Denial - A good business weapon or stupidity?

There is a great article in this week's London Evening Standard ES Magazine Page 23 by Helen Kirwan-Taylor.It basically states an anecdote of someone attending a meeting at a certain Global Bank and asking the executive how was the bank coping in the wake of the credit crunch. The reply was that the bank was pretty lucky not to be affected by it. The same bank had recently written off £12bn against sub-prime lending. The executive of the bank was in denial.

Was he being downright stupid to be in denial or was this a useful coping mechanism in business?

The article goes on to argue that in the extreme this is how African dictators or wife-beaters cope with their wrong doing - it is self-deception which conventionally is thought to be a sign of moral ineptitude. The article argues that this may not be the case. Denial is a defence mechanism by the body in response to fear or anxiety by pretending the problem doesn't exist. By doing so the body can channel its energy and focus elsewhere. It is the body's way of coping with trauma and stress that if left unchecked could lead to depression.

Researchers have shown (Peter Kim at Univ Southern California and Donald Ferrin of Singapore Management Univ) that groups of students were asked to rate trustworthiness when told an applicant for a job has behaved fraudulently at another job. They were shown videos of the applicant being confronted with the problem and either denying or admitting it. When the students saw the applicant deny the transgression saying it was a mistake but apologising they rated him trustworthy. When shown that he admitted to it, he was rated untrustworthy. The conclusion was that most people already assume others are imperfect and are prepared to deny flaws for the sake of maintaining a relationship.

The article goes on to say that denial is essential factor for maintaining a positive point of view. Michael MCullough of Univ Miami claims that 'There is increasing evidence that memory can be updated or changed' and he cites examples of how politicians can selectively push positive aspects about themselves while putting negative things into the background. With the spate of recent 'Blair Years' biographies and TV programs around, it is very topical. I personally watched some of the 'Blair Years' TV program and got very angry about how it seemed to be a blatant attempt to rewrite a history I had lived through and somehow make a nation remember things differently. More recently, I heard John Prescott (he was actually being interviewed about Hull City's forthcoming date at Wembley) saying that he 'should be judged on his record' and I had to pinch myself to make sure if I was dreaming or him. I also remember people leaping to the defence of Jeffrey Archer when he was convicted of basically lying to get substantial damages from a Newspaper saying that 'He was a lovable rogue' and therefore should not go to prison. Denial, it seems, can be a powerful thing.

And so to business, is it healthy for a senior executive to use denial to paper over problems? Should we rate people as trustworthy who deny transgressions?
I would like to hear your views on this. For my part, I have to say I worry a great deal about companies who use denial. At a customer service level you see it day in and day out - companies who put out marketing statements that their products and service are superb yet when you call them with a problem they are useless - things do not get better by denying issues at that level. Remarkably, Willie Walsh at BA presided over the debacle at Terminal 5 but managed to turn in large profits at the same time - and he was then rated by some authoritative magazine as one of the top executives in Britain. It must have been cold comfort for those forlorn travellers who suffered the lunacy of BA and BAA ineptitudes. I have strong views on such a culture in business that rewards failure but that's another subject. We all have our stories on this.

As another example to stimulate thought, we see MPs rushing to cover their tracks on their expenses (the average MP annual expense bill is £136,000 and there are over 600 of them!), we see large companies enforcing low pay rises on staff yet the CEOs are earning large salaries and obscene bonuses, we see merchant banks paying out many £million+ bonuses to certain staff yet are writing off £billions for poor decisions many of which are linked directly to the culture of greed in those that earn the large bonuses. Denial is more powerful when there is money at stake, it seems.

Yet, perhaps by denying all these problems and dilemmas, the executives actually can steer their businesses more effectively? Maybe, that's what makes them good at their jobs and therefore good for their staff and shareholders? I am sure we all have examples - I would appreciate your views.

Since publishing - I had some great feeback from Robin Cole-Hamilton who is based in Syria and cannot access blogs so he asked me to post his excellent contribution here. Robin has rightly picked up that many responses have confused straightforward deception or lying with denial and he illustrates his points really well:

On 6/4/08 5:35 AM, Robin Cole-Hamilton wrote:
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Nigel, one of the most common areas you'll find it is in sport, where the practice of positive thinking - blanking out the negatives - looks to observers like denial or delusion, but is essential to getting the mind in the right frame. See Bob Rotella's books for lots of stories.

In business, the answer to your question is, as usual, one of degree and timing. I remember fondly a museum director in 1998 cheerfully describing a huge and expensive collaborative project that had no consensus between its partners and no funding as "running on optimism and adrenalin". Sometimes there's just no other way to get a bold and innovative vision into play but to shut out the doubts and go for it as though it was as good as done. In which case, sometimes the bigger the better.

The trick of course is to know when it isn't going to happen, and how best to retreat. When people don't have that sense of timing, or can't accept reality, confidence can turn to denial, organisations get stuck in a game of diminishing returns, and knives get sharpened.

Good luck

On 6/4/08 5:35 AM, Robin Cole-Hamilton added the following clarification:
When I started the project I'm running in Syria I was told by a senior cabinet minister that what I was proposing was "nothing but a dream". To him I was in denial - refusing to realise the realities of the situation. We just kept on going, and today he is one of the most enthusiastic advocates for what we are doing. I was told that by the then Governor of Damascus that we would never be allowed to build a discovery centre on a particular brown site in the centre of the city. To him I was in denial because I wouldn't accept his preferred alternatives. We just kept on going, and today he has been replaced and we are master-planning the entire 16 hectares for a new public park. Denial can sometimes take the form of a necessary and productive stubbornness, but as I say, you have to know when to call it quits as well.


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