Guest Insights: Admit it: You’re in denial – Richard S. Tedlow

Admit it: You’re in denial

Richard Tedlow is the Class of 1949 Professor of Business Administration at Harvard Business School. His most recent book is Denial: Why Business Leaders Fail to Look Facts in the Face — and What You Can Do About It.

If any business leader could stare facts squarely in the face, it would seem to have been Henry Ford. His hard-headed analysis of mechanics, manufacturing, and marketing produced the legendary Model T, which put America on wheels and made Ford a business titan. More than 15 million Model T’s were sold in the two decades after its introduction in 1908.

But something happened. By 1927, Model T sales had flagged so severely that Henry Ford discontinued the line in order to retool his factories for its successor, the Model A. To make the change, he shut down production for months, at a cost of close to $250 million. This chain of events was disastrous for the company, because it allowed Chrysler’s Plymouth to gain market share and permitted General Motors to seize market leadership.

Why did Henry Ford, who was such a visionary in the industry’s infancy, fail to see that the Model T was about to run its course and that a smooth transition to a new vehicle was essential? After all, evidence of the Model T’s declining fortunes was everywhere apparent at the time. But Ford dismissed sales figures documenting the product’s declining market share, because he suspected rivals of manipulating them. When one of his top executives warned him of the dire situation in a detailed memorandum, Ford fired him.

Ford wasn’t stupid. He wasn’t ill-informed. He wasn’t merely mistaken. He was in denial.

Denial is the unconscious calculus that if an unpleasant reality were true, it would be too terrible, so therefore it cannot be true. It is what Sigmund Freud described as the combination of "knowing with not knowing."

Denial is one of the most common and potentially ruinous obstacles that managers face. From Ford to General Motors, Sears to Lehman Brothers, it has torpedoed many good businesses.

Why would any sane, smart executive deny a fact of critical importance to his or her business? Because, to state the obvious, he or she is human. From the alcoholic who swears he is just a social drinker to the investor who refuses to open his 401(k) statement after a market crash, denial permeates every facet of life. The impulse to avoid painful truths, just like the impulse to avoid pain itself, is a part of human nature.

There is no foolproof way to escape denial. But there are tell-tale signs of its presence in an organization. And if you don’t spot it, you can’t fight it.

Ask yourself:

1. What happens to the bearer of bad news? Does your firm "shoot the messenger"? Doing so doesn’t change reality, but it does send a clear message: Those who voice disagreement or "speak truth to power" do so at their own risk. Which means you’ll find it awfully hard to discover the truth thereafter.

2. Are meetings more interesting after they are over than while they are in session? Do colleagues wait to secrete themselves in their offices before speaking frankly to one another because they see no point in being candid when the boss is present?

3. Does your company argue about the actual workings of the business or about the motives and methods of the people putting forth ideas? People versus principles. Think about it.

4. Is your firm putting up a big building or constructing an elaborate campus? Why? What is it ignoring while it is engaged in celebrating itself?

5. Would you rather be conventionally wrong or unconventionally right? If you answer the latter, odds are you are in denial. "Think different" is what Steve Jobs told his colleagues when he returned to Apple in 1997. The results of Jobs’s exhortation speak for themselves. But at how many firms do people really think different? By definition, not many. Is yours among those favored few?

The executive can defeat denial, and the rewards for doing so are princely. How do you do it?

First, you must find out what the facts really are. You have to separate rock solid truth from the surrounding haze of assumption. That is what Jim Burke, CEO of Johnson & Johnson, succeeded in doing when Tylenol was mysteriously poisoned in 1982.

Second, you have to deal with perspective. That is to say, you have got to see the world through a point of view other than your own.

Here is an example. In the midst of a crisis at Intel in 1985, Andy Grove found the way out by constructing a "virtual" Andy. He and Gordon Moore, his boss and one of America’s greatest technologists, were fighting what appeared to be a losing battle against an impossible business dilemma. At a loss, Grove finally asked Moore, "If the board kicked us out and brought in new management, what do you think they would do?" Suddenly, the answer to the issue they faced became obvious to both men.

Why? The question did not make either man suddenly smarter. Indeed, both are quite smart enough. Denial is not as much about IQ as it is about point of view.

What Grove’s question did was to strip away his and Moore’s self-imposed blinders. The two men could look at the issue they faced with a new frame of reference, unencumbered by the dead hand of the past. Liberated from history, they saw clearly and decided rightly.

You can’t afford to deny denial. So learn to recognize it. The more we remind ourselves of our capacity for self-deception, the less likely we are to succumb to it. Blind spots in a car are inevitable, but good drivers train themselves to become aware of them and take appropriate precautions. So it must be with managers and denial.

Henry Ford was in many ways a brilliant man. But he was painfully unaware of his blind spots. This ignorance cost him and his company a great deal. Don’t let the same happen to you.

By Richard S. Tedlow

  |  February 26, 2010; 10:29 AM ET |  Category: 

Leadership skills

Guest Insights: Admit it: You’re in denial – Richard S. Tedlow

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