The annals of corporate and government history are littered with incidents of self-deception on a grand scale.
Possibly the grandest example is the justification used by George W. Bush and Tony Blair for the invasion of Iraq in 2003: weapons of mass destruction (WMDs). They were never found and never existed (Richelson, 2004) and yet both heads of state have subsequently sought to justify their decisions. Locally and more recently, think of Leighton Holdings being sanctioned by ASIC (ASIC, 2012) for failing in 2011 to fully reveal the extent of its financial position, causing massive share market losses and a class action law suit that cost the firm $70 million (McKenzie & Baker, 2014). Or think of the Queensland health payroll system fiasco where a steering committee did not ascertain that the system was not ready to progress (ABC News, 2014).
Think of your own organisation. Do you have any examples, where in twenty-twenty hindsight, the wrong decision was made? I would be surprised if you didn’t.
In one organisation I worked for, global strategy was subject to immense self-deception. I recall being at a presentation during the early days of my first stint at the head office of the commercial business in London, where the new head of the global business presented an accumulation of the last ten years of projections of revenue and gross profit. The graph projected on a huge screen showed a procession of hockey stick shapes where the aggregate of forecasts for each region each year showed an initial decline followed by a smooth sharp upward trajectory. Overlaying this series of graphs was the actual revenue and gross profit in a bold thick red line which showed a decline of one to two percent per annum, on average.
Fast forward ten years later and a graph of gross profit and costs reverberated around the world almost as fast as social media today. It purported to show that gross profit and costs were about to cross and a series of never ending losses were about to occur if costs were not cut with some vigour. It started with one graph in Australia that was presented at an internal international conference to help reinforce the macho ego of a senior manager in Australia and his mantra for cost cutting at all costs.
The trouble was, the real reason the gross profit and costs lines were coming together was because over the last few years contracts with large national and transnational organisations were written with a fixed sea freight component, as sea freight costs had not changed in twenty years. Unfortunately, a shortage of shipping caused a doubling of sea freight. A few years later, renegotiation of contracts provided some rebalance in the shape of the graphs. However, by then, the mantra of cost cutting had a full head of steam, and many costs which provided a long term return were cut, along with the bad costs not providing a return in either the short or long term. This was self-deception on a grand scale.
Since that time, that organisation has closed many national subsidiaries which with good leadership and management that should have remained profitable; run the business globally along lines of business which meant that local customers who provided the bulk of the gross margin were marginalised in favour of global customers who provided revenue of very slight gross margins. Today, I understand, some of these decisions may be revisited.
In each of these lurches from one unsustainable model to another the organisation’s leaders have isolated the sceptics and rewarded the people who have understood the ‘strategy’. Unfortunately the sceptics have been so isolated that there has not actually been a strategy, if you define a strategy as being a choice between, at least, two good things, as they have been unable to contribute at all.
How do we get ourselves into the position so often in making fundamentally flawed decisions?
A common major factor is the element of self-deception, where we readily accept as facts, information which proves the correctness of a decision we have or are about to make, and are sceptical of evidence that does not support it.
Every organisation needs and must support its sceptics. In fact they should be given enough support to prove their point with qualitative and quantitative data.
This is just good risk management.
Tools to encourage scepticism
In the nineties Edward de Bono (de Bono Thinking Systems, n.d.) promulgated a system of roles that needed to be present at management meetings through his six hats model.
In the model, six coloured hats represented different roles comprising:
- The White Hat which calls for information known or needed.
- The Red Hat which calls for thinking about feelings, hunches, and intuition.
- The Black Hat which represents the devil’s advocate or why something may not work.
- The Yellow Hat which represents brightness and optimism.
- The Green Hat which focuses on creativity: the possibilities, alternatives, and new ideas.
- The Blue Hat which is used to manage the thinking process.
Each role can play the role of a sceptic dependent on which role appears to be dominant at the time of discussing the information available, the options available, and the workability of the options or the impact on people.
Another useful tool for encouraging scepticism is from Peter Senge’s Fifth Discipline (1999). It is the concept of the right and left hand columns. It works by writing down in meetings what you really think (left-hand column) and what you actually said (right-hand column).
The data collected may be used in several ways:
- People can self-reflect and analyse and identify personal prejudices that get in the way of really productive work
- People can be invited to disclose their left-hand column within the meeting environment. Exposing doubts and concerns as “My left hand column” tends to reduce the tendency to attach those doubts to an individual and thus causing increased conflict rather than increased problem resolution.
The role of audit as the professional sceptic
Sometimes, however, it is insufficient to encourage scepticism in our teams and individuals and we need to have a body whose role is to be our professional sceptics. This the role of audit.
Auditors and their green pens are almost infamous in their pursuit of incongruent financial processes and standards. Where they seem to be less used, however, and need to be used more often, is to audit elements of corporate activities such as:
- Compliance audits to determine if departments are adhering to federal, state, and organisational rules, regulations, policies, and procedures.
- Operational audits to examine the use of organisational resources to evaluate whether those resources are being used in the most efficient and effective way to fulfil the organisation’s vision, mission, and objectives.
- Investigative audits to focus on alleged violations of federal and state laws and of organisational policies and regulations.
- Information Systems audits to address the internal control environment of automated information processing systems and how these systems are used.
In each of these audit activities it makes sense for us to encourage auditors to be sceptical of what they see and test for corroboration rather than accept the “truth” as presented at face value.
Without scepticism, organisations tend to fall into the trap of groupthink, the consequences of which can be disastrous. Are you doing enough to encourage scepticism in your decision making, your team, and in your organisation and avoid the consequences of self-deception?
ASIC. (2012). Leighton Holdings complies with three ASIC infringement notices for alleged continuous disclosure breaches and ASIC accepts compliance enforceable undertaking. Retrieved April 6, 2015, from ASIC: http://asic.gov.au/about-asic/media-centre/find-a-media-release/2012-releases/12-53mr-leighton-holdings-complies-with-three-asic-infringement-notices-for-alleged-continuous-disclosure-breaches-and-asic-accepts-compliance-enforceable-undertaking/
de Bono Thinking Systems. (n.d.). Six thinking hats. Retrieved April 6, 2015, from de Bono Thinking Systems: http://www.debonothinkingsystems.com/tools/6hats.htm
McKenzie, N., & Baker, R. (2014, May 17). Leighton pays $70m to settle lawsuit. Retrieved April 6, 2015, from Sydney Morning Herald: http://www.smh.com.au/business/leighton-pays-70m-to-settle-lawsuit-20140516-38fef.html
Richelson, J. (2004). Iraq and Weapons of Mass Destruction. Retrieved April 6, 2015, from National Security Archive: http://nsarchive.gwu.edu/NSAEBB/NSAEBB80/
Senge, P. (1999). The Fifth Discipline: The Art & Practice of The Learning Organization. USA: Doubleday.