Latest / Fit Happens: Why CEOs and Leaders Succeed or Fail / Why Nobody Tells the CEO the Truth
Transcript
- Jason Baumgarten 00:00 I'm Jason Baumgarten and you're listening to Fit Happens, the podcast where top leaders, investors and board directors share the stories, surprises and hard earned lessons behind finding the right fit. Let's get into it. Jason Baumgarten 00:18 73 seconds after launch, the space shuttle Challenger broke apart, and the warning that could have stopped it had already been reported to management. By the time that warning made its way to the people with the authority to act, it had been softened, changed at every step along the hierarchy. Today, why does hierarchy filter the truth out of every organization long before anyone tries to lie? And what can you do as a leader to build so that the truth survives its trip to the top? I'm Jason Baumgarten and you're listening to Fit Happens. Jason Baumgarten 01:01 Before we get into it, ask yourself something. When's the last time someone on your team told you a piece of bad news you really didn't want to hear? Jason Baumgarten 01:13 On the night of January 27, 1986, engineers at a NASA contractor looked at the overnight temperature forecast and told their bosses, don't launch, it's too cold. The seals on the solid rocket boosters had never been tested in weather like this, and there was real reason to believe that they'd fail. And failure wasn't a minor thing. It was an explosion, a loss of life, a catastrophic failure. The warning went up the chain of command, and by the time it reached the people with the authority to scrub the launch, it wasn't really a warning. Jason Baumgarten 01:50 It was a data point mixed among others, softened at every handoff, a technical review that management read as somewhat inconclusive. Not an alarm, leave, stop, red button warning. The next morning, the space shuttle Challenger launched in freezing temperatures. 73 seconds later, it broke apart over the Atlantic and seven astronauts died. Jason Baumgarten 02:17 I was watching that launch at school. What started as a celebration, a monumentous achievement, turned into a tragedy as teachers turned the tube TVs on wheeled carts away from the kids, as some broke down crying and some said, surely it's still there, we didn't really know. The presidential commission that investigated the disaster didn't conclude that NASA lacked brilliant engineers. It concluded something a lot harder. Jason Baumgarten 02:50 The launch decision was made on the basis of incomplete and sometimes misleading information. And the agency's own management structure let safety critical concerns bypass the people who most needed to hear them. And the problem wasn't that nobody knew the risk. The problem was that knowing and deciding happened in different places. And the walls, real and metaphorical, between them muffled the signal until it was too dampened to act on. Jason Baumgarten 03:19 And I've watched this. Smaller, quieter versions and larger, even more consequential ones play out in boardrooms that have nothing to do with rockets. In fact, when I was at Stanford, this was a case study of management failure and decision making and all of the complexity that goes into it. And you'd think that when something becomes taught in business schools around the country, everyone would go into organizations ready to change it, to do something different. But it turns out this is pretty wired into how we act as humans and structured into organizations at an alarming rate. Jason Baumgarten 03:56 So I want to talk about the rooms that leaders build, the rooms where people tell you the things you want to hear, and where you hope they're telling you the truth. But why? That's always a smaller and less real version of what you're hearing. I see it every day. Jason Baumgarten 04:13 So the fact I want to start with is not a claim about character. It's not about people lying. It's the architecture of silence, the hierarchy that creates predictable conditions for information to get filtered on its way up. Not because people are more dishonest, and not because people are actually trying to gain power, but because the architecture of an organization teaches everyone underneath it what's safe to say and what isn't. And what's really fascinating is the more entrepreneurial, the more bold an organization tends to be at the very top. Jason Baumgarten 04:47 For founders by rule breakers, the more the organization underneath them can often represent the exact opposite, a place where people are penalized for risk taking, even if that's exactly what built the organization to begin with. It teaches everyone a way to behave. Two researchers, Elizabeth Morrison and Frances Milliken, gave this a name several decades ago, organizational silence. Their argument, which is held up under a long run of follow up research, is that silence isn't an accident and it isn't cowardice. Jason Baumgarten 05:21 It's a structural reality produced by centralized decision making, weak channels for feedback moving upward, leaders who visibly punish or simply ignore bad news, who don't seek the truth but instead the rosy version that makes them look good, and employees who watch all of that happen and draw pretty obvious conclusions. Now, going back to the founders that I mentioned earlier, often those founders who are bold risk takers when they're at the top lording over their organizations, they don't want to believe that things have been corrupted, that things have changed. They cling to the celebrated notion that the organization is still in their image, a group of entrepreneurs creating value. Jason Baumgarten 06:05 But the reality is they're the entrepreneur. The other people are there to please them. So nobody issues a memo that says