Why CEO’s Are Blind To Trouble!

Posted on | September 15, 2009 | 11 Comments

With all the ‘buck stops here’, ‘chain of command’ and ‘celebrity CEO’ rhetoric going around, it’s pretty clear today what politically-correct modern business theory demands – your wholehearted support of the following notion: CEOs should be all powerful. And for ego accommodation, scrutiny avoidance, and ease-of-management reasons, most who hold these positions and those who oversee them want it to stay that way.

Unfortunately, all powerful doesn’t translate into infallible. Contrary to received modern business wisdom, it’s a well documented fact that way too many highly regarded CEOs (and senior execs and entrepreneurs too) are blind to trouble. Simply put, they can’t see and refuse to confront the obvious ‘brick walls’ that loom right in front of them and their companies. Even on more minor things, they all too quickly brush aside talk of potholes in their road and shamelessly avoid open or candid discussion about cliffs that line their route. The result of this ‘three monkeys’ approach to corporate management and risk avoidance is: Lost Wealth; and Lost Jobs.

For those who doubt or would seek to diminish what I say, take some time to check out these four recently published books: ‘How The Mighty Fall’ by Jim Collins; ‘Blind Spots: Why Smart People Do Dumb Things’ by Madeleine L. Van Hecke; ‘Why Smart Executives Fail’ by Sydney Finkelstien, and ‘Predictable Surprises: The Disasters You Should Have Seen Coming And How To Prevent Them’ by Max H Bazerman and Michael D Watkins.

Clearly, there is a pervasive problem here. Can something be done about it?  Yes, but I put this to to you.

The key question is not how CEO blindness can cause blunders or how abnormal are these occurrences? Collins, Finkelstien, Van Hecke, Bazerman and Watkins all give great answers to those questions.

No, in my view, the two key questions we need to answer are:

• why is it that all of us, CEOs included, are susceptible to mental misstep failure?; and
• what can and should companies, shareholders and boards do structurally to better address this long proven and predictable source of corporate leadership failure?

But, before we get into the four psychology-based reasons why all of us run the risk of mental misstep, and what companies can do, and should not do, to better manage it, there’s an important US Central Intelligence Agency test you need to take first.

Your Powers of Observation

The following test is a quick and simple check of your information gathering skills. It comes from a CIA text book called The Psychology of Intelligence Analysis by Richards J. Heuer, Jr. All that you need to do in step one is read the following:

Now, step two is: tell me, what did you see? Yes, everyone sees the three triangles and the phrases in each. But did you take in all that was there? Did you do it correctly? If so, either you have exceptional powers of observation, were lucky, or you’ve seen the figure before. Should you need help finding out what you and most others miss, there’s a footnote at the end of this article that describes all what’s there.

Test Results Show Why Human Strength is Weakness

This simple experiment you just participated in demonstrates a fundamental principle about perception:  we all have a built-in bias to take in only what we expect to perceive. 

While much of the time this helps all of us process lots of information quickly, it can lead to fatal oversight if we misapply our built-in bias mechanism or if we don’t take time to properly consider things when we encounter something new, unusual, or complex. Think of this as ‘misread’ risk. It’s like that the elephant on the right is facing. If all you know is life on Africa’s flat Serengeti Plain, then you’ll have little understanding of cliffs, what they are, and the risk of death that falling off one can cause.

The flip side of this built-in bias principle is that when it comes to unexpected developments as opposed to expected ones, people need to take in a lot more information and a lot more unambiguous information before they begin accepting something unexpected has or might have happened. Consider this as ‘excessive-conviction’ risk. This is likely what led the Captain of the Titanic to lose his life, kill lots of innocent people and sink his boat because he won’t slow the ship down when they encountered a field of icebergs.

Built-in Bas Risk in Business

Take caution from the above. If you are an entrepreneur or CEO who maybe is a little too head strong, self confident, self reliant, and/or one who expects to succeed in almost everything you do, you will be psychologically wired to dismiss or filter out too many important things. These will be those discordant suggestions, news items, indicators, or contrary developments that suggest something negative is starting to play out, be it under-performance, adverse developments, or the onset of early stage failure.

