Dealing With Denial at the Top

By Steve McKee

El Nino gets a bad rap. So does the price of oil. Not to mention the Gregorian Calendar. I’m talking about the excuses CEOs make when things don’t go as planned.

Writing in The Wall Street Journal, Richard Teitelbaum noted that well-known companies find all kinds of reasons to explain away tepid performance. Del Taco didn’t do so well in the first quarter because of the weather. Restoration Hardware pinned its problems on flagging demand in Florida, where the economy is tied to South America, where wealth is tied to oil prices. And FTD blamed its poor Valentine’s Day on the fact that it fell on a Sunday this year.

Teitelbaum points out that it’s not that these events aren’t causal or even significant; many (if not most) are — and they certainly can’t be falsified or the companies in question will get nailed by a shareholder lawsuit, if not the Securities and Exchange Commission. That said, CEOs do have an incentive to keep investors from becoming alarmed, which enhances the appeal of pinning poor performance on one-time, uncontrollable events. Saying “this too shall pass” is a whole lot more palatable than “we have no idea what we’re doing.”

But I think there’s another reason why the weather, or the price of oil, or what might be characterized as other “baby black swans,” sometimes get the blame. Not only are corporate leaders loath to frighten the investment community, it does them no good to cause alarm among their management team and staff, not to mention in their own minds. They may be, in some cases, in denial.

The psychology of denial is fascinating. Mosby’s Medical Dictionary defines it as, “an unconscious defense mechanism in which emotional conflict and anxiety are avoided by refusal to acknowledge those thoughts, feelings, desires, impulses, or facts that are consciously intolerable.”

Conscious intolerability is an interesting way of putting it; psychotherapist Dr. Carl Alasko says that denial allows someone “to keep moving rather than stopping and facing the painful restrictions and demands of reality.” And yet, as the good doctor points out, “Reality always wins.”

Indeed it does. The trouble is it can cause a great deal of damage along the way.

Research my firm completed among struggling companies pinpointed four destructive internal dynamics that are often subject to denial by those at the top. As I’ve shared our findings with organizations of all types over the past several years, many people recognize one or more of the four factors as contributing to — or even causing — their companies’ troubles. When they do, the most common next question is this: “What do I do if my boss is in denial?”

There’s no easy answer. After all, someone who’s in denial isn’t looking for a solution to a problem they don’t believe exists. And they’re unlikely to take kindly to one of their staff members pointing out they may have a blind spot. It’s a Catch-22 that has kept many a company in its clutches.

With that in mind we set out to develop a tool to help shake the tree of denial. It’s a confidential, two-minute self-diagnosis that tracks respondents’ level of agreement with twenty penetrating statements like, “We’re more opportunistic than strategic,” “We have a lot of false starts,” and “We tend to over-think things,” among others.

Sometimes, completing the self-diagnosis is enough to alert a CEO to a problem they may not be seeing. In other cases, they might power through it in full denial. When that’s likely to happen we recommend that every member of the management team complete the self-diagnosis, then gather around a conference table and share their results. It may be going around the block to get next door, but it’s guaranteed to get the right conversation started, without the need for direct confrontation of any individual.

Alas, denial has been with us since the days of Adam and Eve, and there’s no silver bullet that’s going to slay it. But the sooner those involved can come to terms with it, the less damage it can do. There’s no denying that.

Originally published on SmartBrief on Leadership

Steve McKee

Co-founder and author, Steve specializes in addressing the most meaningful problems. Call Steve when you want to change the world. He’ll have a thought (and some research) on that.

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