Denial: Why Business Leaders Fail to Look Facts in the Face--and What to Do About It.

• Author: Marshall, Jeffrey
• Position: Book review

Denial: Why Business Leaders Fail to Look Facts in the Face--and What to Do About It. By Richard S. Tedlow. Portfolio, 252 Pages. $24.95.

While this book is about the corrosive effects of denial by business leaders, author Tedlow, a professor of administration at Harvard Business School, astutely reminds us that denial has been with us everywhere in recent years. It was practiced by the banking and real estate industries, homeowners, investors, politicians and bureaucrats.

All were either seduced by history--"things have never gotten that bad"--or afraid to confront the truth that disaster was brewing and solutions were nowhere to be found.

Tedlow states in no uncertain terms that, based on his studies of dozens of companies and CEOs that have suffered reversals, the disasters don't require 20-20 hindsight. Indeed, the problems could have been averted, he writes, "on the basis of information available to decision-makers right then and there, in real time. These mistakes resulted from individuals denying reality."

The book is divided into two basic parts: Accounts of companies that got it wrong, and those that succeeded in "getting it right." Not surprisingly, the list in part one is the longer of the two.

Tedlow's first example, lifted from the pages of history, is wonderfully instructive. It details how Henry Ford and his iconic car company, Ford Motor Co., began losing market share--irretrievably, as it turned out--to General Motors Corp.

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Henry Ford ran the company in a mercurial way, and the success of the Model T blinded him to changing consumer habits; when the car's sales started to slip, he blamed incompetent salespeople rather than the fact that the Model T came only in...