Paper

Groupthink in Corporate America

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Institution

Groupthink in Corporate America

One of the major problems in corporate decision making is the ability to coalesce the dissenting opinions of the members of the boards. In some cases, the pressure from the dissenting forces results in the delay of crucial decision-making endeavors. As a result, some organizations have opted to create a culture of ideological harmony. Roland Bénabou (2012) believes that due to the innate desire for most organizations to conform to all members of the board and to bring harmony within the organization, the culture of groupthink is created. Groupthink is a psychological phenomenon, common in the corporate world, which occurs when the organization’s desire for conformity, consensus, and harmony overrides the need to present the critiques and alternative positions in the decisions making process (Bénabou, 2012). As a result, board members of an organization make decisions bereft of critical evaluation of possible alternatives. As a result of the groupthink culture, such organizations suppress the dissenting opinion from within as well as shielding themselves from the outside influence. According to Cass Sunstein and Reid Hastie (2015), groupthink suppresses creativity in an organization thus having a negative impact on the profitability of the company. The culture of groupthink has been evident in various organizations within the United States. It is, therefore, imperative that a critical examination of this phenomenon be undertaken, using the American case studies, to enlighten the Americans on the repercussion and the possible prevention and solution of the problem of groupthink. Considering the American cases of the impact of groupthink on a corporate environment, it is imperative that every American, especially those with interest in entrepreneurship, appreciate the effect of this phenomenon thus find a way of getting out of its yoke.

The phenomenon of groupthink traces its history back in 1952 when William H. Whyte Jr. first used the word in a similar context. Whyte derived the term from George Orwell's novel, Nineteen Eighty-Four. Orwell, however, did not use the idea of groupthink to represent an actual occurrence but representation of a factious totalitarian government. In his essay in Fortune Magazine, Whyte argued that the instinctive conformity of mankind is the major cause of the failure of corporate organizations (Whyte, 1952). This idea remained silent for almost two decades when Irving Janis finally revived it in 1972. Janis believed that organizations desperately seek for consensus even if it detrimental (Janis, 2015). He used the cases of “Bay of Pigs” disaster and the Pearl Harbor bombing by the Japanese to illustrate the disaster of groupthink. All the two military attacks ended up in failure because the policymakers were driven by the need for consensus; not critical evaluation of the events and incorporation of divergent opinion to come up with a more rigorously thought out decisions (Leung, 2014). Janis was a psychologist hence his focus was on the impact of groupthink on government policymaking. His ideas have been adopted in the corporate world and are parts of the literature on corporate communication. Several American corporate organizations have fallen into the wrath of corporate groupthink hence the idea should be considered with the importance it carries.

In corporate America, groupthink is caused by three major antecedent conditions. These are the conditions “that produce, elicit, or facilitate the occurrence of the syndrome” (Hassan, 2013). According to Janis (2015), these conditions include high affinity to group cohesiveness, the existence of structural faults, and the existence of a negative situational context. Out of the three conditions, the most prominent causal factor is the group cohesiveness. According to Chen, Tsai, and Shu (2009), the cohesiveness in an organization makes the members create a friendly relationship among them by avoiding counterarguments and criticism of a decision unanimously made by the members. In other words, organizations with the culture of groupthink appreciate the status quo and vilify any attempt to for diverse thinking. As a result, groupthink replaces creativity and critical thinking within an organization (Hassan, 2013). The general position of groupthink is that it has a negative impact on the productivity of an organization. It eliminates critical thinking and deters creativity thus hampering the possible competitive advantages that the organization can gain from coming up with new ideas. However, Pratkanis and Turner (2013) believe that there is still hope for the organizations that have adopted the groupthink culture. They provided three interventional approaches that can be used effectively to bring an organization out of the wrath of groupthink.

