Corporate leaders risk failure if their own data dashboards start lying to them

Corporate leaders risk failure if their own data dashboards start lying to them

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What’s common to Enron, Arthur Anderson, Satyam, DHFL, Volkswagen, Yes Bank, Ranbaxy and Theranos? You would have probably guessed that each of these once-lauded companies was involved in a major scam, causing an incalculable erosion of wealth, reputation, shareholder value, and, in some cases, worse. There is a more disturbing commonality among these fraudulent companies. All of them had been awarded prestigious accolades. Satyam was awarded the Golden Peacock Award for excellence in corporate governance just months before its fraud was uncovered. Elizabeth Homes, CEO of Theranos, was featured on the cover of Forbes in 2014, just a year before her fiction began unravelling. Yes Bank was awarded ‘Bank of the Year’ in 2015, DHFL won a ‘Best Housing Finance Company’ award, etc. You get the gist.

They had yet another sinister commonality. Each espoused ‘Integrity, transparency and authenticity’ as the core values of its company culture. So, in supreme irony, the leaders of these companies were lying straight faced, (some under oath), while preaching those exalted values to employees and stakeholders. But that is not the point.

The point is that ‘dashboards’ put in place to ensure transparency and authenticity not only failed, but were rigged to paint a picture so false that shareholders, analysts, oversight boards and even industry bodies that were supposed to assess these companies objectively, were beguiled. While the above examples are of extreme failures, many companies have a huge gap between what they state and what they practise. No wonder the rank and file of such firms have little faith in management declarations.

The senior management and boards of large organizations rely almost entirely on ‘dashboards’ to track and measure progress on their stated intent. However, the fidelity of information fed into these dashboards is often suspect. Many a time, they are doctored to display what the management wants to see, rather than what they should be seeing. This is especially true for subjective areas like customer satisfaction, employee morale, reasons of attrition, project delays and competitive landscapes. There is no way that the employees of Theranos, Enron, Satyam or for that matter Barnes & Noble, Nokia and Kodak, etc, did not sense impending disaster. And yet, their senior leadership either was—or pretended to be—unaware of ground reality. In the worst case, they were fraudulent and complicit, and, at best, they were grossly incompetent. Either way, the leadership was responsible not just for poor decisions based on a faulty dashboard but also for corrupting it.

There are several reasons why structured reporting channels get vitiated. The first is a focus on short-term gains, which prioritizes immediate profits over long-term sustainability and ethical considerations. This usually results in unethical decisions such as lying about product quality, ignoring checks and balances and the cooking of books. The second reason is a culture of zero-error syndrome. When leaders insist on ‘no error’ and penalize every failure, employees are tempted to fudge reality. If mistakes are unforgiven, then they will be underplayed or not reported. The third reason is doublespeak by the management. Risk taking, independent decision making, good governance, authenticity, etc, are proclaimed to be desirable, but conventionalists, yes-men and those who deliver near-term outcomes (even if they cut corners) are then rewarded. Similarly, leaders often make grandiose proclamations about an emphasis on aspects such as work-life balance, role rotations, learning and growth opportunities, etc, but neither follow through nor allocate concomitant resources to them, thus betraying their real intent. Hypocrisy corrodes trust and institutionalizes a culture of embellishing minor successes as major achievements and major failures as minor setbacks. After all, if business leaders are duplicitous, why wouldn’t subordinates follow suit?

The most insidious reason, however, is a weak leadership will to face harsh reality. Companies don’t rot overnight. They start spoiling slowly and raise enough stink for the management to discern early warning signals. If their dashboards were honest, they would display a downward path. But some leaders paint themselves into a make-believe world and chasten anyone who tries to sound alarm bells. And soon enough, ‘loyal’ officers start bending reality to align it with their leader’s perception. Messengers telling the truth get sidelined and the organization starts situating the appreciation rather than appreciating the situation.

Like any aspect of an organization’s performance, the responsibility of nurturing and maintaining a high-fidelity command-and-control system rests squarely on its top leadership. Pressure to meet financial targets in the face of fierce competition and winning at any cost are no excuses for subverting dashboards. Once leaders start down this slippery slope, they will be taking decisions based on dashboards that don’t tell the truth. And as Andy Stanley observed, if leaders do not listen to others, they will soon be surrounded by people who have nothing to say.

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