Company cultures and top leaders may unconsciously penalize subordinates who bring them bad news. This dangerous judgment error is called the MUM effect and it creates an atmosphere of secrecy that leads successful companies to stagnate and deteriorate. That’s the key take-away message of this episode of the Wise Decision Maker Show, which describes the danger of missing vital information due to the MUM Effect.
Video: “Are You Missing Vital Information Due to the MUM Effect?”
Podcast: “Are You Missing Vital Information Due to the MUM Effect?”
Links Mentioned in Videocast and Podcast
- Here’s the article: Are You Missing Vital Information Due to the MUM Effect?
- The book Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters is available here
- You are welcome to register for the free Wise Decision Maker Course
Transcript
Hello, everyone and welcome to another episode of “The Wise Decision Maker Show”, where you improve your ability to make the wisest and most profitable decisions. Today, we will talk about how to get negative bad information. It’s actually surprisingly hard to get negative information because, within a company, often it does not trickle upward. Often, it stays at the lowest levels. I’ll give you a case study. I will give you a story about how this happened.
I was giving this conference at a manufacturing association on avoiding business disasters for manufacturers. There was a tall thin man, probably in his 50s, who approached me, and he looked pretty agitated. I was a little concerned. I hoped he wasn’t angry at something I had said. He came up to me and introduced himself as Mark, and he asked me to tell him more about one of the cognitive biases/dangerous judgment errors that I have been talking about.
Now, if you have been following “The Wise Decision Maker Show” for a while, you know that cognitive biases are what cognitive neuroscientists and behavioral economists like myself call the dangerous judgement errors that are part of our brains’ wiring due to our evolutionary heritage, due to the data processing capacities of the brain, causing us to make bad mistakes in business settings, in life, and elsewhere.
The cognitive bias that Mark was interested in was called the MUM effect – M-U-M, mum, like quiet. MUM refers to people at the lower levels of the organization not passing negative information up the chain of command. They do what’s called shooting the messenger, colloquially, “Don’t shoot the messenger”, where people who actually give bad information, pass that information on, are blamed for that information or punished for passing up that information.
It’s a very common problem in companies. It happens a lot, so it has its own name by now, the MUM effect, and it applies not only to companies but all sorts of interactions where humans are. You don’t what to pass on information, that is the MUM effect. I started giving him some examples from my consulting and coaching. I told him how the MUM effect harms companies, causes them damage, because that’s what Mark seemed to want to know about. And he grew more and more agitated, more and more upset.
I wondered what was going on here. This is feeling kind of weird. Eventually he interrupted me and he shared his own story. He used to be the CEO of a company – a pretty successful manufacturing company, a few hundred people in the Midwest – and the company was doing pretty well until the Great Recession hit in 2008, and then things were kind of tough for a bit.
Mark thought that he was, as a CEO, pulling it through this rough patch, until a couple of years later when he was called by the chair of the board of directors and asked about some of the accounting discrepancies that had been occurring in the company. Mark was very surprised. “What accounting discrepancies? I have no idea what you are talking about.”
Apparently, the board got some anonymous whistleblower complaints about some accounting issues in the company. There were two members of the board who had some experience with accounting, and so they went to investigate, along with Mark, these accounting issues.
They went to the CFO of the company. They went to the accounting department, and they discovered, they were shocked – apparently, the CFO along with a couple of head accounting personnel, the comptroller and so on, were using some of the same fraudulent accounting techniques that got Enron and WorldCom and others in trouble around the time of the previous recession 2002, 2003.
It wasn’t quite as bad as Enron, but it was on the same principles. And they were using that to hide the negative situation of the company and the seriousness of the problems of the losses from Mark and from the board, and so on. It was a privately held company, so they were hiding it from the owners. It wasn’t a publicly held company, but still it’s not something you should ever do.
It was a very serious situation. Mark fired the CFO, fired the accountants who were involved. As they dug deeper, it turned out that the accounting shenanigans were actually not limited to the Great Recession. It happened on quite a bit smaller level, but it happened before, too.
