Strategy, Groupthink and the Elephant in the Room – A Case Study

The 2003 Complete Idiot's Guide to Psychology  claims as an established "psychological fact of life" that, "when it comes to human beings, the best predictor of future behaviour is past behaviour."

Now although the above reference may hardly be the most authoritative source available, it is true that many psychologists subscribe to this line of reasoning. It is, for instance, hardly likely that a person who has been an alcoholic for 40 years is likely to wake up tomorrow without a hangover.

If one does subscribe to the above theory, it also means that human beings are very predictable. This is something that is exploited on a daily basis by criminals, using social engineering techniques. A classic example is the case of defrauding victims at ATM’s, by using card swapping or card skimming modi operandi. This is only possible because the individual has engaged in repetitive behaviour which is predictable, especially when it becomes executed on an "automated" basis, as is the mode that most of us are in when we withdraw money at an ATM.

To a certain extent we fall into a pattern which may be termed "learned helplessness, " as Jeroen De Flander terms it in his book The Art of Performance. De Flander’s main thesis in his book is that real skill and capability is learned, not an inborn trait. The old nature versus nurture debate. He goes to great lengths to illustrate his hypothesis with many real-world examples, but the bottom line is this – any (bad) trait can be unlearned, and he has a number of ideas in this regard.

To my way of thinking, if his theory is correct – and I have no reason to doubt it, myself being an example of the veracity of this theory – then, within the domains of strategy and strategic management one could also unlearn one of the great pitfalls to successful strategy implementation – groupthink.

Psychology Today defines groupthink as "...when a group of well-intentioned people make irrational or non-optimal decisions spurred by the urge to conform or the discouragement of dissent. This problematic or premature consensus may be fueled by a particular agenda or simply because group members value harmony and coherence above rational thinking."

I have very specific first-hand experience of this - this is my story.

In 2014, arriving back in South Africa after my first "tour" in the Middle East, I got a job at debt recovery company. This was my first exposure to this environment, and I must admit that I was somewhat amazed by a number of factors.

Firstly, the complexity and scale of the operation was staggering. The company was buying bad debt books from financial institutions to the tune of hundreds of millions. They had an extremely complicated intelligence capability (which I was involved in) to track (bad) debtors. Second, contrary to popular opinion in the banking industry, where if you get relegated to the debt recovery division it is generally seen as pretty much the end of the road for you, this organisation was populated by some of the brightest minds that I had yet come across – lawyers, data scientists, engineers – you name it. In fact, it was all about big data manipulation.

But here comes the elephant in the room – the organisation was founded by a person who had significant experience in this industry – one could in fact say that he had started the short term lending and debt recovery industries in the country (in many respects these two disciplines – lending money and recovering bad debt are two sides of the same coin – a fact which he had very astutely noted early in his life).

Once a week we had a management meeting in a command centre (I cannot really term it anything else), which was aptly named NASA. These sessions lasted a whole (painful) day, and in front of the room there were about 20 computer screens mounted against a wall on which the whole "value chain" of debt recovery was depicted – the numbers and monetary value of debt books received/outstanding, the number of individuals traced versus not (they had an extensive countrywide network of agents who did the physical engagement with debtors – these agents all had to be paid as well), number of cases handed over to tracers throughout the country, the number of cases at court ready for subpoenas or attachment orders to be issued, the state of finances, and many more (these courts were of course also distributed throughout the country, making the geographical and logistical challenge so much more difficult).

But here is the thing – if you do not stay abreast of changes in the environment, that is, of the context within which your organisation operates, you are doomed to failure. No matter how clever the people, how efficient the operations – as the adage goes – no tactics can rescue bad strategy.

So why did the strategy become bad? It had after all worked pretty well for this individual for at least 20 years.

Simple – by about 2014 the landscape regarding debt collection in South Africa had started to change significantly. There were a number of incidents that had precipitated this, but most importantly – the fallout was that magistrates were no longer keen on attending to cases concerning bad debt – an extension really of the government’s policy of becoming (a) more aggressive as to "policing" debt recovery organisations, and (b) trying to come across to the masses as being more sensitive to their plight as far as debt is concerned (a vote-gathering ploy of course). This manifested in the adoption, or amendment, of a number of Bills and Acts that regulated this landscape.

Now, this CEO and the company in general understood quite clearly what was happening. He had after all some of the brightest legal minds that advised him – some of whom I have huge respect for till today. The point is though – he tolerated very little, if any, contradiction as far as his strategy was concerned.

The main stumbling block became the number of cases that were piling up at the courts. There were literally tens of thousands. One has to understand the implication here – debt books are bought for millions of Rands from financial institutions of all kinds – not only banks (a further buggering factor was that the banks had by now started reading the political context, and were more and more loath to embark on aggressive debt recovery practices, choosing to focus more on debt counselling) – so if you have, for instance, 50, 000 cases mounting up at the courts before you can start recovering your investment from debtors, it becomes a harrowing cash flow scenario – the death of most organisations who go under, and in this case as well.

Back to groupthink – this individual’s answer to the problem (change in strategy context), was not to change the strategy, but to exhort everyone to work harder, to work smarter. His frustration was obvious for all to see, and the more attached he became to his strategy, the less he accepted any talk of a new strategy, or a deviation from the present course of action.

The other managers who had worked in the organisation for a long time knew him well by then, and understood that they had to toe the line as far as differing from him was concerned. For me it was quite obvious soon after arriving that the strategy was not sustainable, but I knew too little of the industry at the time to intervene with any significant degree of authority. The few times I did raise a voice of dissent I was duly slapped down - not only by him, but also by some of the others who had become equally fixated by the present course of action.

The rest as they say, is history. About 300 people lost their jobs virtually overnight. I understand he has managed to start again and by all accounts is doing well – the mark of a true entrepreneur. One does hope that he has learned his lesson as to why a CEO is supposed to surround himself with bright minds – not too agree, but to differ and challenge.

As per De Flander's approach - groupthink can be unlearned. The CEO of course has to make a conscious effort in this regard, and has to have a proper strategic navigation approach in place that will provide feedback loops for when the context changes, that are firmly tied to KPI's which are non-negotiable when triggered!

Subordinates, of course, also have to have the necessary cojones to speak up....