Have managers lost the ability to listen to bad news?

A new study by Cambridge Judge Business School suggests managers don't listen to bad news which leads to poor decisions.

Faced with all sorts of information, project managers need to merge various signals to make judgments. A new study co-authored at Cambridge Judge Business School finds that they are prone to prioritise good vibes over bad news and this can result in poor decisions.

Managers often lack time to process information, and this becomes problematic when there are mixed signals of negative news and positive feelings – as when managers are told the project is delayed but we’ve made great progress and team spirit is high.

Managers consider both objective and subjective signals before making decisions, but because they lack time to process all the information they rely more on subjective information, according to research published in the new issue of The European Business Review, entitled Have We Lost the Ability to Listen to Bad News?

Good vibes a priority

Through an in-depth study of a failed multimillion dollar product development in the semiconductor industry – involving an unnamed (prominent and usually well-managed) company – the authors found that project managers continuously prioritised good vibes (positive, but subjective signals) over bad news (negative, but objective signals), which resulted in decisions of poor quality.

It took the semiconductor project management team more than 80 weeks to realise that the project couldn’t be finished on time, as the team repeatedly persuaded itself that it could make up for current delays in the future. The project was eventually cancelled after more than 20 million euros was spent.

‘The study examines the interplay between objective information and gut feelings in project management,’ says Kishore Sengupta, Reader in Operations Management at Cambridge Judge Business School.

Sengupta adds, ‘We found that the more information managers have to process in a short time, the more they tend to rely on their gut feelings – but this can be really dangerous to proper decision making. Gut feelings shouldn’t be ignored, but they should be handled with extreme care.’

In the semiconductor project, each missed deadline created more information that needed to be processed, resulting in even more reliance on gut feelings that led to poor decisions.

The study was conducted by Kim E. van Oorschot of BI Norwegian Business School, Luk N. Van Wassenhove of INSEAD, Kishore Sengupta of Cambridge Judge Business School, and Henk Akkermans of Tilburg University.

The authors suggest several steps managers can take in order to avoid taking poor decisions through an inability to pay heed to bad news.

When team members of troubled projects report how well they are working together or that they are soon expecting to make good progress, managers should ask where do the statements come from? – in order to determine whether it’s sheer hope or an actual understanding of the situation’s dynamics.

They also suggest that managers could compile a tally of the number of events that reflect good or bad news, and good or bad vibes, and then plot these events over time.

Such graphs provide deeper insight into the status of the project, and this can lead to a better use of both facts and feelings in order to steer a project to success.

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