Michael Hansen | Crain's Boston

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Michael Hansen

Background:  

Cengage is an education company focused on digital tools to improve learning in the K–12, professional and library markets. The company is based in Boston and has an office in San Francisco, with company sales in more than 125 countries around the world.

The Mistake:

Several decades ago, in the late '80s and early '90s, I was a freshly minted consultant working for a well-known consulting company, and our client was a well-known landline telecommunications company. The company was large and basically engaged us to look at how they could defend their landline business. We very quickly found out that one of the fundamental threats to the landline business was the advent of cell phones, which were at the time still very clunky and not really on the radar screen of any one of the traditional telecom companies.

We talked to our main client, who was the head of that division, and he basically said, “Look I get it, but that's not our focus, and it would completely unsettle the company if we think about a radically different approach to our business.”

It would be very hard to quantify this because it was such a large company, but they may have lost tens of millions of dollars by not making an early investment in cell phones and allowing other competitors to come in.

The mistake that I made at the time was to not really push for what I would now call, with the benefit of hindsight, radical transparency. There are too many cases—and I've seen it in my career too many times—where management thinks, “No, we can't really tell this to our organization, because they might get panicked and go to another company.”

But I think the reality is that, by withholding information, you're actually doing the opposite. You're making people nervous. People will typically find out, maybe at the water cooler, or today they'll find out through social media. I give a lot of credit to the employee, to their ability to find out what's really going on in the market.

They weren't ready to hear it, and the excuse at the time was that the organization couldn't stomach it. I think that was a mistake. I've seen it in my career, when I was hired at Cengage to take them through bankruptcy. I told people right off the bat what the facts were: "Here's what's going on, here's why we're going into bankruptcy and here's why I think we have a chance to come out but there's no guarantee." And I think that has paid off for us, this concept of radical transparency.

Ask yourself which type of information you truly cannot share.

The Lesson:

There's no substitute for judgment. You need to apply judgment, but I would say that a lesson learned for me is to ask yourself which type of information you truly cannot share.

As the CEO now, with 5,000 employees, I ask myself, “What is it that my frontline employees cannot know that I know?" And if I answer that question very consciously, there are very few things that I cannot give away. Obviously, insider information, privileged information, all of that. But they're really not that interested in that. What they're really interested in is an assessment about where we stand. And so I'm using this in every bit of communication and I think that builds a bit of a brand.

If you ask people in the organization, they say, “Mike might not always tell us comfortable things, but he tells us the facts.” It's not flowery language, it's not obfuscated, and I think that is a very good recipe to lead a company through transition.

Don't shy away from sharing the facts with people in an organization. People can handle the truth.

Follow Cengage on Twitter at @CengageLearning.

Photo courtesy of Cengage.