So, they started investigating more about what was going on, and they found that accounting was not the only department where such issues were happening. It was also in operations, in manufacturing. For safety, there were some safety issues that occurred that were swept under the rug. The customer service department, some of the negative customer service interactions, they weren’t brought up to the attention of management and they weren’t reported as they should have been.
As a result of a broader investigation, what the board of directors discovered – Mark discovered, to his chagrin – was that the problem actually was Mark. He was, unfortunately, behaving in such a way that people who were passing up positive information were rewarded. People who were passing up negative information were punished. So that was really bad. It encouraged complacent behavior. It encouraged hiding negative information in the company, in the lower parts of the company, not passing it up the chain of command.
As a result, of course, that really hurts the company. Research shows that it’s not only Mark. It’s a very typical CEO trait. It’s a very typical top-leader trait that as any CEO goes higher in the ranks, they get more and more cut off from the previous sources of information, from the bottom up reports.
And the people who surround them, unless they are very actively fighting the natural human thing, how things naturally occur, is that the people around them become the praisers. Everyone likes to be praised, right? It feels good. It feels comfortable. You like people who like you. You like people who praise you. You like people who give you good news.
You don’t like intuitively people who give you bad news. So, unless you actively fight this very natural human tendency, you are going to get surrounded by sycophants, by people who just kiss up to you, the brown-nosers, ass-kissers and so on. Those are the people who remain around you if you don’t actively fight this trait.
And very many CEOs don’t. They just don’t fight this trait. They don’t realize that that’s what’s going on. They might think that they want the truth, but their behavior, their emotions aren’t actually conducive to learning the truth.
And the board ended up firing Mark. I would say it wasn’t an unfair thing to do because he was responsible as the CEO for setting the company culture, and the organization’s performance clearly suffered. It was really hurting. Good people were leaving the company because they don’t want to be in such an atmosphere where telling the truth gets them punished. And the people who were staying were more the people who just kept their heads down and passed up only good information.
The company failed to adjust to shifting market conditions even before the Great Recession, and it was in pretty serious trouble, much more serious than Mark was understanding when he thought he was taking the company through the rough patch.
Again, this happens very often. There was a study by Leadership IQ of 1087 board members, members of boards of directors of 286 organizations, that fired their CEOs. So, 286 organizations, 1087 people. That’s a lot. What they found was one of the top 5 reasons (so over a fifth), 23% of the CEOs were fired for denialism, meaning denying negative reality, failing to face the facts. And of course, part of the failing to face the facts comes from creating culture, where the negative facts don’t flow to the top and where they’re hidden at the bottom. Whether it is about safety or about customer service or whether it’s about the basic numbers of the company hidden through fraudulent accounting techniques, that’s a serious, serious problem.
And economic downswings often reveal this negative information and lead to the removal of leaders like Mark. So, Mark was actually in a pretty tough spot after he was fired. He was in a grim state of mind. He fell into a depressive episode for a while. He slept most of the day, didn’t want to eat, didn’t work out. He stopped spending time with friends. He snapped at his wife and kids. It got to be pretty bad, from his story. He was kind of tearing up when he was telling me this. It was hard to hear. It was a tough story. It was a tough time for Mark after he was fired. I mean, he realized that it was, to a large extent, his fault, and that was pretty bad.
Finally, his family wisely staged an intervention after he lost 40 pound in about 5 months. They staged an intervention. They got him some professional help. They got him to a therapist. They got him to a psychiatrist, he start taking meds and eventually he was able to address the depression that was taking serious hold of him. Five months, that’s a rough time.
So Mark, at the time I met him, he was just recovering. He recovered already his mental health. He was recovering from his job loss, his professional career. He was trying to recover his professional career. He went to the conference, the one I was giving the keynote at, both to tap his network, to try to get another job, after the 5 months that he was out. It was more than that – it was by that time 7 months, because it was 5 months in a depressive state, and it took 2 months to start recovering to the state where he was comfortable beginning to network.
And so he also wanted to tap his network to get another job and to also try to figure out what was going on, what happened, and he wanted to hear my speech on cognitive biases, these dangerous judgment errors to try to understand more what happened to him. He clearly made some bad decisions, bad judgment errors in his decisions making.
