Groupthink! - Here's to us, who's like us?

The dangers of Groupthink - from schools to global industries

Groupthink! - and in the original Scots:

Here’s tae us,

Wha’s like us,

Damn few,

And they’re aw deid!

This is an old Scottish toast, incorrectly attributed to Robert Burns, which perfectly captures the essence of Groupthink.

Essentially, Groupthink is a situation where the group reinforces a confirmation bias - usually in the positive frame - but with frequently catastrophic consequences.

I used to observe it in relation to some schools when I was a director of education. It usually went something like this.

The headteacher/principal would lean into positivity, and tell everyone they were wonderful. This mentality would permeate the staff and prevent anyone from highlighting an area that might be less than wonderful.

This ethos created a groupthink mindset where any external ideas were resisted or rejected - “why change when we’re already great?”

This often led to real difficulties when either the headteacher left or the school was subject to an external review. Collective cognitive dissonance kicked in with people’s beliefs and attitudes being threatened by conflicting information, leading people to rationalise the conflict by rejecting the evidence upon which the alternative perception was based, i.e. you’re wrong!

This level of groupthink often extended to parents and students who had been pulled into the groupthink narrative.

All this came back to me last week when speaking to Kevin Davidson the exceptional CEO of Norman Broadbent Plc who asked if I’d written anything on groupthink. I hadn’t but HAVE NOW in the latest Leadership Case Story - the Enron example, and a variety of others show the danger of groupthink, especially when analysed using the Building Blocks of culture.

It's been fascinating observing how easy it is for human beings to fall into this mindset from schools to global industries!

Take care!

The downfall of Enron, an American energy company, from the late 1990s to 2001, is one of the most significant illustrations of this phenomenon. Central to this collapse was extreme groupthink within the board of directors, which led to poor oversight of executives like CEO Jeffrey Skilling and CFO Andrew Fastow. Fastow’s questionable LJM funds were approved with minimal scrutiny, and despite numerous warning signs, unethical practices continued unchecked.

When Enron declared bankruptcy in December 2001, it resulted in the loss of over $74 billion in shareholder value. Enron’s failure serves as a profound case study in the dangers of groupthink. Despite having one of the most praised boards among publicly held firms, Enron’s leadership structure exhibited serious flaws that contributed to its ultimate collapse.

By examining the Culture Building Blocks from the Ceannas Culture Footprint, we can better understand the dynamics at Enron, and how it happened in other contexts, and how groupthink played a significant role in its demise.

Groupthink in Leadership

Viewing through the LEADERSHIP Building Block , the Enron board displayed extreme and flawed deference to its executive management. This deference led to an absence of critical oversight, where high-ranking leaders, including the CEO, were not adequately challenged by the board— this despite clear conflicts of interest, such as CFO Andrew Fastow’s involvement in the LJM private equity funds (LJM were the first initials of this three children).

Dominant leadership figures like Ken Lay and Jeffrey Skilling were perceived almost as infallible, making it difficult for other board members to challenge their decisions or express dissent. This indicates a classic case of groupthink, where the emphasis on maintaining group cohesion overshadowed the need for constructive criticism.

The Challenger Space Shuttle disaster in 1986 is another example of groupthink in leadership. NASA’s management, eager to maintain consensus and adhere to the launch schedule, ignored engineers' concerns about the safety of the O-rings in cold weather. This led to the catastrophic failure of the shuttle, demonstrating the dangers of groupthink in leadership.

Groupthink in Teamwork

When it comes to TEAMWORK, the situation was equally dire. Despite being seen as a cohesive group, the Enron board met infrequently, and members had minimal interaction outside formal settings. Groupthink stifled dissent, leading to critical decisions being made with little to no deliberation. Board members heavily relied on recommendations from insiders, indicative of poor intra-team communication. Social pressures further compounded the problem, creating a dynamic where critical decisions were not adequately scrutinised.

This is another hallmark of groupthink, where the suppression of dissent prevents adequate deliberation.

The Watergate scandal in the early 1970s offers another example. President Nixon’s advisors operated within a tight-knit circle, where dissent was discouraged. The lack of open dialogue and critical questioning facilitated illegal activities, ultimately leading to the infamous scandal.

Groupthink in Entrepreneurship

On the ENTREPRENEURSHIP front, Enron was celebrated for its innovative approaches, but these were riddled with unchecked risks. The board's lack of diverse perspectives further fostered groupthink, preventing a healthy exchange of innovative ideas. By not encouraging diverse viewpoints, the board missed out on opportunities to challenge potentially risky ventures and failed to address the growing risks within the organisation.

The 2008 financial crisis saw investment banks engaging in high-risk mortgage-backed securities. The ingrained culture of reward without adequate risk management exemplified groupthink, where innovative financial products were prioritised over prudent financial scrutiny.