For leaders in companies starting to struggle, particularly those where their slide into trouble is more gradual than sharp, this fact of human psychology can lead to fatal oversight or blindness. This is another form of ‘misread risk’ that I call ‘filter distortion’ risk, which is like that depicted in the picture to the left. This occurs when you alone arbitrarily distortion reality, and when top decision makers do that, they can all too easily kill their company. This happens because those in charge just can’t believe they’re in a now-loosing business game and precious time to save the company from crashing might be fast running out.

Getting Dismissive? Beware!

“Success is a lousy teacher – it seduces smart people
into thinking they can’t lose.” – Bill Gates

Lots of entrepreneurs and CEOs reading this piece about now likely will be saying that built-in bias is a problem only others have, not them. Beware if this is you, for you are falling prey to the very risks I am trying to warn you about, namely over-confidence and excessive self-reliance. Better you read the rest of this article, then actively consider how you and your team might be less than prefect, maybe even fatally so. You will only take the important first step toward avoiding misstep caused by built-in bias when you have the awareness and open acceptance of your real risk for situational misread and the potential for business reversal that such risk may cause. Your key second step will come when you put in place systematic processes to offset this risk using independent decision support systems.

Another Example of Built-in Bias

To emphasize my points made above, let me tell you about another classic experiment that demonstrates the powerful influence preset expectations have on perception.  It deals with playing cards where some were gimmicked so the spades were red and the hearts black. Now when pictures of the cards get flashed briefly on a screen, needless to say, test subjects identified the normal cards more quickly and accurately than the anomalous ones. But, even after test subjects became aware of the existence of the switched colours, their performance with the gimmicked cards improved but it still did not come anywhere close to the speed or accuracy they achieved identifying the normal, non-gimmicked cards. These two examples of built-in bias described herein may seem nothing but parlour tricks or mind games to you, but they are not. Their negative consequence potential in business is all too real.

Just What is ‘Perception?’

Why do we suffer unexpected perception distortion? It comes because too many people think their ‘perception’ is a passive and perfect process when in reality it is an act of cognition that is selective and error prone. Consider the situation of the cat thinking it’s a lion in the picture to the right – close to correct perception but still significantly wrong! While we sense by way of sight, hearing, smell, taste or feel those stimuli that our sensory organs produce, most of us are convinced that, if we are the least bit objective, we will record absolutely all of what is actually there or occurring. However, perception is demonstrably an active not passive process. It constructs and interprets rather than records “reality”. This is why you should think of perception as something that implies ‘developed understanding’ as well as ‘awareness’. Best you consider it to be a process of inference in which people construct their own version of reality based on the information provided to them through their five senses, where what is taken in is mediated by all what they have learned, experienced, and thought about before.

Now, what most influences perceptions, and how fast and correctly things get perceived, are the expectations, desires, past experience, education, cultural values, role requirements, assumptions, and preconceptions of those doing the perceiving. These all filter or parse the stimuli coming from the receptor organs. Many experiments have confirmed this, but it is easiest to understand this if you think about the Hans Christian Andersen fairy tale of the Emporer’s New Clothes. The story begins with a self-absorbed emperor who unwittingly hires two swindlers to create a new suit of clothes for him. It goes on the tell how a majority of people around him were unwilling to state an obvious truth, maybe out of fear of appearing stupid, unenlightened, sacrilegious, or unpatriotic, or perhaps out of "political correctness". The situation is saved only by an innocent young boy, and the moral of the story is how the motive and rationale for our not seeing obvious truth can all too easily become too ingrained such that the majority do not even realize how they are perpetuating falsehood. Clearly, most people in this story chose to use the wrong mental model.

