Michael Skapinker is FT contributing editor and author of ‘Inside the Leaders’ Club: How top companies deal with pressing business issues’
Silicon Valley Bank collapses after its investments in long-term bonds left it vulnerable to rising interest rates. The BBC has been thrown into chaos after suspending its top football pundit and colleagues are leaving their posts in solidarity. JPMorgan Chase is suffering reputational damage and lawsuits after keeping sex offender Jeffrey Epstein as a client for five years after he pleaded guilty to soliciting prostitution, including from a minor.
In all these cases, we can ask, as Queen Elizabeth II did on a visit to the London School of Economics during the global financial crisis in 2008: “Why did no one see this coming?”
Asked someone in BBC management if they suspended Gary Lineker from presenting his prime Saturday night football programme today’s match other experts can also go out? Did SVB run the risks associated with its investment policies if interest rates rose faster than expected? And why did JPMorgan agree to senior banker Jes Staley’s wish to keep Epstein? These are dramatic examples of what can go wrong, but any organization that fails to keep its potential risks under regular review can go down the same path.
Too often, senior managers fail to consider the worst-case scenario. Why don’t they listen to doubters?
Amy Edmondson, a professor at Harvard Business School, says that sometimes it’s because there are no doubters. Leadership groups become so locked into a “shared myth” that they ignore any suggestion they might be wrong. “We have the well-known confirmation bias, where we are predisposed to pick up signals, data, evidence that reinforces our current beliefs. And we will filter out disconfirming evidence,” she says.
It’s like taking the wrong route in a car. “You’re on the highway driving somewhere and you’re going in the wrong direction, but you don’t know it until you’re just hit over the head by disconfirming data that you can’t miss: you’re crossing suddenly a state line that you didn’t expect to cross.”
This groupthink and confirmation bias is prevalent in the wider society, where people jump on any evidence to support their views on things like climate change, says Edmonson. “Oh my god, it’s the coldest winter ever. What do you mean by global warming?”
In many cases, there are doubters, but they are either reluctant to speak up, or when they do, colleagues are hesitant to join them. At JPMorgan there were questions about Epstein. An internal email in 2010 asked, “Are you still comfortable with this client who is now a registered sex offender?”
James Detert, a professor at the University of Virginia’s Darden School of Business, says evolution has hardwired us not to deviate from our group. “If you think about our time on earth as a species, we lived most of it in very small clans, bands, tribes, and our daily struggle was for survival, both around food security and physical security. In that environment, if you became outcast, you would die. There was no solo life in those days.”
We carry this fear of being ostracized in our workplaces, reinforced by the experiences of whistleblowers who sometimes suffer retaliation from their employers and are shunned by colleagues. Dissenters present their colleagues with an uncomfortable choice: either see themselves as cowards for not speaking out too, or view the rebel as “some kind of crackpot.” The second is often easier.
Isn’t the Lineker saga a counterexample? His colleagues supported him and forced the BBC to quickly see how badly it had miscalculated. Detert says this was an unusual case. Famous footballers turned commentators are brands themselves, Lineker in particular. The BBC realized how much it needed him and how easily he could have secured a contract with a rival. Usually, he says, insurgents find themselves isolated.
So what can leaders do to encourage doubters to speak up, to ensure they consider all the possible downsides to their strategies and avoid possible humiliation or disaster? Detert is not in favor of appointing a “devil’s advocate” who is tasked with providing an opposing point of view. It is often apparent that they are simply going through the motions. He prefers what he calls “joint evaluation”. In addition to the preferred policy – e.g. to invest in long-term bonds – top managers should develop a markedly different policy and compare the two. This is more likely to show the flaws in the preferred strategy.
Simon Walker, whose roles have included head of communications at British Airways and spokesman for Queen Elizabeth, and Sue Williams, Scotland Yard’s former head of kidnapping and hostage negotiators, told me at an event organized by the Financial Times’ business networking organization that leaders should involve every function from communication to legal to HR when investigating possible future crises. Detert agrees that this can be valuable, provided the presence of often undervalued departments like HR is taken seriously.
Managers’ behavior is a signal as to whether they want staff to speak up. Edmondson says, “Leaders of organizations need to go out of their way to invite the dissent, the missed risk. Before we shut down any conversation where there is a decision, we need to say without fail: ‘ What do we miss?’ We say, ‘OK, let’s just say we’re wrong about this and it goes badly wrong, what would have explained it?’” She recommends calling people by name and asking what their thoughts are .
Detert adds that office design can signal to staff that their thoughts are welcome: the manager sits in an open plan, or has bright stripes on the floor that show the way to their office, or sits at square tables without place names rather than at rectangular tables where their seating position makes it clear that they are in charge.
How relevant are these workplace layouts when post-lockdown employees no longer come into the office every day? “That’s the $10 million question,” Detert says. On the one hand, telecommuting can make it harder for managers to read the signs that people are uncomfortable with a strategy. On the other hand, it may be that people find it easier to express themselves from their own homes. They may also feel that other aspects of their lives, such as family, are now more important than work, which could encourage them to speak up.
Others believe that SVB’s relaxed telecommuting culture, which meant that executives were scattered across the United States, contributed to its failure. Nicholas Bloom, a Stanford professor who has studied telecommuting, told the Financial Times: “It’s hard to have a challenging call over Zoom.” Hedging interest rate risk was more likely to come up over lunch or in small meetings.
Leaders also need to consistently praise people who speak their mind. The penalty for doing so is often more obvious than the reward. Those who keep their heads down are rarely blamed. As Warren Buffett said, “As a group, lemmings may have a rotten image, but no individual lemming has ever received bad press.”