There are salient symptoms of groupthink in an organization. The first type of groupthink symptom is the “overestimation of the group which includes the illusion of invulnerability and the belief in the group‘s inherent morality” (Rose, 2011). For example, in the United States before the economic crisis of 2008, the entire banking industry was plunged into the abyss of groupthink (Barberis, 2013). Due to the real estate boom and the exponential growth in the industry, the decision makers thought that they had it all right. Barberis (2013) believes that the entire industry was deluded that they were invulnerable hence they did not see the crisis coming. With the rising in the house prices, decision-makers in the banking industry believed that the mortgage sector will continue booming even if there were pieces of evidence that this was not true. Groupthink also creates the tendency of closed-mindedness where the decision makers develop the sense of collective rationalization and develop negative stereotypes towards the members of the out-group who try to contradict their ideology (Rose, 2011). Due to groupthink, the organization is pressured towards uniformity in thoughts and actions.

In the United States, the problem of groupthink has affected both the government and the corporate world. Between the years 2000 and 2003 alone, more than 149,000 companies in America filed for bankruptcy protection (Rabe, 2009). It is not clear which of these companies went down due to collective rationalization, biased information-gathering, or the close-mindedness of groupthinkers. One thing which is known for sure is that major companies such as Enron collapsed in 2001. For years, the company reported a fraudulent financial report. The board was aware of these fraudulent acts but made no attempt to correct them. To them, this was a way of selling Enron’s reputation to the public. As a result of the impressive financial report, the Enron shares increased thus increasing the shareholders’ dividends and earnings. Anybody within the management who tried to criticize this fraudulent approach was shut down. Those who tried to defy the groupthink such as Sherron Watkins were vilified by the board members and shut down (Cavaiola, 2015). Eventually, Watkins blew the whistle and the public was made aware of the financial difficulties the company was facing. Through groupthink, Enron hoarded the problem for so long that when the problem was revealed to the public, it was too late. The company eventually collapsed.

Another major case of groupthink backfire is the case of the American auto industry. This does not focus on one organization or company but on the entire industry. For a long time, the industry has prided itself with enormous profits, productivity, and growth. As a result, the company cultivated a culture that they are the best automakers in the entire world. They even believed that they knew the kind of vehicles the Americans want and anyone who thought otherwise was disregarded (DeMers, 2018). With the rising financial and environmental concerns, the appeal foe small energy-saving car increased. However, the American auto industry insisted on manufacturing the huge fuel guzzler SUVs that were no longer appealing. Foreign companies such as Honda, Toyota, Nissan, and Hyundai responded to the new appeal and started manufacturing energy-efficient cars. As a result, the American population started importing cars. American Auto industry faced the biggest financial challenge when President Obama signed the Cash for Clunkers extension into law in 2009. This legislation provided the Americans with the freedom to import energy efficient car from foreign manufacturers (Li, Linn, & Spiller, 2013). The American auto industry started to experience stiff competition from foreign manufacturers. The competition resulted in a negative impact on the productivity and profitability of the industry.

Americans have experienced the repercussions of groupthink. There are several companies that have collapsed due to this culture of organizational conformity. Enron and the American auto industry are just a few examples. Other companies such as Everest Events and Swissair have also faced a major corporate problem because of this culture. Currently, there are various organizations in America which are trapped in the yoke of groupthink. Dominic J. Packer (2009) argues that the only way for corporate America to get out of groupthink is when strongly identified members of an organization offer dissenting opinion and criticism to popular opinions. If organizations can always give room for dissenting opinions, instances such as the Space Shuttle Columbia disaster could be avoided. As much as groupthink provides a sense of togetherness and conformity in an organization, it can culminate to can result in a financial, legal, or physical disaster that the company can get out of. Groupthink kills creativity and creates a competitive disadvantage to a corporate organization. The American corporate environment should, therefore, give room for dissenting opinions and criticism to encourage critical thinking and innovation within organizations.

References

Barberis, N. (2013). Psychology and the Financial Crisis of 2007-2008. Financial innovation: too much or too little, 15-28.

Bénabou, R. (2012). Groupthink: Collective delusions in organizations and markets. Review of Economic Studies, 80(2), 429-462.