Model Based Bias & Leadership Failure Risk

In the human thought process that we all use, we build mental models which we use to process information. You can better appreciate how this is so by looking at the picture to the left. Most of us all know lots of great looking women who see themselves as always being too fat. Equally, we know lots of beer-bellied men who picture themselves as sexy and virile. So as you can see, distortion-prone model-based perception is not a phenomenon unique to company CEOs and entrepreneurs. Indeed, it happens around us all the time, but usually the negative consequences of it are small. This fact has been confirmed by Heuer’s research that demonstrates how model-based perception is part of the natural functioning of the human cognitive process. Indeed, others have demonstrated this across a broad spectrum of fields ranging from medicine to stock market analysis.

When we analyze or try to make sense of situations, we typically use processes that rely on creating mental models. Often, however, we are not aware we do this or how distortion can creep in. But consider how all of us have the great tendency to jump start our thinking by constructing what often tunrs out to be half-baked hypotheses. We do this thinking we are properly following the dictates of John Stuart Mill’s scientific method, but we typically find out through subsequent experience these were based on a less-than-satisfactory-set of understandings and expectations about what were the operative cause-and-effect relationships actually in play. Compounding our problems, we typically then go on to process and interpret only what information we have readily on hand before we ever start considering if sufficient research has been done or enough unbiased information has been gathered. While doing it the other way around would be best because it would better insure all the proper data gets collected and considered first, this typical approach is OK if we make sure to test or seek external confirmation of our interpretations. However, too many business leaders rely on intuitive, non-professional, arbitrary approaches using too little information selectively considered. As well, too many never seek second opinions or solicit input from others. As such, they are highly subject to circumstantial blindness/oversight, critical error, and/or misread. Unfortunately, approaches like these are all to common in the command and control / hierarchical authority structures that most company management teams use. There, challenging the boss is generally considered the dumbest of career moves.

What this highlights is how all too often, when and if newly acquired information does get taken in, it only gets evaluated and processed through those analytic filters that already have been approval by those in charge. Better would be if such information was first used to reassess the premises and assumptions of the model or filter in use before going on to commence analysis and conclusion finding.

Why is this detrimental effect on business management practice allowed to continue in the face of what is a now-known natural human tendency for mental error? It does because it stems from two raison d’êtres of all organizations – control and efficiency. However, maybe what we need is to adopt a more enlightened business practice even it it comes with less short term benefit and management practice efficiency.

Your Three Brains – Which One Does Your CEO Use Most?

Another factor that explains why we and CEOs act and react they way we do is how evolution has wired our brains.

Our oldest, instinctive behaviours are lodged in what many call our ‘reptilian brain’. This brain, which evolved to insure personal survival, encompasses all the mechanisms that control our basic functions necessary for life, such as our heart rate, breathing, fighting, fleeing, feeding, and reproduction. This reptilian brain is all action and no feeling.

Our social behaviours on the other hand are managed by our ‘mammalian brain’. This is our playful, subconscious brain and it is the source and processor of our feelings and caring instincts. Its name comes from the fact that mammals tend to their young whereas reptiles usually do not. Our mammalian brain helps us determine what is real, true, and important to us, but this brain is unfortunately inarticulate and challenged to communicate ideas that express our feelings to our most developed brain, the conscious mind which is what we call our thinking ‘human brain’.

So, in contrast to how we use our subconscious ‘mammalian brain’ to derive information and judgments based on our feelings about our experiences, we use our ‘conscious mind’ and its storehouse of non-emotional, learned, rational thought processes and concepts to more objectively interpret experience for the purpose of deriving the important information and judgments we need to operate in today’s complex world.

Now, it should not surprise you to know that it takes a lot more energy to operate our thinking ‘human brain’ than it does to operate either our subconscious ‘mammalian brain’ or our instinctive ‘reptilian brain’. It is no surprise, therefore, that we spend most of our time in reactive, emotional or instinctive modes of behaviour than we do in thoughtful, reflective, objective ones.

Because of this, it is entirely not unexpected that business leaders, with ‘many balls to juggle’ who often operate under high expectations and lots of stress, heavily rely on their subconscious, social ‘mammalian brain’ to get through most of each and every day.

