Facing reality is more important than being nice.
Aversion to confrontation is embedded in many national and corporate cultures. Unfortunately, that niceness feature can turn into a nasty bug when it enables bad strategy and bad management.
Coca-Cola recently decided to issue stock that will dilute ownership of existing stockholders in order to pay huge compensation to top management. How huge? $24 billion. Twenty-six states in the USA spend less than that each year. That seems excessive, to put it mildly, even if you assume Coca-Cola’s top executives are the most talented people in the world.
Warren Buffett, Coca-Cola’s largest stockholder, abstained when the Board voted even though he thought it excessive too. He didn’t want to create a rift with management. That’s the downside of nice. Too much harmony, too little confrontation, too bad for shareholders. Shareholders at other companies, too. “Well, Coca-Cola did it for their executives…”
Then there’s confronting reality. The culture of the large automobile companies in Detroit has long been notorious as good old boys who don’t rock the boat. Look at what happened to GM when it chose to keep product defects tightly under wrap rather than face the issue head-on. This year it will probably recall more cars in the USA than it will sell.
If you don’t create a safe forum to say, aloud and in time, that the king has no clothes, the rest of the world will do it for you, and not so nicely. It is not a mere business school cliché, as so many companies discover too late.
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