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Alan Schwartz had taken over as CEO of one of America’s iconic investment banking firm – Bear Stearns on Jan 8, 2008, after it’s stock had fallen from $172 to $71. His task was to turnaround Bear Stearns. On Monday 10th March 2008, Alen Schwartz was quoted saying “Bear Stearns balance sheet, liquidity and capital remain strong” And by Sunday 16th March 2008 the bank was gone to JPMorgan Chase. Shareholders were decimated, more than 7,000 employees lost their jobs, and Schwartz found himself facing tirades from employees who couldn’t understand why their livelihoods were destroyed.

Let me take another scenario. The world’s largest luxury passenger ship is on it’s maiden trip to New York. The ship is equipped with safety features that are an absolute top class to make it virtually unsinkable. Back home, the entire top management of this shipping company is watching with bated breath the success of this first trip. As the ship nears the maiden voyage, there comes a business update from the line manager – 706 happy passengers have reached New York safely so far. The performance report is factually accurate. However, it does not quite tell the whole story. How will you react, when you are told that this actually is the story of the “Titanic”. This luxury liner hit an iceberg. 1517 people were dead, only 706 survived and just about made it to New York, happy to be alive.

I am sure all of you have heard many more such stories. The distance between a blue chip investment bank and bankruptcy is shrinking to just a weekend. Friday’s heroes are becoming Monday’s newsmakers. The question to ask here is, why are the CEOs of such organizations not sounding warning bells? Is it they do not know or is it they are not mustering enough courage to raise red flags? Why do managers delay bad news? Why do leaders report imaginary silver linings where they can see gloomy dark clouds ahead?

The answer to my mind is

Key Leadership trait

As a CEO, how much have you have developed your BNQ? Yes, Bad News Quotient.

We don’t like hearing bad news and we also don’t feel very comfortable sharing bad news – they naturally trigger worries, stress us and make us less happy.

Humans are programmed to hear optimistic information. Good news releases the happy hormones in our body which lift our mood.

BNQ is about our ability to manage bad news as CEOs – both in encouraging bad news to flow into us and our ability to deliver bad news fearlessly.

In my next Blog, I will talk about how CEO’s can foster an organization culture for Bad News to flow in seamlessly to them.

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