How Our “Threat and Reward” Response Rules Us

Unfortunately, our social ‘mammalian brain’ has an all too easily invoked “threat and reward” response wired into it, which is a neurological mechanism that governs a great deal of human behavior. The “threat and reward” response arises when the limbic system (a relatively primitive part of the brain, common to many animals) is aroused as a result of your encountering something unexpected — a shadow seen from the corner of your eye, or a new colleague moving into the office next door, or some business development that makes you uncomfortable.

As described in the just published article called ‘Managing with the Brain in Mind’ from Booz & Company’s Strategy + Business magazine, “Neuroscientist Evian Gordon refers to this as the “minimize danger, maximize reward” response; he calls it “the fundamental organizing principle of the brain.” Neurons are activated and hormones are released as you seek to learn whether this new entity represents a chance for reward or a potential danger. If the perception is danger, then the response becomes a pure threat response — also known as the fight or flight response, the avoid response, and, in its extreme form, the amygdala hijack, named for a part of the limbic system that can be aroused rapidly and in an emotionally overwhelming way.

“Recently, researchers have documented that the threat response is often triggered in social situations, and it tends to be more intense and longer-lasting than the reward response. Data gathered through measures of brain activity — by using fMRI and electroencephalograph (EEG) machines or by gauging hormonal secretions — suggests that the same neural responses that drive us toward food or away from predators are triggered by our perception of the way we are treated by other people. These findings are reframing the prevailing view of the role that social drivers play in influencing how humans behave. Many studies now show that the brain equates social needs with survival; for example, being hungry and being ostracized activate similar neural responses. [CEOs and company directors certainly all deal daily with powerful job related social needs and interpersonal threat related issues.]

“The threat response is both mentally taxing and deadly to the productivity of a person — or of an organization. Because this response uses up oxygen and glucose from the blood, they are diverted from other parts of the brain, including the working memory function, which processes new information and ideas. This impairs analytic thinking, creative insight, and problem solving; in other words, just when people most need their sophisticated mental capabilities, the brain’s internal resources are taken away from them.”

Notwithstanding how CEOs like all the rest of us tend to react emotionally, not logically to threats, and how use verbally skillfulness to as glibly as we can turn aside or dismiss what they don’t want to address, it is important not to fall into what Edward de Bono calls the ‘Intelligence Trap’. This is where someone of high intelligence, in their need to be seen as right and more clever, uses their innate better-than-average abilities to defend, often arrogantly, their position without giving thought to the merits of other points of view.

In the view of William J. Altier, President of Princeton Associates and the author of The Thinking Manager’s Toolbox, the ‘Intelligence Trap’ leads people to lose their objectivity. Additionally he says, people similarly lose objectivity when they get too close to a situation. Since in either case they feel they may be personally impacted by the outcome, they lack what psychologists refer to as "stranger value". For Altier, Peter Drucker summed this up best when he talked about loss of objectivity in business situations, saying: "The executive in an organization … is like the physician who treats his own family: he diagnoses with the heart and always takes his own pulse rather than that of the patient."

In light of the above, what is the right criteria we should use to judge of whether a CEO has fairly evaluating the challenges their company faces? This is best judged on how thoughtfully presented, well founded and rational their argument is, and how they acknowledge and deal with contrary points of view, not how glib, smooth talking or emotionally charged are their words.

The Failure of the ‘More Expertise’ Response

An all too common organizational remedy to overcome shortcomings in expectations, results, estimates, and analyses is to affect a major increase in so-called “expertise”. This often happens after some perceived “business failure”. However, in almost all cases the ramped-up expertise brought in comes in the form of more industry area or ‘doing’ expertise (often those riding past success). The better response is adding management or ‘thinking’ expertise (those who have situational appropriate abilities and strategies).  This is supported by Heuer’s research, and the studies he cites, which point out how mirage-like is the promise of success that comes from past knowledge or past glory.

