At some point in almost every fast-growing company’s life there is a moment when a manager realizes business as usual is not going to cut it. As a leader you have to face facts: Change or fail.

I was reminded of this recently from stories about the ride-sharing service Uber. Among other criticisms, a former employee alleged in a blog post that she experienced sexual harassment from a superior and reported it. She says she was told it was the first that human resources had heard of the issue and that the offending manager was a good performer and would only be warned. She chose to transfer to another work group. After the transfer, though, she met other women who’d had the same experience with the same manager and other managers, and who said they’d reported it.

As word of this employee’s experience spread, other employees and former employees started reporting additional claims about a toxic workplace culture. Uber launched an investigation. I know nothing beyond what I read in the papers about the details of this situation. But from a distance I recognize a familiar scenario, one I’ve seen repeated in company after company in Silicon Valley, where I’ve worked for over 40 years. Energized with a mission and intensely focused on meeting milestones, executives adopt the posture of the three wise monkeys on the archway at the Tōshō-gū shrine in Nikkō, Japan who suggest, “See no evil, hear no evil, speak no evil.”

In my book Applied Wisdom: Bad News Is Good News If You Do Something About It, I talk about the management principles that helped me build the semiconductor equipment company Applied Materials from a small, near-bankrupt player in a crowded field into a multi-billion dollar global corporation with 15,000 employees. I served as CEO for almost 30 years, and we built a corporate culture we were proud of and that delivered bottom-line results.

It’s easy to get caught up in the mythology of changing the world or reinventing a category of technology or business. But the secret of managing success is paying attention to a handful of basic principles that apply in any kind of organization, whether a start-up or an established business, whether of mundane consumer commodities or sophisticated web-based services. In fact, I learned many of these lessons as a kid growing up in Indiana and working in my family’s vegetable canning business.

In a canning plant, you sometimes hear a problem before you see or experience it some other way. You’re suddenly aware of a funny sound in a canning machine, or maybe a clicking along a conveyor belt. But you’re on deadline; the line is working full-speed. What do you do? You stop and fix a small problem before it becomes a big problem. My dad managed the plant that way every day, even when it was tempting to cross his fingers and hope that the problem would fix itself or go away.

At Applied Materials we refined the basics of this idea into a kind of management mantra: “Good news is no news; no news is bad news; bad news is good news—if you do something about it.” Let me deconstruct that in the context of a CEO and a public company’s board.

At many board meetings the bulk of time is spent in CEO-orchestrated cheerleading. The CEO marches out all the accomplishments, the regional sales upticks, the promising advances in the lab, the great new executive team hire, the news that the company’s won some community award. Since the board sets the CEO’s pay, it’s not surprising she or he wants to make sure accomplishments are noted—but, generally speaking, what a waste of a board’s time! Beyond agreeing it’s all great, what is there to do or say about what’s going well? The board’s collective time and experience are wasted.

No news, on the other hand, is ominous. A board exists to help and coach and support a CEO in the difficult decisions of growth and management. If you are not hearing anything from the CEO about difficult challenges, something is wrong. There are always challenges, always competitive threats developing, always less than happy customers, always personnel issues to be resolved. The silence is as loud as the unfamiliar knocking in a canning line motor. If a manager is repeatedly acting inappropriately, you have a problem. Seek counsel. Act. You need to investigate when the problem is still small and keep it from growing.

Bad news can be your best friend. Bad news is what should take up the bulk of a board’s time even when the bottom line is looking strong and the company appears to be thriving. Teaching your organization to take reports or even rumors of trouble seriously the first time, and then investigating and fixing the underlying problem, is how you ultimately build a successful organization that avoids the kind of eruptions and revelations of toxic culture that can chase customers and partners away. Build a culture where reporting a problem is rewarded, not punished.

There’s not a company in Silicon Valley, or anywhere else, whose success represents just a steady path forward and upward. Everyone hits challenges that demand change. The secret is to take your hands away from your ears, eyes, and mouth. Be alert to the bad news, report it, investigate it, and fix the problem.

Please Comment Below

Have you found occasions where your organization wouldn’t confront bad news, failing to recognize that bad news can be their best friend?

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