Detecting and mitigating denial in business

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Business Matter
Manish Shah is the former president of Midwest Law Printing in Chicago. He also worked at Intel, PwC and Motorola. He has an MBA from Kellogg Graduate School of Management, and a MS in Computer Science from Illinois Institute of Technology. He can be reached at manishshahus@yahoo.com.

By Manish Shah
Denial is when a person faced with a fact rejects it despite overwhelming evidence. Many companies such as  Ford, Lehman Brothers, Xerox and DEC have succumbed to the destructive power of denial. DEC’s Ken Olson proclaimed in the late 1970s that there was no reason for anyone to own a PC. He was in denial about the market shift brought about by the small PC makers in the 1980s. As a result, DEC, one of the most storied companies of 1970s, became a footnote in history.
According to Richard Tedlow, author of Denial: Why Business Leaders Fail to Look Facts in the Face, you should ask five questions to detect signs of denial in your company.

1. What happens to the bearer of bad news? Does  your firm “shoot the messenger”?
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?
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 your organization is mired in denial, Tedlow prescribes two ways to mitigate it. First is to face reality head on. Jim Burke, CEO of Johnson & Johnson, did just that when he was confronted with the Tylenol crisis in 1982. He made a decision to recall 31 million bottles of Tylenol which cost the company $100 million. Recently at Toyota, the management’s denial about the accelerator pedal problem ended up doing colossal damage to the company’s reputation.
Second is to view the problem from a different perspective. In the 1980s, Intel was challenged by low cost Japanese manufacturers of DRAM. Andy Grove asked Gordon Moore what he would do if the board fired both of them and brought in new management. This injected a new perspective in their decision-making process and led them to their historic decision to enter the microprocessor business.
Denial is fatal for a company. Therefore, a denial detectometer is an indispensable tool in a leader’s arsenal.

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