Rather, true to the “Success is a lousy teacher” insight of Bill Gates quoted earlier, Heuer’s data proves how subject matter expertise and past success themselves offer no protection from the common analytic (or performance) pitfalls. These he found are endemic to the human thought process, a point Heuer states that has been demonstrated in many fields beyond CIA intelligence analysis. Now, if you consider notorious business and intelligence failures, you will see how analytic pratfalls and traps catch up so-called experts and authority figures just as often as anybody else. More concerning is how the data show that when ‘experts’ fall victim to ‘situational misread’ mistakes, the negative effects are often aggravated. What makes this so is the excessive confidence that they and others have in the subject matter expertise of the authority figure being relied on. Consider this an excellent case why success is often highly situationally dependent and why there is a pressing need and compelling benefit to be had from proper management decision making checks and balances being in place.

Excessive hubris, often born from past success, is the telling symptom of a too-often ‘fatal’ mental affliction. To avoid the bad fate it portends requires that all of us, CEOs and company directors alike, be independent minded enough to see it for the risk it is and call it out. Time and again, excessive self belief and unreasonable optimism are precursors of the downfall that too many overly glib and overconfident A-type personalities and fraudsters suffer.  CEO and company directors need to make sure they don’t drink this brand of Kool-Aid for we should all remember why the names of Jeffery Skilling and Ken Lay of Enron and Bernie Maddoff all stand out in our collective consciousness today. And who became their victims? Why it’s all the rest of us. Little wonder, therefore, how research published in 2000 by the Centre for Risk & Crisis Management at the University of Sheffield in the UK points to how core beliefs and communications problems are the principal reasons why organizations collapse. Their unfortunate conclusion was organizations’ ‘failure to learn’ from clear and abundant opportunity, even in the wake of crisis events, is the principal and otherwise avoidable reason for most corporate downfalls.

Conclusions

Thankfully, there are simple, easily-executable things we can do to better avoid the negative consequences that are the product of built-in bias, ‘misread’ risk and the like.

Unfortunately, however, it is delusional thinking to believe you can-and-will-do thingsbetter simply because you now know about these problems and their symptoms like hubris, over-confidence, or down playing the consequences of negative outcomes.

You can’t do this because all of us use built-in bias and mental models all the time and because confidence is one of the key factors we leverage to take positive action. We use these things to help us process the tons of information we encounter every day. It is our way to ‘make’ sense of what’s going on around us, and act in timely, knowledgeable, generally-appropriate ways without suffering sensory overload.  But with lots at stake in business situations, the reason why just being on-guard against inappropriate applications of built-in bias won’t work is because it is not democratic enough.

The only way you and your company can achieve better thinking and decision making is by using an open, structured, more socially interactive information gathering and decision making process.

Apart from crisis situations and ones where a vision is being played out that shows clear market-based signs of being successful, the more your information gathering and decision making process is open to free and fair debate and reflection the better.

Now, while adding more subject matter, industry sector, or past success expertise may be a strategy that helps particularly in stressful times, that type of enhanced input is no guarantee things will work out. In fact, relying too much on subject matter expertise can blindside people and organizations to the potential impact of new disruptive technologies or other unexpected, sometimes gradual developments. Even Bill Gates got it wrong when in 1981 he said “nobody would ever need more than 640 kilobytes of memory in a PC”. And this came on the heels of IBM’s 1980 mistake that handed Gates a literal gold mine of wealth when they decided to manufacture PCs using licensed copies of Microsoft’s MS-DOS rather than buying the software rights outright which they easily could have done.

While it may be more satisfying (i.e. ego gratifying) to a leader to call all the shots, not to mention quicker, consensus decision making is almost always best because, like they always say, two heads really are better than one. And to get this, you only need to canvas a handful of others to get the perspective required, provided of course they have enough good intention, knowledge, independence of thinking, and commitment to honest and fulsome communication to be straight with you. If your management team and board work as academically they should, you’ll get most of what you need there, provided you all aren’t trapped in the danger zone of collective ‘group think’ or worse, indifference.

