The role of CEO requires a mix of vision, leadership, enthusiasm, inspiration and passion. A big part of the job is to serve as the corporate cheerleader. However, when things are not quite right, members of the team become acutely aware of the vibe coming from the CEO. Like dogs that can detect fear, team members have a sixth sense about what is really going on in a company. They pick up on queues like closed doors, unidentified visitors (“suits”), hushed conversations, unusual absences, etc. On the positive side, team members pick up on confidence, joy, openness, and any number of other traits that convey a calming sense to the organization.
CEOs and executives are often surprised by the efficiency of the corporate grapevine and rumor-mill. We often fool ourselves into believing that nobody will notice when something is not quite right. Certainly in the tech world that I am familiar with, and I am sure it is true in every other environment, employees are quite smart and astute, and nothing gets by them.
As the head cheerleader, CEOs often feel obligated to be upbeat - to put a positive spin on whatever is happening. Team members have a natural disproportionate bias to over react to bad news, so if a CEO delivers a negative message, the way it lands will get amplified by this bias, much more than the impact of a positive message. In the HR world, the corollary is that a manager needs to provide at least four positive messages to offset the impact of one negative message. Similarly, CEOs often go overboard in the positive direction to counterbalance the negativity bias.
The problem is that team members are smart and they see through the BS. You cannot fool them. Over optimism is immediately understood to mean something is wrong. You really cannot spin missed bookings, or churned customers, or staff reductions, or strategic pivots, and expect the team will buy it. The result is a loss of credibility for the CEO. As goes credibility, so goes trust, and trust is very hard to regain. Once the team flips the bit from trust to doubt, it is hard to flip it back.
This balancing act creates the ‘Optimism Dilemma.’ In challenging times, how does a CEO balance optimism and cheerleading with reality? How do you keep the team engaged and moving forward when things seem to be going backwards? It comes down to the CEO’s track record for truth and candor.
Trust is like a bank account. You cannot spend what you do not have, and if you have not built up a balance of trust in your account, there is no quick fix. From day one, a CEO has to be honest and truthful with the team, and present a believable reality. Everyone expects the CEO to be optimistic and see the future vision with a positive outlook. They need to see that the CEO believes in the business, but they also understand that not everything goes as planned, so candor is vital. It is the role of the CEO to put the bad news in a believable context. Explain what it means, what the company is doing about it, and how it effects the future. You can be a cheerleader while still delivering an honest appraisal of results. When things are not ideal, the team needs to hear the CEO say “we screwed this up, but we got that right, and things will be OK.” The cheerleader role is important, but it has to be authentic.
The same Optimism Dilemma exists between the CEO and the board of directors. In a healthy board environment, we are all in this together. The board wants to see the CEO and the company succeed, and they are there to help. A good board can handle bad news, but they want to know that the CEO is on top of things. They can handle the miss if it comes with a believable plan to make things better. However, boards are very discerning and have a fantastic BS meter, so over optimism with the board undermines trust in the CEO. On the other hand, if the CEO projects doom and gloom or uncertainty, just like the employees, the board will run with the negativity. The best course for the CEO is to maintain a healthy dialog with the board so there are no surprises and there is a constant flow of grounded facts and information flowing between the CEO and the board. Transparency and confidence win the day.
The bottom line is that establishing a track record of honesty and candor, balanced with CEO optimism will keep a CEO out of the ‘optimism dilemma’ with all of their constituents.