How Frank or Deceptive Should Leaders Be?
HBS professor Jim Heskett sums up comments to this month's column. Given the possibility that a naturally pessimistic (or perhaps more realistic) CEO might adversely affect everything from market reactions to employee morale, HBS Working Knowledge readers' comments are full of advice for honesty, candor, and an optimistic bias.
How should context affect leaders' candor and transparency? Candor, transparency, and optimism generally trump dishonesty, deception, and pessimism as characteristics of good leaders. But is this true at all times? Conclusions about each of these characteristics may not be applicable to all organizations in all cultures, in times of success as opposed to decline, when talking about the past as opposed to the future, or in dealing with employees of all generations. As many respondents to this month's column pointed out, the effectiveness of candor, transparency, and optimism as leadership behaviors may depend on the "context" in which they are found. As a result, one might conclude as Mike Leahy did that "… I am fascinated with the range of our readers' responses to something I thought was rather straightforward."
Harsh Honmode's comment reflected this train of thought. He said, "… for a leader to be transparent he should have had inculcated an environment of TRUST beforehand, which means he cannot suddenly become candid about his apprehensions." Dora Bonnet commented, the role of leaders is "knowing what to say and where to say it." Sharon Richmond pointed out that, "Because 'trust' is elusive … Leaders must always be mindful of their context and audience, and communicate accordingly." And Phil Clark reminded us that "Transparency without context is dangerous …. Leaders place the current facts (good or bad) into (the) context of the future." Gerald Nanninga commented that "It is impossible to fix a problem if one does not properly acknowledge the full extent of the problem…. Problem resolution, however, can take a more optimistic tone …. The biggest problem occurs if we get these reversed …."
Comments were replete with advice to leaders regarding honesty, candor, and an optimistic bias. Zack Allen advised, "Honesty is the best policy … (but it) does not mean being a nay-sayer or a wet blanket." Peter Bowie suggested that "A leader needs to be honest in assessment, have clarity around a plan to move forward and communicate his confidence in the plan …." Terri Bonar-Stewart suggested to leaders that they, "Lay out the facts, ask for employees' help (they have been waiting for you to ask), use humor (you can't laugh and feel stress at the same time) …." Shruthi Sridharan emphasized, "… keep communication channels open for feedback to assuage any employee anxieties; be cautious in messaging about (the) here and now; stay positive about future plans!"
Heather Neary raised questions for us to ponder. For example, are Gen Yers and new media affecting responses to these questions? Do leaders face special challenges in an age of, in her words, "Twitter Congressmen and Senators, Facebook, DIGG and other social media in undoing all the mistrust that has surfaced as a result of all of the previous 'spins' placed on misinformation"? Do these trends present special challenges or pressing needs for greater honesty, candor, and transparency in the future? In discussing management issues, we often conclude that "it all depends." Does that kind of thinking apply here? What do you think?
Several leadership concepts, such as "transparency," are in vogue these days. Perhaps we should add "self-fulfilling prophecies" to the list. They have become particularly relevant as comparisons of the current economic situation to the Great Depression have given way to increasing talk of the potential today for not just a recession but a depression. They raise questions about the appropriate posture for leaders under conditions in which they themselves may harbor pessimism about the future. And they call out for more attention to ways in which economics intersects with psychology, the theme of a new book by Nobel-prize winner in economics George Akerlof and economist Robert Sheeler of "irrational exuberance" fame.
These authors cite the importance of what John Maynard Keynes once referred to as "animal spirits" in dealing with economic issues. These help explain, in the words of the authors, "how the economy really works" as opposed to the way that classical economics views it. They cite the importance of economists understanding the impact of such things as "confidence, fairness, corruption and antisocial behavior, money illusion (in part an undervaluation, particularly by younger adults, of the importance of compound interest, inflation, and long-term value of money in one's planning), and … political-economic stories (the way people communicate confidence that can affect entire economies and their performance)" on assumptions they make about economic behavior.
It's the first and last of these that may be of greatest importance at the moment to the extent that they lead to self-fulfilling prophecies. They may also have implications for leadership behavior. This line of thinking leads to the conclusion that the more stories we tell about depression, the more likely we are to have one. If one subscribes to this line of thinking, avoiding the use of certain terms like "depression" may make sense.
How frank should leaders be? Jim Collins emphasizes the importance of organizations facing "the brutal facts" about causes of mediocre performance. On the other hand, there may be reasons why good leaders have to have an optimistic bias. As one CEO put it in a meeting last week, "I can't lead from a position of pessimism." Even though CEOs may harbor doubts about the future performance of their organization, how candid can they be in expressing those doubts? The ability of a naturally pessimistic (or perhaps more realistic) CEO to adversely affect everything from market reactions to employee morale and motivation may be substantial, thereby creating the wrong kind of self-fulfilling prophecy. That is why we might ask whether, when President Franklin Roosevelt said at a particularly dark point during the Great Depression that "the only thing we have to fear is fear itself," did he really believe that or was he trying to exercise good leadership by creating a positive prophecy by means of some comforting words? We applaud candor while sometimes penalizing those who pursue it. Exhibit A is President Barack Obama, whose candor (assuming he really believes what he is saying about the potential length and depth of the current downturn) has been rewarded with further deterioration in a number of indicators, not the least of which is the stock market.
What's the fine line that leaders have to walk between transparency and candor on the one hand and the need to create self-fulfilling prophecies and confidence through stories on the other? To what degree do leaders owe it to others in their organizations to mask personal negative feelings in an effort to inspire good performance? How, if at all, should leaders employ self-fulfilling prophecies? When does such effort become unproductively deceptive? How frank or deceptive should leaders be? What do you think?
To read more:
George A. Akerlof and Robert J. Shiller, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (Princeton: Princeton University Press, 2009)
Jim Collins, Good to Great: Why Some Companies Make the Leap … and Others Don't (New York: HarperCollins, 2001)