These comments should in no way be construed as being negative about the value of subject matter or industry management expertise. Indeed, as Heuer states, there is no such thing as too much information or expertise. Rather, the important issues that should be highlight are: how biased or unbiased, independent or not, premise / assumption questioning or accepting is the thinking process that gets applied to the information, conclusions, recommendations, and decision making your company’s leadership and its supporting sector experts do.

Clearly, the right conclusion here is that companies need to build a better disciplined thinking and more detached, reflective decision-making approaches into the very structure of how their organization operates.

Do that and you will find it the best way to succeed while being able to withstand the tests of time, suffer-but-survive the winds of change, and overcome the fickleness of fate.

Implementation Recommendations

Here are my two recommendation sets to better avoid business misstep or failure.  CEOs, boards, company owners, even secured lenders, can use these as simple, positive and efficient methods to offset the built-in bias predisposition and other mental misstep tendencies that business leaders and all the rest of us have:

A) For organizations not in trouble, making sure your board and management team enjoys the most positive working relationships possible is a great first step. However, the best safeguard any entrepreneur, CEO or other senior exec can get against observational bias and the risk of mental misstep that can lead to blindness comes only from building a dependable, independent, third-party-based feedback system into your company’s management and governance systems. Yes, you can try doing this through your Board with independent directors. But will they have the time and resources to do their own research into what’s really happening internally and externally to the Company? And will they really care enough to constructively challenge or change things when the facts seem only concerning, not clear, or unconvincing?

In these cases, your better bet is to hire an independent consultant to give top management and the board more balanced, independent feedback. You can get this by having your external expert perform, maintain, and regularly report to both the board and the CEO the results of a full competitive and performance analysis of your Company. You should make sure the report covers how competitive the Company is, what’s its position vs. the competition, its standing in the market, and how it is, can and should meet the evolving needs of customers. That way, you are much more likely to get and take-in the course-correcting information you’ll need to keep your Company out of trouble while at the same time, making sure it is primed to maximize its full success potential by seizing newly developing opportunities as they arise.

B) For organizations in trouble, in addition to following the advice above, you really need to focus on: (i) changing up the way the top decision maker(s) gather and interpret information (for clearly there have been problems doing that); and (ii), changing up the way both day-to-day and strategic decisions get made (for clearly there have been past failures there). In this, you have two options: 1) change the CEO; or 2) bring in a Chief Restructuring Officer (CRO) – a proven clear-headed executive who helps companies deal with crisis and reestablishing stability. This person should be charged with the authority and responsibility for acting as the CEO’s alter ego and being their check and balance in important decision making matters, while providing that required extra pair of skilled hands necessary to clean up the mess and stabilizing the Company in terms of cashflow, P&L, and the balance sheet. That’s the way to get back on the growth road. Let me emphasize that what you need here is crisis and turnaround management skills, not industry experience or sector past success credentials for the Company probably is already over-weighted in those.

Need Help? –> It’s Available!

If you need someone to do comprehensive competitive analysis or act as company interim CEO or CRO, call me at Compass North. It’s what we do and we do it well.

Footnote: In each of the three phrases shown in the diagram’s triangles, the article there was written twice. This fact is commonly overlooked by most people because perception is heavily influenced by our expectations, i.e. how familiar phrases like these are normally written.  Therefore, because your expectations distort your perception of reality, and you can’t avoid this, it takes a strong governance/management system, special training, and a healthy measure of detachment and reflection, to avoid falling into the trap of having ego, self confidence and positive expectations of success set you and your company up for a potential big fall if and when the world starts working out in ways you didn’t expect.

© Blog.TonyJohnston.biz & Compass North Inc. 2009

Article by –

Tony Johnston is a results-oriented executive & management advisor. With an 80% success rate over five turnarounds, he provides leadership and decision support services to companies with mid-sized or better ambitions, helping them:
   (i)  make better, more informed business decisions, and
   (ii) maximize their operational & financial performance and enterprise
        market value.

Compass North Inc is a management & advisory services firm that helps companies access and use money brilliantly so they achieve important, challenging goals. Examples of what they do include helping companies and their owners:
– make better decisions by providing customized competitive intelligence,
– grow by crafting strategic plans and implement them,
– get turned around by dealing with their debt or other business problems,
– borrow more money and/or raise more equity, and
– plan, prepare, negotiate and close acquisitions, divestitures and ownership
   transitions.

