Who tells you the truth?
There’s a tragic cycle in human affairs. A leader solves a problem and achieves a level of success. He is celebrated for his wisdom or decisiveness or practical understanding, and is given more and more authority. Eventually, the adulation goes to his head. He doesn’t like to hear bad news—who does?—and acquires sycophants and yes-men who only tell him what he wants to hear.
Eventually, such a leader overreaches—tries to accomplish something beyond his abilities and resources, and doesn’t learn of his errors until it’s too late. The ancient Greeks called this “hubris.” The cycle of success-overreach-downfall repeats itself in individuals, companies, and nations. When people have to deliver bad news to rulers, they often implore the recipient not to “shoot the messenger.”
It’s important for companies to have systems in place where bad news can be safely conveyed to senior management before mistakes become so ingrained into the system that drastic steps are needed to correct them. Proctor and Gamble recently announced that they would shed half their brands in an effort to streamline their business. Seemingly no one was willing to tell the previous CEO that the agglomeration of products as diverse as pregnancy tests and pet foods were acting like barnacles on the bottom of a ship, slowing growth and making it hard to steer. It took new leadership to see the problem and propose a radical solution.
Many of Shakespeare’s tragic heroes threaten bringers of bad news—especially just before they fall. Cleopatra, Macbeth, King Henry IV—they all fall into this pattern. Ironically, it was the king’s “fool” who was often the most frank. If corporate leaders are to avoid overreach, they need to have a culture that encourages people to speak truth to power.
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!