don't tell me the truth, I'm a leader. But the system teaches this lesson every day in tiny, small transactions that people don't write down. Jason Baumgarten 06:21 And I've seen it play out so often. Just this weekend, a leader called me to say that somebody had done something bad in a meeting. I didn't want to push, but my hunch was the person didn't really do anything bad, but the person who had the sense of obligation to conform to the organization's norms of niceness said this to conform, not because it was really right. So this isn't some fringe theory dressed up for a podcast. Jason Baumgarten 06:50 The research on psychological safety, the shared belief that it's safe to take an interpersonal risk in front of your team, analysis over tens of thousands of people and thousands of teams. It isn't some soft concept. It's a consistent predictor of whether people actually speak up, learn from mistakes, and stay engaged. But you'd assume the fix is simple. Invite more input, ask more questions, keep your door open. Jason Baumgarten 07:16 Don't scream at people when they tell you bad news, or challenge your opinions. But it turns out that voice and silence aren't opposite ends of the same behavior. They're distinct. You can build a team that offers plenty of suggestions, small process tweaks, low stakes feedback, the easy stuff that doesn't ruffle feathers, while the exact same people stay completely silent about the things that actually threaten the business or that really matter. So you can feel like you're running an open door policy and preside over a really silent company at the same time. Jason Baumgarten 07:49 Because the door isn't open to the variables that matter. And this is an important distinction. If you feel like you're getting a lot of feedback, but it's not the feedback that's bone crushing, that's making you worry about the future of your entity or the quality of your leadership, you're not getting the truth. This distinction is constantly visible in my own work. Jason Baumgarten 08:10 When I run a reference check on a candidate, I can always find people who will say the candidate was approachable, ran great town halls, took questions, and that's voice. It's real and it's worth knowing. But it doesn't tell me about this thing I really want to know about, which is whether that same leader heard the really bad news that would have changed a decision. Did they solicit things that made them worry about their organizational structure or leadership model or strategic direction? Those are different kinds of questions. Jason Baumgarten 08:41 And the best reference calls I run go out of their way to get deeper on both of them, not just did this person solicit feedback and have an open door policy, but did they really get the truth? And it isn't cowardice. So it's really a list of mechanisms, and once you start to go through it, the reality is it's simple to see, harder to change. So the first is fear. Jason Baumgarten 09:10 And this isn't really the fear of being fired. It's actually, you don't need explicit punishment to get someone to stay quiet or quieter. They just need to believe that dissent carries cost to their reputation, their relationships, the next promotion. And it doesn't even have to be evident, it just has to be plausible. Now think about this for a minute. Jason Baumgarten 09:32 The last time you thought about saying something that would make a more senior person or a more powerful person in your organization not look great, did you speak truth or did you stay quiet? Because the reality is telling somebody their idea may not be accurate, or the direction might have a challenge they're not seeing, or there's a problem that they're not seeing in their organization, it's not a good look for you. In most organizations, you get pointed out as the naysayer, the negative Nelly. So that's important. You fear it and you just stay quiet. Jason Baumgarten 10:07 The second is futility. And speaking up, it turns out, requires two beliefs, not just one. The first is what we just talked about, that it's safe for me to say this, that nobody's going to come after me in a big way or a little way. But the second is a belief that somebody actually cares, that they give a damn, that they're going to do something about it intellectually, that they'll embrace it, and then reality operationally, that they're going to do something. And the research suggests that the perceived impact, whether your voice, whether your comment will matter, predicts speaking up even more strongly than psychological safety. Jason Baumgarten 10:44 So people aren't just calculating the risk to them as a career move, they're calculating return on risk. And the smarter they are, the more capable they are of dissecting your direction, the more they're likely to dissect that return on risk. Is it worth it? If you're really jolly about taking the feedback but never do anything about it, never change direction, never ask for another review or more resources or anything else, even if it's just a tiny perceived risk, why on earth would I keep bringing it up? I'll just stay silent. Jason Baumgarten 11:18 So if the first is fear, the second is futility. The third is something called implicit voice theories. Now this is what researchers James Detert and Amy Edmondson have spent a lot of time on. And it's a set of unwritten rules people absorb about when it's appropriate to speak and when it isn't. In one study, they interviewed hundreds of people inside a single multinational company. Jason Baumgarten 11:41 And then they tested the pattern they found against hundreds more. And it turns out that once someone senior has stated a preference, the job changes, in that people stop diagnosing the actual problem and start managing that leader's reaction