MAY 2017 / NO. 2
TAGS: KNOWN, UNKNOWN, DONALD RUMSFELD, SENIOR MANAGEMENT, CHARLES SCHWAB, SALESFORCE, XERO, ROYAL DUTCH SHELL, DELHAIZE, WALT BETTINGER, MARC BENIOFF, ROD DRURY

All too often we tell management what they want to hear

The Number One challenge facing CEOs has two forms – “People telling you what they think you want to hear, and people being fearful of telling you things they believe you don’t want to hear”, Walt Bettinger, CEO of Charles Schwab
“Many times, the question is harder than the answer. If you can phrase the question properly, then the answer is the easy part”, Elon Musk, CEO of Tesla
An important issue in HBR in March/April 2017, dealt with information that challenges your assumptions and allows you to perceive a looming threat or opportunity. When a dramatic shift is on the horizon, the first indications may usually appear in ambiguous events on the fringes of the market. A key problem is getting information that senior management have not demanded because they do not know how to ask for it. Often, this may be a development brewing that may ultimately redraw the lines of competition for the future. One way to describe the unanticipated risks became famous in 2002 as ‘unknown unknowns’, thanks to Donald Rumsfeld, the former US Secretary of Defense. He spoke about:
  1. Known knowns – what we know we know
  2. Known unknowns – what we know we do not know
  3. Unknown unknowns – what we don’t know we don’t know
The worst casualties can happen when a company is blind-sighted by innovation and new players, which management never even imagined.
Below are five examples, three from HBR and two from our own experience, of ways to ensuring that executives do not withhold information from Senior Management:
  1. CEO Walt Bettinger of Charles Schwab requires “brutally honest reports” twice per month
  2. CEO Marc Benioff of Salesforce regularly goes on global “listening tours” looking for weak strategic signals
  3. CEO Rod Drury of Xero hosts conversations that people across the company participate in and also shares the company’s strategy and market intelligence with these people
  4. At Royal Dutch Shell, we co-created the Seven Guidelines of Strategic Intelligence: one of the seven is “tell management the brutal truth”
  5. At Delhaize Belgium, we co-created an early-warning structure as part of a daily practice in the newly-established ‘Company Radar Room’
The core of our strategic intelligence best practices is to generate the early warnings signals for future action and deliver courses of intelligence action that cannot be ignored.
“The difference between successful and unsuccessful executives is not the quality of their decision-making. The difference is that successful executives are faster to recognize bad decisions and adjust, while failing executives often dig in and try to convince people that they were right”, Walt Bettinger, CEO of Charles Schwab
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