A tall, thin man in his late fifties approached me after my closing keynote for a manufacturing association conference on how manufacturing leaders can avoid business disasters. He looked distraught and agitated. I hoped he wasn’t angry with something I said. 

Mark introduced himself and asked me to tell him more about one of the many dangerous judgment errors – what scholars call cognitive biases – that I discussed, the MUM effect. This cognitive bias causes those lower down in the organizational hierarchy to avoid passing bad news up the food chain due to fears of the “shoot the messenger” problem, namely that they’ll be blamed for the bad news. According to research in cognitive neuroscience and behavioral economics, such mental blindspots stem from how our brains are wired.

Fortunately, recent research in these fields shows how you can use pragmatic strategies to address these dangerous judgment errors, whether in your professional life, relationships, or other life areas. 

You need to evaluate where cognitive biases are hurting you and others in your team and organization. Then, you can use structured decision-making methods to make “good enough” daily decisions quickly; more thorough ones for moderately important choices; and an in-depth one for truly major decisions.

Such techniques will also help you implement your decisions well and formulate truly effective long-term strategic plans. In addition, you can develop mental habits and skills to notice cognitive biases and prevent yourself from slipping into them.

Turning back to my exchange with Mark, I started giving some examples from my consulting and coaching experience of how the MUM effect tripped up successful companies and leaders. He grew increasingly and visibly agitated. Finally, he interrupted me and told me his story. 

He served as the CEO of a successful manufacturing company for over 12 years. Hit hard by the 2008 Great Recession; the company struggled for the next couple of years. Still, he believed his leadership was bringing it through the rough patch. 

Unexpectedly, the Chair of the Board of Directors called him in for a meeting in March 2010 and asked him to explain accounting discrepancies he heard about. Mark had no idea what the Chair was talking about and told him that. The Chair said that the Board received several anonymous whistleblowing complaints about accounting issues that cropped up over the last year.

Upset and surprised, Mark promised to look into it. The Chair asked him to coordinate on the matter with two members of the Board who had accounting expertise. 

What Mark and the other Board members found shocked them. The CFO and others in the accounting department were covering up much more severe losses than Mark knew about, using the same kind of tricks deployed by Enron and WorldCom. Naturally, Mark fired the CFO and other accountants implicated in cooking the books. 

Yet further investigation revealed that such accounting problems weren’t limited to the Great Recession, with smaller shenanigans occurring even earlier. Moreover, the issues didn’t stay in the accounting department. The organization’s culture prevented bad news from going up the organizational hierarchy, whether in the accounting department, customer service, or operations. As a result, safety problems in operations were swept under the rug, and customer service failures went unreported. 

The Board of Directors took a more active hand in investigating the situation. The result? The problem was Mark. 

The values of the CEO powerfully shape company culture. Mark – without realizing he was doing it – encouraged complacent behaviors, rewarding those who reported good news and punishing the bad. Unfortunately, too many business leaders share that trait, often without recognizing it.

Over his tenure, he grew more and more cut off from day-to-day operations. The people who surrounded him – those he rewarded with favor and promotions – were sycophants. 

 Hey, who doesn’t like people who praise them, right? But, unfortunately, surrounding himself with such people kept him from recognizing reality. The organization’s performance suffered as a result, with good people who reported the truth leaving and the company failing to adjust to shifting market conditions. 

The Board ended up firing Mark. He’s a typical example of many CEOs who found themselves in a similar position. A four-year study, which interviewed 1,087 board members from 286 organizations of all sorts that forced out their chief executive officers, found that almost one-quarter of CEOs – 23% – got fired for failing to recognize negative facts about the organization’s performance. Economic downswings often reveal such denialism and result in the removal of top leaders. 

Mark’s firing put him in a grim state of mind. He had trouble acknowledging his failure. Mark couldn’t face it at first, suffering a depressive episode. He slept for most of the day, didn’t want to eat, stopped spending time with friends, and snapped at his wife and kids. He lost over 40 pounds in five months. Finally, his family staged an intervention and pushed him to see a psychiatrist. He started taking medications and getting back on track with his life, including his career.

