27 Responses

  1. Excellent post- thank you for writing it!

  2. The coverup culture also exists in the largest corporations.

    Boeing’s mishandling of the development of the 787 is going to be a classic Business School case study one day.

  3. […] This post was mentioned on Twitter by steve blank, The Network Hub, Alan Gleeson, bartezzini, Eric Mieras and others. Eric Mieras said: Never hide failure as mistakes are telling you where not to go: http://bit.ly/gE4cmO […]

  4. I have a question, Cover-Up is natural instinct!

    “entire company had a “cover-up culture” – the CEO punished failure and bad news”, but that does not mean you can encourage failure, if you then people will tend to do more failure. But still I want my guys to report me the real facts. So how do develop such culture?

    • from the small amounts of psychology i’ve read, this type of behavior is learned at an early age. mostly from the relationship a child has with their parents. so ask potential new hires how their parents reacted when they made mistakes as a child. the same roles will play out in the workplace.

    • There is actually an emerging philosophy of “Fail Faster”. Reason being that as soon as you realize that something is a failure, the faster you can move on and try to find something that works.

      If everything that didn’t work was hidden, you wouldn’t have the innovation.

      Famous results of “Failures”:
      WD-40 (the 40 indicates that it was the 40th formula)
      Post-it notes
      Edison light bulb (He “failed” several thousand times)

  5. This is especially problematic at the CEO and Board level as you indicate. However this is so prevalent that it seems to be the default mode of behavior.

    I’ve witnessed first hand how devastating bad Board dynamics can be. And nobody would ever admit to being a person who handles bad news poorly.

    So the challenge is how to identify this in Board and CEO candidates.

  6. This one really resonated. Thanks for identifying this trait, which I’ll be looking out for in future (Happily our Directors don’t do this – that, or I simply haven’t ‘failed’ badly enough yet.)

    I’d say a cover up culture is damaging for any size business, but a large corp may survive it for a length of time, while a start-up won’t. Of course when the impact is finally felt in large organizations, the fallout is spectactular, isn’t it.

    I’ve often wondered myself what causes good people in large organizations (gov’t, corps, etc.) to lose sight of their moral compass and behave unethically. Some of my family have witnessed execs giving testimony under oath, blatantly lying to protect their company.

    • A good place to start building a corporate culture around ethics —- yup address lying, creative accounting, self-aggrandizement, etc- is to read Good Business: Leadership. Flow, and the Making of Meaning by Mihaly Csikszentmihalyi.

      Time to put our virtues into action regardless of the size of your company.

  7. The causes of a cover up culture are as complex as the factors effecting denial in a dysfunctional family.

    A company leader who turns problems into opportunities makes it rewarding for employees to share challenges in a timely way. Hiring people with a track record of turning lemons into lemonade is also a way to overcome the cover up culture.

    Importantly since no one can control everything any plan will encounter problems. How everyone copes with problems has a lot to do with success. As my husband recommends (who spent some time serving the auto industry) it is always better to hire someone who has experienced a car falling off the line.

    Katherine Warman Kern
    @comradity

  8. I like these two from your learnings summary:
    # Startups are built around rapid iterations of hypotheses. Most of them turn out be wrong
    # Collectively analyze failures,then iterate, pivot and try again

    Small sample size – one startup – but would emphasize need to rapidly iterate and both quantitatively and qualitatively understand each success and failure. Then iterate again and discover why your analysis was wrong but take half a step forwards in the process. Few more lessons here:

    http://nextblitz.com/blog/lessons-for-entrepreneurs/

  9. we cover up what we are ashamed to admit. and we are ashamed to admit that american society is way off course. has been for years. what should we do about it? let’s do something positive about it for a change.

  10. I can really relate to what you are writing, but it needn’t always work out like that. I had a similar experience in product development and when the CEO chewed me out at the board meeting for “making him look bad”, I replied with a strategic response, laced with very blue language. The stunned look on the board members’ faces was priceless. I expected to be fired and waited. About three weeks later, the CEO was fired and I got to finish the project. No I didn’t get a promotion, nor a demotion. But the level I respect I got from the new CEO and the board after that episode made it easier to get projects done without interference and obstructions.

