reporting of subordinates, who sometimes have career incentives that work against honesty.

So how can this unhappy situation be avoided? Part of the answer has to do with the behavior of the leaders themselves. It is important for leaders to explicitly and implicitly invite the truth -- whether it is good news or bad news. Subordinates must be encouraged to be forthcoming and truthful; and bearers of bad news must not be subject to retaliation. Boards of directors, both private and public, need to make clear their own expectations on this score as well: that they expect leading executives to invite and welcome truthful reporting, and that they expect individuals throughout the organization to provide truthful reporting. A culture of honesty and transparency is a powerful antidote to the disease of fabrications to please the boss.

Anonymous hotlines and formal protection of whistle-blowers are other institutional arrangements that lead to greater honesty and transparency within an organization. These avenues have the advantage of being largely outside the control of the upper executives, and therefore can serve as a somewhat independent check on dishonest reporting.

A reliable practice of accountability is also a deterrent to dishonest or partial reporting within an organization. The truth eventually comes out -- whether about sexual harassment, about hidden defects in a product, or about workplace safety failures. When boards of directors and organizational policies make it clear that there will be negative consequences for dishonest behavior, this gives an ongoing incentive of prudence for individuals to honor their duties of honesty within the organization.

This topic falls within the broader question of how individual behavior throughout an organization has the potential for giving rise to important failures that harm the public and harm the organization itself.


Procopius said...

I recall in Barbara Tuchman's book, Stilwell and the American Experience in China, she noted that one of the first things Vinegar Joe did when he arrived in a new place was to tell the personnel who were going to be his subordinates that he loved getting bad news. He liked bad news much more than good news, and he would have much higher regard for people who brought him bad news than those who brought him good news. It seems to be the same everywhere, in every time.

Anonymous said...

While it's a good point in general, I think it is a little simplistic. Small start ups can function close to a traditional hierarchy but modern multi nationals tend to function much more like interleaved social and political networks with a large amount of legacy baggage.

You need to factor in perverse incentives, limited time in any one role and selection effects at the least (One example: people who are fully transparent about problems in their departments, look from the outside that they have many more issues than those who aren't, so seem less successful, so are less likely to get promoted).

It's a good topic for book, but I haven't really found a good one on the subject.

Anonymous said...

One of the toughest things in organization honesty is dealing with whistleblowers and people who jump the chain of command. These people tend to be fools or jerks, and regarded as such ex ante. Organizational honesty entails the very strange act of honoring the organization's fools and jerks when they get something significant right. Which, of course, encourages useless noise from the other fools and jerks.
Well, nobody ever said that management is easy.

Anonymous said...

"A culture of honesty and transparency is a powerful antidote to the disease of fabrications to please the boss."

I don't think it's nearly so simple. There are personalities types out there who truly enjoy being challenged, being forced to debate, who relish cut and thrust. But that's not most people. Most people prefer success to failure, enjoy seeing their desires come to fruition, don't like having their authority challenged and prefer enthusiastic and willing followers to foot-dragging, doubt-sowing Eyores. So in a situation in which the truth is uncertain, the risks great, and much perseverance and dedication is needed to ensure success, who will a leader believe? The underling who stands up and says, based on what we know, I think our plan is flawed, our methods aren't working, and we're likely to fail? Or the one who says, the basic idea is sounds, some adjustments need to be made, and with a little more effort we'll be alright? Especially in a case such as Vietnam, in which admitting defeat in the war was likely to ruin the political career of the politician involved, one doesn't need subordinates to consciously deceive their leaders to end in ruin and folly. 9 times out of 10, everyone's unconsciously deceiving themselves. Hope may have been stuck to the bottom, but it was still an necessary component when assembling Pandora's Box.

Unknown said...

"And yet the knowledge of higher-level executives depends upon the truthful and full reporting of subordinates, who sometimes have career incentives that work against honesty."

Executives have greater incentives to dishonesty than the lower orders. Organizational culture is top down not bottom up. A person's organizational success does not depend on knowledge (of product, service, market, technology, etc.) but on being liked by the persons with more power, especially the person one reports to. At a minimum this requires cheerful obedience. Almost all organizations work this way (private, public, non-profit) ...even in a crisis that threatens the organization's existence. There are exceptions such as IBM under Gerstner: the firm had to pay attention to reality. Numerous books and journal articles have been written about how to overcome this seemingly ineluctable phenomenon. None seems to have changed how human organizations work. Indeed, in today's organization getting along (being a "team player") is explicitly specified in job descriptions and trumps any knowledge.