Mark went to the conference both to tap his network to find a new job and to see if he could learn how to prevent what happened to him from repeating. My keynote struck him hard, opening a wound that was still fresh. 

He grew tearful as he shared how he regretted not learning about the dangers of cognitive biases earlier in his career. He felt confident that what happened with the manufacturing company wouldn’t have occurred if he had known to watch out for such problems. Mark thanked me for opening his eyes about these dangers and committed to understanding how cognitive biases functioned in business contexts to make sure that he never suffered from these mental blindspots in his work. 

Within the following year, he found a new role as the COO of a manufacturing company somewhat smaller than the previous one he ran. Within a couple of years, he became CEO again, and at the time of publishing this article, he was still working there successfully. He made sure to spread knowledge about cognitive biases throughout the company. We still exchange emails sometimes when he has specific questions about them. 

Mark’s story stuck with me. Whenever I have a tough time dealing with disappointments and setbacks to help business leaders avoid the dangerous judgment errors that lead to business disasters, I remember Mark. He helps remind me of how high-flying careers and good companies get tripped up by people doing what’s comfortable and following their gut instead of suffering the temporary discomfort that can arise while making sound choices that will avoid business disasters and truly protect the bottom line. 

I hope you’ll recall Mark when you are tempted to do what’s easy and comfortable. I also hope you’ll look at your own professional activities right now and think about where and how dangerous judgment errors might be tripping you and your team up. Doing so is critical for the long-term success of your career.

Are you worried that hybrid, especially full-time remote employees, will undermine junior employee on-the-job learning, integration into company culture, and intra and inter-team collaboration? This issue recurrently came up with organizations that I guided in developing strategies for returning to the office and establishing permanent future work arrangements.

On the one hand, these leaders acknowledged that the future of work is mainly hybrid, with some staff working remotely full-time. After all, surveys illustrate that 60-70% of employees permanently want a hybrid post-pandemic schedule while 25-35% want a fully remote schedule. And 40-55% would be willing to quit if not given their preferred amount of work from home. 

On the other hand, these leaders showed concerns about on-the-job learning, cultural integration, and intra and inter-team collaboration. To address these concerns, I helped them adopt the best practices for leading hybrid and remote teams in the future of work, in this case, virtual coworking.

Why Do Leaders Fail to Adapt to the Future of Work?

Leaders often fail to adopt best practices because of cognitive biases’ dangerous judgment errors. These mental blindspots result in poor strategic and financial decisions when evaluating options. Moreover, they render leaders unable to resist following their gut and their personal preferences instead of relying on best practices. 

One of these judgment errors is called functional fixedness. When we have a particular perception of appropriate practices and processes, we tend to disregard other more suitable alternatives.

That’s why leaders failed to address strategically the problems arising with the abrupt transition to telework. Instead, they adapted their existing ways of interacting in “office culture” to remote work.

Another cognitive bias, which is related to functional fixedness, is called the not-invented-here syndrome. It’s a leader’s antipathy towards adopting practices not invented within their organization, no matter how useful.

Defeating these cognitive biases requires the use of research-based best practices. It means a mainly hybrid model of 1-2 days in-office with most employees working remotely as needed and a minority working full-time remotely – those who are well-disciplined, organized, and proactive. This setup provides optimization of innovation and collaboration, retention of top talent, and flexible company culture.

Remote Training Through virtual coworking

To facilitate remote training for on-the-job learning through virtual settings and promote effective team collaboration, employ virtual coworking. That involves all members of a team spending an hour or two per day coworking digitally with their teammates when they are not in the office.

That doesn’t mean working together on a collaborative task: each person works on their tasks but can ask questions if they have them. After all, much on-the-job training comes from coworkers answering questions and showing less experienced staff what to do on individual tasks.

First, all should get on a videoconference call. Then, all share what they plan to work on during this period. Next, all turn microphones off but leave speakers on with video optional, and then work on their tasks. That way, no sounds will be coming through unless a team member deliberately turns on their microphone to ask a question or make a comment.

