Truth telling

As children most of us were taught to always tell the truth. As we grew to adulthood, we learned that there were multiple versions of the truth and some kinds of truth should not be spoken such as those that might hurt other people’s feelings (like telling your sister her dress was ugly – even if it was!).

Telling the truth in business can also be hazardous to your health and we’re not talking about illegalities or allegations of impropriety. For example, investment analyst “sell” ratings remain highly problematic, even unpopular. [1] Investors and analysts benefit when stock prices rise; few benefit when prices fall.

But “truth telling” is a critical element of efficiently functioning markets, and the same is true for business organizations. Here are three examples:

• CFOs talk about “creating one version of the truth” – all units and personnel using the same information systems so that everyone is looking at the same set of numbers.

• Savvy general managers and CEOs routinely talk with outsiders and people down the organization to find out what’s really going on rather than rely on the sanitized reports that come up through their staffs.

• Investment decisions based on inaccurate or erroneous information will likely yield sub optimal returns, if not losses.

Are you telling / hearing the truth or are you just kidding yourself?

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[1] “A Tough ‘Sell’ for Jeffries Analyst,” WSJ, 11/20/09, p. C1