    Hope my experience encourages others to be aggressive with the truth and not suck up, because it’s the done thing.

    • Thank you for your post, as it has provided me encouragement that there actually are companies (and hopefully government) that place value on ethical and truthful behavior, by “walking-the-talk”. I’m a senior accounting/auditing professional who has received extensive training from both Deloitte & PWC while working as the SOX Project Team Lead from 2003-2006. Subsequently, I took a job as a federal-aid compliance auditor for a State government agency in 2009. In 2010, prior to completing my 12 month probationary period, I was, in my opinion, wrongfully terminated. In fact, my supervisor admitted the reasons for my termination was a result of my having a “BIG PICTURE” approach (i.e., risk based approach) in performing my duties, attempting to develop time-consuming “AUTOMATED Processes/Forms” AND focusing on “FIXING PROBLEMS TOO QUICKLY” …..I’m still confused by the “WHY” and “HOW” this could happen in an environment where not only the State, but the whole US/World is in dire need of accountability and transparency. In my professional opinion, the “Cover UP” culture, in both the corporate world and government, is why the global economy is on the brink of total collapse.

      Question: How can I identify potential employers that are “GOOD Corporate Citizens” and that reward their employees who refuse to compromise principals & values in performing their jobs?

  11. This is quite typical.
    All the governments would just lie to their people.

  12. […] The Cover-Up Culture In a startup “Good news needs to travel fast, but bad news needs to travel faster.” There’s something about […] […]

  13. Really great post. It may be a little off-topic, but I hope you can include a reference (or two) in your talk next month at the Commonwealth Club. It’s such a critical piece to the culture of any startup (or entrepreneurial effort). See you there/then.

    :dm

  14. My previous startup I was CEO and I did everything in my power to be transparent. It backfired on me. I had investors that clearly did not get it. The Chairman of the Board (not me – an investor) took me once out to lunch and berated me even further when I explained to him I needed help deal with a specific issue that I was not capable of handling on my own. His attitude gave me a very clear hint of what turned out later to be reality. He wanted to manage the company from the board and replace me and my co-founder. This before we were even generating much revenue and still only 8 months into it… the rest is history. Thanks so much for educating everybody (not just entrepreneurs. I forward your posts to just about anyone these days :)

  15. […] un muy interesantes post de Steve Blank, en su blog que lleva el mismo título que este "The cover-up culture". Blank fue un activo empresario, ahora retirado y ejerciendo como profesor de la Escuela de […]

  16. A cover up culture is not only death to a startup, it is detrimental to any company. When I did turnarounds, one of the first things I would tell people is “you can surprise me with good news, but don’t ever withhold bad news.” And unfortunately, yes I did have to fire people who didn’t get the message to get it to stick with everyone else. Courage is a commodity in short supply in many companies and it starts with the CEO making it a safe place to dissent.

  17. Excellent article, thank you for writing it!
    I was wondering, do you think good and bad news should be shared with employees as well? Should a startup be completely transparent to all its stakeholders?
    Thanks again,
    Michalis

    • Yes! That’s like asking ‘when is cheating okay?” If you create a culture of trust — your employees will be there for you when you need them most — when times are tough! I might suggest reading:
      Employees First, Customers Second: Turning Conventional Management Upside Down by Vineet Nayar

  18. […] they trust you to pay for it when it gets there.)” Steve Blank, serial entrepreneur, says don’t cover up problems: “All news, but especially bad news, needs to be shared, dissected, understood and […]

  19. Thank you for another great article. I’m curious. Is it best to fire an employee right away for covering up, or to give them a warning first? Or does it depend on what line of the spectrum the cover up is on? How does one create a company that has just enough transparency to influence employees to be open and honest and not have managers jump down their throats?

    • Is there a culture of cover up at your company? Be honest? Is your leadership sending the message that cover up is okay. If so, why would you single out any one individual? I’m a firm believer in open book management — but even more so — the idea of managing with no manager. See Ricardo Semlar’s work. Or, Tony Hseih’s work at Zappos. When people know management has their back — they will respond!

  20. […] and this is the sort of behaviour that carries forward into the workplace. In many workplaces, those who are wrong are often punished or side-lined, whereas those who cast their weight in with the obvious consensus answer are the ones that […]

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