This experience replicates the benefit of a shared cubicle space, where you work alongside your team members but on your own work. As less experienced team members have questions, they can ask them and get them quickly answered. Most of the time, the answer will be sufficient. Sometimes, a more experienced team member will do screen-sharing to demonstrate how to do a task. Another option is to use a virtual whiteboard to illustrate the task graphically.

Junior team members don’t get all the benefits. For example, more experienced team members might need an answer to a question from another team member’s area of expertise. Occasionally, issues that would benefit from a brief discussion and clarification might come up. Often, team members save up their more complex or confusing tasks during a coworking session for just such assistance.

Furthermore, sometimes team members will just share about themselves and chat about how things are going in work and life. That’s the benefit of shared cubicle space, and virtual coworking replicates that experience.

However, note that this call is not meant to be a work meeting, and you should not intend to have any lengthy conversations during it. Instead, do a separate call with a teammate if you need a longer chat. In addition, if you have specific teammates with whom you’re collaborating more intensely, you should do a coworking session with them daily in addition to broader coworking with the team as a whole.

Such virtual coworking does not cause the drain of a typical Zoom meeting. On the contrary, team members typically find it energizing and bonding. It helps junior team members get on-the-job learning and integrates them into the team while assisting all team members in addressing questions while feeling more connected to fellow team members.

Conclusion

Leaders worry about new employees hired during the pandemic failing to integrate into the company culture, not getting on-the-job learning, and lacking effective intra and inter-team collaboration. To address these issues, remote training through virtual coworking offers excellent best practices for leading hybrid and remote teams in the future of work.

When a threat seems clear to you, it’s hard to believe others will deny it. Yet intelligent people deny serious risks surprisingly often.

A case in point example comes from my experience helping a mid-size regional insurance company conduct a strategic pivot to thrive in the post-COVID world in January 2021. While doing a pivoting audit, I observed the underwriting department failing to address severe long-term risks for a number of industries resulting from the shifts in habits and norms due to the pandemic.

For example, many companies committed to having many employees work from home permanently, ranging from innovative tech companies like Dropbox to traditional ones such as the insurance giant Nationwide. This growing trend makes it riskier to insure providers of commercial real estate and office-based products and services. Likewise, the rise of virtual fitness spells trouble for the future prospects of everything from yoga studios to gyms. Similar dynamics pose trouble for restaurants and other industries.

Unfortunately, the company’s underwriting department proved resistant to clear evidence of such trends. With the department’s performance evaluation based on how many policies they approved, the Chief Underwriting Officer (CUO) did not want to adjust the company’s underwriting strategy according to wh0at he termed “theoretical problems.”

Research shows that professionals at all levels suffer from the tendency to deny uncomfortable facts. Scholars term this thinking error the ostrich effect after the (mythical) notion that ostriches stick their heads into the sand when encountering threats.

The ostrich effect is one of over 100 dangerous judgment errors that result from how our brains are wired, what scholars in cognitive neuroscience and behavioral economics call cognitive biases. These mental blindspots impact all areas of our life, from relationships and health to politics and even shopping. Fortunately, recent research has shown effective strategies to defeat these dangerous judgment errors.  

To Deal With Risk Denial, Use EGRIP (Emotions, Goals, Rapport, Information, Positive Reinforcement)

Our intuitive action to overcome risk denial involves confronting people with the facts and arguing with them, but research suggests that’s usually exactly the wrong thing to do. Instead, when we talk to someone who believes something we are confident is false, we need to suspect some emotional block is at play. 

Rather than leading with facts or arguing, you can use a much more effective, research-based, and easy-to-remember strategy called EGRIP. This acronym stands for Emotions, Goals, Rapport, Information, and Positive Reinforcement.

Step 1: Model Their Emotions

Your goal should be to show emotionally intelligent leadership and figure out the emotional blocks inhibiting others from seeing risks clearly. Then, focus on deploying the skill of empathetic listening to determine what emotional blocks might cause them to deny reality.