He was kind of upset when he found out how our brains screw us in professional decision making, even at the very top of the organization. In some ways, more at the top of the organization because of what I mentioned before, being cut off from previous sources of information, being surrounded naturally and intuitively, if you just go with your gut intuitions, what’s comfortable for you, being surrounded with sycophants.
And he felt confident that what happened with the manufacturing company he used to run would have never occurred if he learned about the MUM effect and other cognitive biases because he would have been working against the natural gut intuitions that caused him to make these really bad decisions.
So, he thanked me for gaining this understanding and started learning much more actively about cognitive biases, these dangerous judgment errors. And he made sure that he used them in his next job. So, he succeeded eventually in finding a new role, within the next year he found a role as the COO – not CEO – of a smaller manufacturing company, it was like 150 people.
Eventually he moved into the CEO position. And both as the COO and the CEO, he made sure to spread information about dangerous judgment errors, the cognitive biases, throughout the company as a part of helping his team, both continuing his own professional development in this and helping his team make sure that they don’t make the dangerous judgment errors that are such a natural intuitive part of who we are if we don’t try to take deliberate steps to address these dangerous judgment errors.
Mark’s story – I am still in contact with Mark, he sends me questions occasionally by email, and we chat by email, on the phone and Zoom video conference – and his story really stuck with me. Every time I think about it – when I am having a tough time convincing business leaders, professionals, entrepreneurs, about the importance of dangerous judgment errors, people saying to me, I go with my gut all the time – I remember Mark.
I remember his story and remember the terrible decisions we all make, occasionally when we go with our gut reactions because of the way our gut reactions are wired to intuitively surround us with sycophants and so many other problems. The MUM effect is one of over a hundred cognitive biases, over a hundred of these dangerous judgment errors that really screw up our judgment in very important situations, especially as we grow in our careers and become top-level leaders where we are cut off from previous sources of information.
Mark reminds me of how high-flying careers can easily be brought down without people doing anything malignant or malicious. Mark did not know about the accounting fraud that was going on. He set up a culture – he unintentionally created the culture. As the leader, he set the precedent. He set the culture and the norms that allowed that to happen. These cognitive biases, these dangerous judgment errors, can do the same thing to anyone. Any leader, any follower, any professional, anyone, you can fall into them, and just like Mark fell into them without realizing it.
And what you need to do, and what Mark realized he needed to do and he’s been working on in his new company that he is running – the manufacturing company, smaller, about 150 people or so – is to teach people there about these dangerous judgment errors, these cognitive biases and make sure they don’t fall into them.
And I hope you take Mark’s example. Don’t fall into these dangerous judgment errors. Do the counterintuitive things. Don’t go with what’s comfortable. What’s comfortable will often get us into huge trouble as it got Mark into trouble, hearing praise and liking people who liked him and who liked the company. You want to do the hard thing, the counter-intuitive thing, the thing that will be most beneficial for the long-term success of your career and your company by making sure to use effective decision-making strategies that address these dangerous judgment errors.
Check out the blog on this topic. It’s linked in the show notes, as always. There are some more blogs linked in the show notes. If you like this episode, please click Like and leave your comments in the episode. Let us know what you think. Let me know what you think.
Please review the show on whatever platform you are using to get the show. Leave a review. I’d love to know what you think about the show as a whole, not simply this episode.
Please make sure to click Follow and subscribe on the platform where you are getting the show from. I hope that you will also follow us on social media. All social media are linked in the show notes.
To learn much more about making the wisest and most profitable decisions, there is a great free resource called the “Wise Decision Maker” course. It’s an 8-module, video-based course. Please check it out. Register for it at disasteravoidanceexperts.com/subscribe. It’s also linked in the notes.
If you would like to get more in-depth information, very specific take-aways, and a lot of case studies, check out my book on this topic. “Never Go With Your Gut: How Pioneering Leaders Make The Best Decisions And Avoid Business Disasters”.
I hope to see you on the next episode of “The Wise Decision Maker Show”. As always, the wisest and most profitable decisions to you.
Originally Published at Disaster Avoidance Experts on August 18, 2020
