When No News is Bad News: The Hastie Group collapse and the Yes Crowd Syndrome

January 29, 2013   |   General

On 28 May 2012, the Hastie Group was placed into administration.  Before its demise, the Hastie Group was a large group of companies with national and international operations involved in significant projects, including the new Royal Adelaide Hospital.  The Hastie Group collapse has had far-reaching consequences for its customers, suppliers, workers and shareholders which will continue to have an impact for some years to come. 

What went wrong?

On 21 January 2013, PPB Advisory, the administrators of the Hastie Group, released a 98 page report which included some initial findings as to the factors that lead to the collapse of the Hastie Group. 

It would be difficult, and indeed improper, for me to stand on the sidelines and attempt to analyse the reasons behind the downfall of the Hastie Group at this relatively early stage.  However, there is one interesting theme in the PPB Advisory Report which I think provides a timely lesson that is applicable to all businesses, no matter what size. 

In listing some of their initial findings into the reasons behind the Hastie Group’s failure, PPB observes that “the Board…appeared not to have ‘an enquiring mind’ as to reliability of financial statements and overall reporting.”   The report goes on further to observe that there was evidence of “internal cultural issues concerning inflated reported results and optimistic forecasting”  and a “general culture of ignoring bad news”.   

The Yes Crowd Syndrome

Internal culture is an important aspect of any organisation.  Enthusiasm, optimism, focus on positive outcomes and a ‘can-do’ attitude are often valuable attributes in an employee.  Having a ‘yes crowd' in a business is vital to maintaining a healthy culture, embracing change, maintaining workplace morale, and fostering creativity.

But, as is emerging in the case of the Hastie Group, when optimism is left unchecked by reality, this can have disastrous consequences for business.  A business that is populated by a ‘yes crowd' that only gives or receives good news, ignores or hides bad news and fails to ask questions, is at serious risk of contracting a condition that I will refer to as the "Yes Crowd Syndrome".  In my view, and as touched upon in the PPB Advisory Report, the number one cure for the Syndrome is an organisation that is balanced by leaders that have developed an ‘enquiring mind’.

The enquiring mind

Often a leader will view their role as being purely about delegating, training, coaching, instructing, managing and motivating those that they supervise.  Certainly, this is an important part of leadership.  But there is another crucial duty that every leader must fulfil, and that is the duty to ask questions. 

The concept of the ‘enquiring mind’ was discussed in the Federal Court case of ASIC v Healey  which involved the prosecution of company directors that had approved inaccurate financial statements.  In that case the Court said:

"What each director is expected to do is to take a diligent and intelligent interest in the information available to him or her, to understand that information, and apply an enquiring mind to the responsibilities placed upon him or her."

Questions come in all shapes and sizes.  They might be basic, obvious, difficult, uncomfortable, or complex.  As a leader, you have an ongoing responsibility to apply an ‘enquiring mind’ to the information and data that you receive from within and outside the organisation.  Think of yourself as a ‘student’ of the business.  As a student, you will need to constantly build upon your education as to how the business works, what cultural dynamics are at play, what outside influences might have an impact on operations, whether the information that is being fed to you is accurate.  If something doesn’t quite make sense to you, keep asking questions until it does. 

There is, of course, a tactful way to do this.  There is a balance between enquiry and interrogation.  The Yes Crowd Syndrome thrives on fear and insecurity.  It is important to create and foster an internal culture that is transparent and supportive but not accusatory.  The 'yes crowd' needs to be reassured that honesty is valued, even if it unearths bad news.  The sooner bad news is unearthed, the sooner you can work together to develop strategies to deal with it.  Unfortunately, bad news doesn’t disappear just because it is ignored.

Saying no to the Yes Crowd Syndrome

If you think that your organisation is at risk of developing the Yes Crowd Syndrome here are a few helpful tips:

  • Think about how information/ data about the business is presented to you.  Are you receiving meaningful data regularly and do you understand that data?  If not, is there a more effective way of reporting?  Is there other important data that you should be receiving on a regular basis?
  • Be prepared to ask what might seem like ‘silly’ questions of those that report to you.  If your delegates struggle to explain why certain things are the way they are, this could be an indication that you are not being told the whole story.
  • Encourage healthy conflict.  There will be times when people within your organisation disagree with something you have done or said or certain procedures and policies.  Sometimes this can lead to vast improvements in an organisation if dealt with constructively.  Take a slice of humble pie and try to embrace an environment where people feel comfortable to disagree constructively without feeling threatened.
  • Think about how you react to bad news.  Is your first instinct to accuse or look for a target to blame?  This attitude is a sure way of ensuring that bad news will be concealed by the 'yes crowd'.  Try to develop an enquiring manner when receiving bad news – collecting all the facts and developing an understanding of the whole situation rather than reacting emotively.
  • Think about your support network and whether you feel fully equipped to deal with bad news.  Remember, bad news doesn’t just go away if ignored.  If you don’t feel that you have the necessary resources around you to deal with the issue on your own, act promptly to get the help you need – whether from within the organisation or through the help of external professional advice.

For further information, please contact the author.

This article is posted in Adelaide, South Australia by Tri-meridian Corporate & Commercial Law and is intended to be used as a guide only. It is not, and is not intended to be, advice on any specific matter. We do not accept responsibility for any acts or omissions resulting from reliance upon the content of this article. Before acting on the basis of any material in this article, we recommend that you consult your professional adviser.