A key clue for helping me understand the emotional factors for the CUO stemmed from the CUO’s skepticism toward altering underwriting policy based on climate change risks. He’s not alone among insurance leaders. Less than half of all insurance firms in a 2018 National Association of Insurance Commissioners (NAIC) survey reported having a climate change risk plan. 

For this company, it was only in late 2019 that its claims department, especially its Chief Claims Officer (CCO), successfully led the charge to overcome the CUO’s reluctance to integrate climate change risks into underwriting policy and develop a climate change risk plan. 

Such tensions between claims and underwriting occur frequently. The performance evaluation of the claims department stems from its ability to minimize claims payouts; the less risk, the fewer payouts. Thus, claims departments show strong and sometimes excessive risk aversion.

In discussions around the COVID strategic pivot audit, the CUO kept stressing how bad it would be for a business to adjust underwriting policy based on risks he felt overblown. He even brought up the recent changes in the company’s climate change risk underwriting policy, about which he still felt bitter. By contrast, the CCO firmly pushed for more heavily weighing the risks of industries negatively impacted in the long term by the pandemic. So, we can safely assume that worries about the performance of his department played a decisive role in the CUO’s risk denial.

Step 2: Figure Out Their Goals 

Next, you’ll want to figure out the goals motivating their emotions. As part of doing so, try to understand your broader shared goals that the false beliefs might block.

While talking to the CUO about his goals and aspirations, he expressed a strong desire to grow the company as a whole and his department in particular. He resented what he felt like the unnecessary increases in threat assessment for climate change and saw the COVID-related industry trends in a similar light.

Step 3: Put Yourself on the Same Side By Building Rapport

Next, you’ll want to communicate that you have shared goals and are on the same side. Build rapport without necessarily agreeing with the accuracy of their assessment of the situation by mirroring, or echoing in your own words, the points made by the other person, which helps build trust. 

With the CUO, I empathized with his desire to grow the company and especially the underwriting department as a praiseworthy aspiration. I echoed, without saying he was correct, his frustration with the claims department, which led the charge on reducing underwriting risks for climate change and COVID-related trends alike.

Step 4: Lead Them Away From False Beliefs Through Sharing Information

After placing yourself on the same side, move to the problem at hand — their emotional block. Without arousing a defensive response, show them how their risk denialism will lead to them undermining their own long-term goals.

I pointed to the positive flip side of addressing the threat of long-term industry adjustments after COVID. Indeed, permanent remote work for many employees threatened commercial real estate and products and services for the office. Yet, it promised a brighter future for private real estate construction and products and services targeted at work and entertainment at home. The pandemic spurred trends that had as many long-term winners as losers.

The CUO told me he didn’t think of it from this perspective before. He focused on the loss to underwriting from incorporating pandemic-related future developments, not the gains. In doing so, he fell for a cognitive bias called loss aversion, our brain’s tendency to weigh losses much more heavily than gains. Loss aversion poses a particular challenge for risk-oriented industries such as insurance.

I also reminded him that celebrating the winners also meant acknowledging the losers as part of a broader shift in underwriting. Doing so would strengthen his department in the future by building up its competency to adjust its underwriting flexibly as various forces created new winners and losers. After much discussion, he agreed this was the way to go and even felt excited about applying the same approach to looking for climate change risk winners.

Step 5: Help Them Associate Good Feelings With Changing Their Minds Via Positive Reinforcement

Conclude your conversations with positive reinforcement for those accepting the facts about risks, an effective research-based tactic. The more positive emotions the person associates with the ability to accept hard truths as an invaluable skill, the less likely anyone will need to have the same conversation with them in the future.

In the case of the CUO, I applauded him for changing his mind. But then, I told him how research shows that strong leaders welcome learning negative information and updating their beliefs toward reality to fix the problem effectively; in turn, failing to identify negative facts is a sign of a weak leader.

Conclusion

When dealing with smart people who deny risks, focus on their emotions above all. Use the 5-step research-based strategy called EGRIP to:

1. Discover their emotions.
2. Then their goals.
3. Build up a rapport.
4. Provide information to change their mind.
5. Finally, offer positive reinforcement for them updating their beliefs to match reality.