The bottom-line benefit that Tony and Compass North Inc. deliver is helping company owners maximize both what they earn while they own their business and what they bank when they sell.

> Follow me on Twitter @CompassNorthInc

Comments

11 Responses to “Why CEO’s Are Blind To Trouble!”

1. bizsugar.com
   September 15th, 2009 @ 10:16 pm

   Why CEO’s Are Blind To Trouble! | Biz Money Matters |…

   Lots of CEOs and business owners could do a better job leading their organizations. Why is this so? And how best can it be done? Here are four psychology-based reasons why all of us, CEOs and business owners included, run the risk of mental misstep, an…

2. David Locke
   September 16th, 2009 @ 9:28 am

   Your mention of the performance degradation when the colors on playing cards was reversed, known to players, demonstrates how knowing your IT systems deliver meaningless or less-than-meaningful numbers leads to compensations, and reliance on bad data. Since we ignore meaning when we build software, we end up losing 75% meaning for 75% of the users.

   Thanks for more evidence that we need a wake up call in our IT systems. The notion of data quality is coming on strong. Sadly,the only quality guaranteed by an IT system is that of the plumbing, rather than the content. Data quality and meaning fitness are not the same thing.

3. Madeleine Van Hecke
   September 16th, 2009 @ 10:39 am

   Excellent article, Tony. I appreciated your referencing my book, Blind Spots. I wanted to mention that I recently collaborated with 2 business professionals to relate recent brain research to business leadership. That book will be released in late November. It’s called The Brain Advantage: Become a More Effective Business Leader Using the Latest Brain Research (Prometheus Books, 2009). I hope it might be a useful resource to you.

   Some of the brain research suggests that even the feeling of arrogance and overconfidence that you discuss are neurologically rooted. It seems that the brain creates a sense of certainty that is very compelling to us. It leads us to believe that we are right – even when we’re not. This is based on a great book by neurologist Robert Burton called On Being Certain. Knowing the neurological roots of the sense of certainty can help leaders compensate for the false sense of certainty that the brain sometimes generates.

   Anyway, thanks for an excellent article -

4. Tony Johnston
   September 16th, 2009 @ 1:41 pm

   Madeleine, thank you for your feedback and positive comment which was warmly welcomed.

   It was a pleasure referencing your excellent book, ‘Blind Spots: Why Smart People Do Dumb Things’. What your book has done is a great job proving how all us can be less than perfect, something that goes as much for the average man or woman in the street as it does for those who inhabit the halls of power, be they political or commercial.

   Too bad George W and Dick Cheney didn’t have your book in 2003 before they made the fateful decision to invade Iraq because if they had, they might have appreciated just how many blind spots they were running. Should there have been something that could have held them back, I bet we would have already won the war against the Taliban and Al-Qaeda in Afghanistan by now. It is precisely situations like that on the political front, and Enron on the business front, which prompts my strong call for effective, practical structural-checks-and-balances and reflective, less-emotional decision-making. As I see it, these are the only types of mechanisms that can, in most circumstances, hold back over-aggressive, over-confident A-type personalities.

   Thank you as well for giving me the heads-up about your forthcoming new book ‘The Brain Advantage: Become a More Effective Business Leader Using the Latest Brain Research” which Prometheus Books will be publishing the month after next. I look forward to its coming out.

   I also appreciated your drawing my attention to the work of Robert Burton and his book called ‘On Being Certain’. I was not aware of his findings. In checking out his book online, I was fascinated to learn how emerging research has now revealed ‘confidence’ to be the “feeling of knowing”, not the “confirmation of knowledge”. That is compelling new insight! While I agree with you that “knowing the neurological roots of the sense of certainty can help leaders compensate for the false sense of certainty that the brain sometimes generates”, I think Burton’s work convincingly makes the case for having effective check-and-balance / reflective-decision-making mechanisms built into the very core of all power structures. To me, this is really important for the long term good of both societies and the organizations alike. Because of that, maybe we should move this as the next Constitutional amendment. It might be the way to avoid having another Great Recession!

