Why Business Leaders Get Caught Up in Their Own Press By Larry Kahaner

During an interview with the late Bill McGowan (for whom the McGowan Foundation is named) I asked him to respond to charges from MCI skeptics that he had filled his board of directors with cronies and ‘yes men.’ “Why would I want ‘yes men,’” he said, with a smile. “Sometimes I want people to tell me ‘no.’”     McGowan and other successful business leader understood that for companies to be effective, their leaders must know what’s going on in their company and that requires subordinates to tell them the truth –good and bad. This may be a leader’s most difficult interpersonal task but the stakes are too high – the company’s survival - not to be addressed.       Sim Sitkin, leadership professor at Duke University's Fuqua School of Business, recently said: “I think the most fundamental reason that leaders fall from grace is that they lose a sense of themselves. They may get too caught up in the trappings of getting attention, being treated as special and maybe begin to believe their own press. The more important your role, the more inclined people are to tell you what they think you want to hear, rather than the truth.”          Companies’ track record on this is poor. According to a survey by the Corporate Executive Board, “Nearly half of executive teams lack information they need to manage effectively because employees withhold vital input out of fear the information will reflect poorly on them.” On the positive side, the survey of 30,000 employees noted: “…companies that break down two key barriers to honest feedback can deliver peer-beating shareholder returns by a substantial margin.”     What can CEOs and other leaders do to promote employees to speak truth to power? The Corporate Executive Board suggests two areas of improvement.     First, employees must perceive that managers want two-way dialogues. This pays dividends. “The survey found that companies rated by their employees in the top quartile in terms of openness of communication have delivered total shareholder returns (1998–2008) of 7.9% compared with 2.1% at other companies.”     Second, the survey showed, not surprisingly, that the fear of retaliation correlated with the willingness to speak up. This offers payback, too. “As with openness of communication, we found that companies that excel on this dimension also had materially lower levels of observed fraud and misconduct.”     These ideas must go further.     Employees must actually see it happen. They must witness for themselves or hear about an employee who tells the boss something he or she didn’t want to hear and not be punished. Even more important, they must see that the teller’s career wasn’t damaged or tainted by relaying the truth.     This is a subtle distinction because while whistleblowers are generally protected by law from being fired, any employee who speaks truth to power is often marginalized or thought of as a ‘negative Nellie’ and not a team player. Leaders must make sure these people are treated as valued employees.     In addition, employees must believe that leaders actually will consider their comments, that the boss actually hears what’s being said and will think about it. Some leaders have reputations of being stubborn, not willing to accept ideas outside of their belief system. Why would an employee tell the boss the truth under these conditions? Again, Sitkin notes: “As a leader, you need to actively create an environment where [employees will tell you the truth], because otherwise it's too easy to spend your time effectively looking in the mirror rather than through the glass to see the world and to see what's needed.”     Without honest ideas, opinions and input, leaders become isolated, out of touch and their companies die of their own weight. The William G. McGowan Charitable Fund provides grants in three program areas including Health care and Medical Research; Education, and Community Programs for Those Most Vulnerable. It gives priority to programs that have demonstrated success, measurable outcomes, have a plan for sustainability, and aim to end cycles of poverty and suffering.