to it. And that shift is subtle. Nobody announces it, nobody wears a T-shirt, nobody orders mugs. Jason Baumgarten 12:03 But it's very real. So before the CEO speaks, people are asking, is this the right call? Seconds after the CEO speaks, that exact same person is asking, how do we make this work? Nobody agreed to the change of subject. It just happened. Jason Baumgarten 12:17 People move from listening to agreement to action without pausing to say, should I speak up? Should I do something else? And then the fourth mechanism is just pressure flowing in the wrong direction. And let's talk about a famous case study, Nokia. Researchers have spent years studying Nokia's slide from smartphone dominance into crisis. Jason Baumgarten 12:41 And what they found wasn't some single villain or terrible CEO or poor decision that ruined the company. They found a fear cycle. Senior leaders, anxious about competitors and shareholders, pressured the layer below to perform. That layer, afraid of their own superiors, softened the bad news headed back up. The result was a top team with an unrealistically optimistic picture of their technical position, at precisely the moment when they needed a whole lot more truth and a whole lot more accuracy. Jason Baumgarten 13:12 Now, it's tempting to compress that whole story into, well, nobody told the CEO the truth. And that's not quite what the research about Nokia shows. What it shows is a system where fear, past success and big success, where the organization's attention was pointed, all reinforced each other, and the real reality, the thing that engineers who were close to the problem really believed, never really got its way to the top in a meaningful way until it was too late. And then the fifth mechanism is perhaps the hardest. It's group level normalization. Jason Baumgarten 13:49 It's what does the person sitting next to you in a meeting do? Because it turns out if they're silent, you're more likely to be silent. Nobody puts their hand on yours and says, don't bring that up. Now we all think it's stupid. They just watch their colleagues not say anything and salute and march on. Jason Baumgarten 14:09 And they draw their own conclusion that, hey, this is a silent organization where people get rewarded for executing the boss's bad idea, not by challenging and improving that idea. The room gives the cue. Now, nobody puts this cost on the balance sheet. So what does this cost? This sounds like a soft problem. Jason Baumgarten 14:30 Well, the evidence says otherwise. Going back to researcher Amy Edmondson, her landmark study in the late 90s of work teams found that this was a huge issue. And it also suggested that quality of talent alone doesn't solve this. Psychological safety predicted learning behavior, teams catching and correcting their own errors before they got worse or compounded into bigger errors. Team competence, how skilled the people actually were, barely predicted it. Jason Baumgarten 14:58 Once the safety was accounted for, you can staff a team with brilliant people and watch them learn to fail, or fail to learn, because nobody felt it was safe enough to talk about what was going wrong. More recently, a systematic review across thousands and thousands of people found that this carries a real human cost too. Lower voice and more silence are linked to higher burnout because we feel like we don't matter. Silence on its own had a moderate association with burnout, roughly as strong as many of the other workplace stressors we take seriously. That's real evidence. Jason Baumgarten 15:35 But it's not a communication quirk. It's real. It wears people down. At the same time, it's degrading the information at the top that you really want as a leader to make better decisions. So you put those together and it's a real cost because the organization starts to fail or succeed less. Jason Baumgarten 15:52 That in turn makes people feel like they're not in a great place, and they feel like their voice doesn't matter, or it shouldn't get heard because there's retribution. So worse decisions where it matters most, and the workforce quietly burning out from carrying the load of not saying anything. Then there's another audience in this whole chain worth talking about, which is the board of directors. The board sitting one layer above a filtered CEO isn't just missing some vague color commentary. It's making its oversight decisions, strategy, risk, succession, using a picture that's already been watered down once on the way to the CEO, and then, let's be honest, once again on the way to the boardroom. Jason Baumgarten 16:37 So have you ever wondered how a board gets blindsided by a problem the company knew was there? This is usually how. It's not often concealment and lies. It's just the accumulation of a culture that rewards silence or rewards inconsequential noise. So what works? Jason Baumgarten 16:58 It isn't about having a more open door, being more approachable, not telling your team that you really want to hear what they think. It's actually more specific. Let's talk about it as the architecture of candor, five specific choices. One, separate the reporting channel from the retaliation risk. Give people a route for sensitive information that doesn't run through their direct chain of command. Jason Baumgarten 17:22 One organization I worked for had a standing ombudsman who was not an employee, who was outside the organization. But importantly, as a leader, you treat this channel as an input, not a substitute, one, because if reports go in and nothing happens, the anonymous channel becomes another way of confirming that speaking up is futile. You need a real triage person and process. Jason Baumgarten 17:46 You need a named owner, a deadline, a feedback loop to the person who raised the