   Thank you again for your comment.

5. Hans Amell
   September 18th, 2009 @ 1:01 pm

   Tony,
   I like your article and I see many of these traits in organizations that I serve. I would like to use your article as a reference document and possibly feature part of it on my site; http://www.catalystacquisition.com. Please send me a printable version at hamell@catalystacquisition.com and do not hesitate to connect with me. Maybe we can find some interesting business opportunities.
   Hans

6. Lehman Bros: What Failure Felt Like | Biz Money Matters
   September 18th, 2009 @ 1:17 pm

   [...] my post ‘Why CEO’s Are Blind to Trouble!’ from earlier this week, reading the following book summary is enough to convince me the [...]

7. Karen Siwak
   September 28th, 2009 @ 12:36 pm

   Great article Tony.

   I think another facet of risk blindness in CEOs is the tendency to hire people who “look like me, sound like me, think like me, golf nearly as good as me.” As one CEO proudly described it in an article I read this summer, “I hire people who look the part.”

   Unfortunately, cultural homogeny in the senior executive team means that everybody shares the same blind spots and biases – a potentially fatal flaw when it comes to recognizing emerging risks.

8. Tony Johnston
   September 29th, 2009 @ 10:41 am

   Thanks Karen.

   I agree – it’s really scary to hear a CEO proudly boost “I hire people who look the part.” Talk like that is highly suggestive this is a surface not substance oriented person (one most likely to be seen proudly sporting his ‘trophy’ wife all around the social scene). What’s the result of vacuous decision making like that? You named it: cultural homogeny. In those situations, you get a tinny, Teflon management team; great looking, glib talking, big thinking and too often disastrous or at least under-performing (remember what people thought about Enron and their management before their self induced implosion in 2001?). Of course, I say ‘team’ here in the roster sense of the word, not the behavioral one because they play the ‘business game’ in a robotic way where the rules of engagement are top down driven. Shouldn’t the goal be to manage a corporation’s business in an interactive, situationally responsive way where strategy and tactics are continually assessed and changed as required based on feedback and give-and-take up and down the line? I think it should.

   These situations referenced are often extensions of the “Intelligence Trap” where a unfortunately misguided and overly ego driven CEO is simply gathering up troops who will blindly help him defend his entrenched position and/or support his chosen business strategy rather than collectively guide the corporation through changing and challenging times. It is therefore little wonder there are too many missteps in the corporate world. If you are interested, here’s a link to a brain science oriented blog by two doctors in Seattle that supports why the overly slick and verbally glib executives are poor thinkers and poor decision makers (Eide Neurolearning Blog). And when there’s knowledge like this around, it makes you wonder why so many fall prey to corporate zealots, fraudsters and con artists. That is until you start to think of the compelling emotional appeal that ‘deals that are too good to be true’ have!

   But in the corporate world, you would expect better thinking is supposed to rule. Because I think it doesn’t, I ask: where are Boards of Directors in all this? It is sickening to think that maybe way too many in the majority are made up of just the types we should be trying to avoid – showy, cocky, all-action types who “look the part” but who’d have a hard time thinking their way out of a wet paper bag. Is this a sign that our capitalistic model of how to organize and run a society is broken and in need of repair? Or is it a sign that we’ve become a too-stressed-out society that no longer is able to think straight? Given the post Great Recession times we’re in and why they are here, this is potentially scary stuff indeed!

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   November 13th, 2009 @ 7:47 am

   [...] de la réalité par les personnes en charge est souvent déformée, à commencer par celle du chef exécutif. Ainsi, on arrive à la conclusion qu’il faut améliorer un produit ou faire une nouvelle [...]

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    December 17th, 2009 @ 9:20 pm

    [...] from Biz Money Matters:     Why CEOs are Blind to Trouble!     Don’t Lead Your Company into [...]

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