Groupthink in Management

Regarding MANAGEMENT, Enron’s board failed to implement or maintain adequate governance practices, particularly concerning conflicts of interest and adherence to the company's code of conduct. The board’s failure to scrutinise management decisions properly resulted in a lack of effective oversight and control mechanisms. Moreover, there was an evident neglect of compliance, with the board granting waivers to the company’s code of conduct without thorough deliberation. This clearly illustrates groupthink, as the board's desire for consensus led to inadequate governance and oversight.

In the 2001 collapse of Swissair, groupthink within the management team played a crucial role. The executive leadership, overly confident in their financial strategies, aggressively pursued risky expansions while silencing dissenting opinions. Governance and compliance mechanisms failed, as the board did not challenge or scrutinise management decisions adequately. This lack of oversight led to unchecked financial practices, overextension, and ultimately bankruptcy, highlighting the dangers of groupthink in management.

Groupthink in Learning

In terms of LEARNING, the board did not engage in reflective practices to learn from risks or mistakes, allowing problematic practices to continue unchecked. A lack of emphasis on organisational learning prevented the board from realising the need for more rigorous questioning and critical thinking. As a result, several warning signs apparent before the company’s collapse were ignored or failed to be acted upon. Groupthink was evident here as well, with the board avoiding critical self-reflection and failing to adapt to emerging challenges.

In 2003, the invasion of Iraq highlighted groupthink and the failure of leaders to learn from past mistakes. Driven by the belief that Iraq had weapons of mass destruction, U.S. leaders ignored intelligence reports disputing this. The Bush administration sidelined dissenting opinions to maintain consensus, leading to a poorly planned invasion. This failure to critically evaluate information resulted in prolonged conflict and instability, underscoring the harmful effects of groupthink.

Groupthink in Warmth

The WARMTH within the board was superficial. Enron’s board displayed a superficial warmth characterised by infrequent meetings and limited interactions among members outside formal settings. The board overemphasised harmony and support to the extent that they avoided conflict at all costs. This desire to maintain a façade of unity and camaraderie meant that they failed to challenge each other or scrutinise critical decisions rigorously. Groupthink again played a role here, with the board's desire for harmony leading to a lack of genuine scrutiny and care for wider stakeholder interests.

In 2011, the Fukushima Daiichi nuclear disaster in Japan highlighted groupthink fuelled by warmth within the Tokyo Electric Power Company (TEPCO). The company's culture emphasised harmony and loyalty, discouraging employees from voicing concerns that might disrupt the supportive atmosphere. Even when engineers raised alarms about the plant's vulnerability to earthquakes and tsunamis, their warnings were downplayed or ignored to maintain consensus and avoid conflict. This excessive deference to maintaining a positive, conflict-free environment contributed to inadequate risk management and preparedness, ultimately leading to one of the worst nuclear disasters in history when the plant was overwhelmed by a massive tsunami.

Groupthink in Edge

The aggressive pursuit of results was another debilitating factor. Enron’s culture was heavily focussed on achieving innovative results, sometimes at the expense of ethical considerations and sustainable practices. The intense pressure to deliver results may have contributed to ethical lapses and risky behaviour, further exacerbated by the lack of board oversight. There was a clear imbalance between the drive to innovate and the need for ethical governance, leading to the erosion of trust and the eventual collapse of the company. This aggressive pursuit of results fell under EDGE—highlighting how the organisation’s focus on EDGE led to a culture that prized results over ethical considerations.

The Volkswagen emissions scandal in 2015 involved the company cheating on emissions tests to meet aggressive sales targets and regulatory standards. The intense pressure to achieve results encouraged unethical behaviour among employees, demonstrating the consequences of an unbalanced focus on EDGE.

Preventing Groupthink

To prevent groupthink, it is essential to diversify board composition by including individuals from varied backgrounds to prevent conformity and encourage diverse viewpoints. Strengthening decision-making processes ensures thorough deliberations on significant decisions and encourages board members to voice differing opinions. Setting term limits for directors can prevent long tenures that may lead to cosy relationships with executive management. Requiring formal time commitments ensures outside directors dedicate sufficient time to understanding company operations and participate actively in board activities. Promoting organisational learning can cultivate a culture of continuous learning and reflection within the board, adapting to emerging risks and challenges.

Finally, balancing WARMTH and EDGE fosters a culture that balances empathy and accountability, ensuring that the pursuit of results does not compromise ethical standards.

Conclusion

The Enron debacle is a powerful lesson in the dangers of groupthink in corporate governance.

By applying the Culture Building Blocks from the Ceannas framework, leaders can learn from Enron’s failures and implement structures that encourage robust oversight, diverse thinking, and transparent decision-making processes.

This approach can help prevent future instances of groupthink, ensuring that companies navigate their challenges with integrity and resilience. The lessons learned from Enron, along with other historical examples of groupthink, underscore the importance of fostering a culture that values diverse opinions, critical thinking, and ethical standards