Leading Edge: The Culture of Candor

By Warren Bennis  |  Posted 08-18-2002

Leading Edge: The Culture of Candor

A brilliant CEO I know has a plaque prominently displayed on his desk that reads: "In every business there is always someone who knows exactly what is going on. That person should be fired."

The plaque would be funny if this were not the age of WorldCom, Enron and Arthur Andersen, an era in which a worrisome number of leaders seems more concerned with punishing whistle-blowers than cleaning up their acts. I am referring to the case of Sherron S. Watkins, the Enron employee who warned her superiors that "Enron could implode in a wave of accounting scandals." Instead of being rewarded, as she deserved, the energy giant's CFO Andrew S. Fastow tried to fire her.

American business is currently being roiled by as serious a crisis as it has seen in decades. The public's growing conviction that corporate culture is intrinsically rotten is a much graver threat to economic stability than the wrongdoings of any one executive or board of directors, however egregious. The media now demonize many of the same executives who were lionized on glossy magazine covers only a year or two ago, and the finger-pointing has extended to once mostly anonymous boards of trustees, now charged with failing to act in the face of malfeasance.

It is easy to forget, after a long period of prosperity in which star CEOs were almost as glamorous as rock stars, that our attitudes toward business leaders are cyclical. We idolize them out of all proportion to their genuine virtues, only to see their overblown reputations shatter. At that point, we often take perverse pleasure in their falls from grace. How else to explain why Martha Stewart came to be transmogrified into a kind of capitalist goddess, only to be pilloried when she faced an investigation of insider trading? Jokes about stenciling the walls of prison cells abound, a phenomenon that some wag dubbed "Marthafreude."

Times of Crisis

Times of Crisis

But times of crisis are always opportunities for learning, however painful. What is the take-home lesson from the Enron, Andersen and WorldCom messes? In the most dramatic way possible, they underscore the importance of creating a corporate culture of candor. The tragic weakness of most organizations today, whether public or private, is that they are designed to suppress truth and transparency. Most are set up in such a way that everyone in them seems to know the truth, but nobody ever tells it to anyone else.

I first became aware of this phenomenon years ago when I consulted for the State Department. Junior foreign service officers lived by three unwritten but universally practiced rules: Never tell a lie, never tell the whole truth, and never miss a chance to go to the bathroom. The unwillingness to speak the unpleasant truth was not confined to junior officers. It went all the way up the line, with senior diplomats equally loath to pass on what they knew because they feared their superiors didn't want to hear it.

Such cultures are somehow perceived as protecting the interests of the organization, yet they never do. They are inevitably costly, and often enough the cost is human lives. Think of the Challenger disaster, which could so easily have been prevented if NASA had only listened to Roger Boisjoly, the engineer at Morton Thiokol who warned everyone within hearing distance that the spaceship's O-rings were seriously flawed. Innocent people died because this expert's warnings were ignored. Unfortunately, we treasure our whistle-blowers and other truth-tellers more readily in films than in real life. Boisjoly spent the rest of his career giving talks on ethics and dissent, in large part because he was unable to get another job in the aerospace industry as an engineer.

Truth in History

Truth in History

History contains countless cautionary tales on the consequences of the failure to speak truth to power. Perhaps none is more vivid than the murder of Thomas a Beckett. In T. S. Eliot's version of the story, "Murder in the Cathedral," Henry II murmurs: "Will no one rid me of this meddlesome priest?" The monarch would have been spared an enormous amount of grief if one of his four barons had simply said, "No." Instead, they murdered the cleric on the altar, one more example of subordinates who became complicit in their leaders' crimes by doing not what was right, but what they believed the leader wanted them to do.

Many corporate leaders encourage cultures of collective ignorance. Sherron Watkins said that talking about what was really going on at Enron was off limits: "You simply didn't want to discuss it in front of the water cooler." Lack of candor is often so deeply ingrained in corporations that they will practice self-deception even when they know that they will pay a terrible price for it. In the early 1990s, for example, General Electric lost almost a half a billion dollars at its Louisville, Ky., refrigerator plant because of a faulty compressor design. Keeping quiet about the design flaw, which some of the engineers had to know about, was somehow perceived as a greater good than saving the company a considerable fortune.

The prescription for creating a culture of candor is easier to articulate than implement. Exemplary leaders welcome dissent and reward it. They know that bad news is often good, even invaluable information. They have the strength to endure thoughtful criticism, from whatever quarter. If they waver in their willingness to hear what the loyal opposition has to say, they remind themselves of the fate of others who covered their ears. One recent example is former Compaq CEO Eckhard Pfeiffer. Compaq fell farther and farther behind competitors Gateway and Dell because Pfeiffer listened only to his A-list of yes-men and ignored a truth-telling B-list that repeatedly warned him that Compaq had to start operating at Internet speed in order to prosper. Pfeiffer ignored responsible dissent right out of his corner office.

No organization can be honest with the public if it is not honest within. Executive compensation should go a long way toward salving the pricked egos of leaders whose followers speak their minds. And boards of trustees must be equally willing to speak up when they see the shadow of corruption or dirty dealing in the actions of the organizations they are charged with overseeing. No organization is served by silence—as the American Catholic Church has so painfully learned recently.

Weak Leadership

Weak Leadership

Most boards have been rubber stamps in recent years, willing to do whatever corporate leaders wanted them to do. You can look at Enron's board and, in retrospect, see obvious weaknesses. Several board members were ultra-busy CEOs of their own firms; at least one was receiving a fee for advising the company on vague "European issues" in addition to substantial compensation for serving on the board. The result of Enron and similar scandals has been a call for pervasive reform and government regulation. But the real flaw in these organizations is one that no amount of regulation will address. Corporate executives and corporate boards must begin to speak the truth among themselves. They must begin to value truth and reward it.

It isn't easy to create a culture of candor within an organization, but it is possible. The plaque I mentioned at the start of this column belongs to Sidney Harman, CEO of Harman International Industries. In a recent quarterly report to the firm's investors, Harman addressed the question of the independence of its board by assuring investors that the company did no business with its mostly independent board members, and had other mechanisms in place to ensure both the board's and the company's integrity. More important, Harman made it clear that he constantly scrutinizes the organization. "I am fully engaged in this company. I pay attention, and I know what goes on throughout it," he wrote. The leader who pays attention and welcomes information, bad as well as good, has taken the vital first step in creating a candid, honest organization—the only kind that can restore confidence in our leaders and institutions.

Warren Bennis is distinguished professor of business at the University of Southern California and coauthor of Geeks and Geezers: How Era, Values and Defining Moments Shape Leaders, which is being published this month by Harvard Business School Press.