It should come as no surprise by now (if ever) that leaders of organizations in the throes of inertia tend to ignore warnings:
The chief executive of the mortgage giant Freddie Mac rejected internal warnings that could have protected the company from some of the financial crises now engulfing it, according to more than two dozen current and former high-ranking executives and others.
That chief executive, Richard F. Syron, in 2004 received a memo from Freddie Mac’s chief risk officer warning him that the firm was financing questionable loans that threatened its financial health.
Today, Freddie Mac and the nation’s other major mortgage finance company, Fannie Mae, are in such perilous condition that the federal government has readied a taxpayer-financed bailout that could cost billions. Though the current housing crisis would have undoubtedly caused problems at both companies, Freddie Mac insiders say Mr. Syron heightened those perils by ignoring repeated recommendations.
As much as we talk about overcoming the dynamics of groupthink and the Abilene Paradox, it’s important to remember that hindsight is 20/20, to use a well-worn cliché. A meteoric housing market is far more compelling than someone down the hall who reports to you (although two dozen people down the hall becomes more convincing). Organizations can build in mechanisms such as a formal devil’s advocate to try to temper their momentum, but failure to heed warnings was as common to George Custer as to Ken Lay. It’s also important to remember that executives in publicly traded companies get paid for momentum; whether that’s healthy or not is another discussion, but it is very clearly a case of hoping for A while rewarding B if temperance is the goal.
So, I’m tempted to give Mr. Syron the benefit of the doubt. But what does he have to say?
“If I had better foresight, maybe I could have improved things a little bit,” he said. “But frankly, if I had perfect foresight, I would never have taken this job in the first place.”
Oh.
On the positive side, this mea culpa indicates that Syron is willing to look at his own part in his company’s crisis; less positive is the failure to acknowledge others’ foresight. This is a trait I have observed in the worst leaders I have encountered: an undue abundance of certainty. If we are interested in why these leaders repeatedly ignore warnings, the abundance of certainty is a good place to begin the investigation.