concern. The other thing is that you have to have a sense of validation. Is this somebody's perception or is this real? Because if you allow for somebody to simply raise concerns without any real investigative approach, you could not drill down to what's really going on. So separate the reporting channel from chain of command, but have the ability and the cultural norms to go on a fact finding mission. Jason Baumgarten 18:22 The second is build dissent into decisions that you can't undo, for things that really matter, capital allocation, strategy, succession. Have a written case for the leading option and a serious case against it. Name the assumptions. Name how it might fail. Jason Baumgarten 18:39 Research comparing these structured conflict methods found that they meaningfully improve the quality of strategic decisions. It's not because arguing is fun, although it can be, but because disconfirming cases that are worked through on paper, that are researched, that are articulated thoughtfully, allow the room to consider them for real. Three, run a pre-mortem now, not a postmortem. You heard me. Write a pre-mortem before you commit, not an autopsy or an after action report. Jason Baumgarten 19:10 Once you failed, there was a researcher, Gary Klein, and he had this concept. Before you make the decision, before you launch, ask everyone to assume the plan has already failed and write down independently, before any discussion, why. Now it allows people to identify plausible reasons what might go wrong. Now, the mechanism's pretty good. Imagine you're living inside this failure and it unlocks your brain around what could go wrong. Jason Baumgarten 19:42 And particularly for optimists, it turns out this is very powerful, because otherwise they really want to believe it's all going to work out. And this gives them the safety, the mechanism, to think through the alternative. And again, you're not doing it to suggest it will fail, but simply to think through what could go wrong, what's most probable. And if four out of six people on your management team identify the same risk, well, that's a great reason to then track down that risk and try to mitigate it, if you still believe it's the right decision. Jason Baumgarten 20:12 And if six out of six think it's going to fail for lots of things you can't find mitigating controls for, maybe it's time to rethink the strategy. Four, and this is the easiest one for most leaders, change the sequence in which people speak. If you're the senior person in the room, go last. Jason Baumgarten 20:30 Now, I'll admit I'm terrible at this. I tend to blurt things out because I'm a verbal problem solver. But I've learned more often, go last. Gather written points of view before a meeting. Jason Baumgarten 20:43 If needed, let disagreements show up in different ways, written, around the room, before you enter the debate. Because the executive who's senior, who weighs in, tilts the direction of the conversation. When the CEO speaks first, the meeting tends to produce consensus. When they go last, it tends to produce a little more information. So just something to think about. Jason Baumgarten 21:08 And five, and this is the last one, build skip level conversations around real questions. Don't ask people, how's it going? Ask very specific things. What risk is being understated in your function right now? What decision creates avoidable work that you don't think we should be doing? Jason Baumgarten 21:27 What would you tell the executive team if you had a totally anonymous way to submit it? Ask real questions, not Pollyanna, how's it going, questions. Then compare what you hear against the data you have, exit interviews, customer complaints. Jason Baumgarten 21:44 And try to understand not just the quality of what you're hearing, but the gap. If your customers are unhappy and your employees are telling you everything's fine, you have a big problem. If it turns out your customers are happy and your employees think everything's fine, you may not have a big problem. Now for the boardroom, in the next meeting, ask what's something you believe is true about the business that you haven't told me because you weren't sure I wanted to hear it? Jason Baumgarten 22:12 It's a great question for the management team, for the CEO. But then you got to stop talking, be silent. See how long it takes. So here's a suggestion. Jason Baumgarten 22:23 In the next 24 hours, go last in one meeting. Ask a genuine question and then shut up. Hold the silence past uncomfortable. Notice who fills it. Notice what they say once they do. Jason Baumgarten 22:38 Audit the things your team are bringing up in a meeting. Are they incremental or fundamental? Nobody builds systems or organizations to fail. We want to win. Jason Baumgarten 22:49 Nobody at Nokia sat around saying, let's hide the truth from the people who need it. Nobody wanted the Challenger to explode. These were built by smart, reasonable people making reasonable short term choices about what they felt was the right thing to do, to say, to be. And silence isn't the absence of a system. It is the system. Jason Baumgarten 23:11 Not hearing raw, rough, tough things about the business means your system is working as your incentives have designed it to. You just have to question, as the leader, whether it's getting you the information you need. The fix isn't a braver conversation. It's not a little more psychological safety. It's a system that you have to engineer to give you a fundamentally different thing. Jason Baumgarten 23:36 So again, go back. Build the architecture of candor. Challenge yourself to hear what could go wrong. Explore it before it happens so you can prevent it. This is Jason Baumgarten, and I want you to think about why nobody tells the CEO the truth.