Features
22 Jun 2016 02:55pm

How big a problem is groupthink in SMEs?

No firm is too small to hatch misguided, herd-like attitudes – but owners can fend these off by nurturing constructive criticism

In big business and national politics, groupthink has emerged as one of the most damaging spectres of our time. Unquestioning corporate cultures have been blamed for scandals ranging from Volkswagen’s emissions-test rigging to the sexism controversies that have surrounded Uber and American Apparel. Last year, commentators accused hive minds on social networks of scuppering open debate in the run-up to the UK’s general election. But does groupthink always require such a large canvas to flourish?

No. While experts differ on how groupthink becomes a problem in SMEs, they broadly agree not only that it can happen, but that it does happen. Defined by Investopedia as a common desire “to not upset the balance of a group of people”, leading those people to stifle conflict, creativity and individuality, groupthink is a risk to which no firm is immune.


Status woe

In the judgment of Ian Cass, managing director of the Forum of Private Business, smaller firms are less susceptible to groupthink than corporates because they have fewer decision-makers, and many of them are defined by single personalities. “However,” he says, “potential rises as companies grow beyond 20 individuals. At that point there is a need for a professional infrastructure, and even among owners there are concerns that their dominant personalities can cause groupthink.”

Consultant Jeremy Old, author of Reinventing Management Thinking, agrees that SMEs are less vulnerable to groupthink than corporates – but argues that this is largely because they are more nimble. “To survive, small firms have to adapt faster than plcs and the public sector,” he says. “Those that suffer from groupthink could die quickly if the trading environment changes and they fail to change with it.”

Like Cass, Old thinks the risk of groupthink increases as the firm becomes more established. The trigger? “An autocratic or otherwise powerful owner-founder who has built the business up, so has a proven track record of success. It’s difficult for new people and subordinate managers to mount a challenge in those situations. As such, good people tend to leave and the more dysfunctional – or at any rate, less independent – types stay on. So the boss collects a group whose main survival tactic is to support the status quo.”

Small business consultant Shai Patel – Sutton Coldfield rep for SME advisory network Business Doctors – sees the problem from the opposite perspective: in some cases, the road to groupthink hell could actually be paved with good intentions. “Perhaps a leader has recently done some development training, has seen the error of some previously autocratic ways and is now consciously trying to involve everyone in every decision,” he says.

Limiting visions

Noble ambitions can backfire in other ways, too. We have all grown accustomed to companies setting up shop under powerful ‘mission statements’ designed to steer their goals and decisions. Countless business books have extolled the virtues of these carved-in-stone maxims – but evidence shows that leaders who are trying to grow their firms in a climate of bountiful choice will have to learn how to nurture more flexible thinking.

“Having a strong core mission statement – particularly if the business is partly defined by a desire to outcompete a rival – can lead to groupthink,” says Cass. “According to a Durham University study, the most frequent, limiting constraint on a company is the vision of its owners – 72% of firms in the analysis suffered from it.”

Sadly, those problems can be exacerbated in SMEs where a significant proportion of the staff are related. “Family businesses are especially vulnerable,” says Patel, “because of the extra complexity of the relationships within them. It is a common pattern to find groupthink occurring among the younger members of cross-generational family firms. In efforts to form a united front against their parents, siblings will present a face of total agreement about every business issue in their remit. This can greatly inhibit individualism and critical thinking – characteristics that are essential if a business is to thrive.”

Noble ambitions can backfire in other ways, too. We have all grown accustomed to companies setting up shop under powerful ‘mission statements’ designed to steer their goals and decisions. Countless business books have extolled the virtues of these carved-in-stone maxims – but evidence shows that leaders who are trying to grow their firms in a climate of bountiful choice will have to learn how to nurture more flexible thinking.

“Having a strong core mission statement – particularly if the business is partly defined by a desire to outcompete a rival – can lead to groupthink,” says Cass. “According to a Durham University study, the most frequent, limiting constraint on a company is the vision of its owners – 72% of firms in the analysis suffered from it.” Sadly, those problems can be exacerbated in SMEs where a significant proportion of the staff are related.

“Family businesses are especially vulnerable,” says Patel, “because of the extra complexity of the relationships within them. It is a common pattern to find groupthink occurring among the younger members of cross-generational family firms. In efforts to form a united front against their parents, siblings will present a face of total agreement about every business issue in their remit. This can greatly inhibit individualism and critical thinking – characteristics that are essential if a business is to thrive.”

Critical culture

At its most vacuous, groupthink can manifest itself not so much as a herd-like devotion to specific viewpoints as a collective abdication of responsibility. A recent poll of 250 SME owners by business data specialists Geckoboard showed that 49% of them had failed to establish any key performance indicators for their firms. Tellingly, 39% had missed their growth targets for 2015. The figures reveal a pervasive head-in-the-sand mentality best described as ‘data denial’.

So, with all those threats and risks stacked against growth and opportunity, what can SMEs do to protect themselves from groupthink’s treacherous undertow?

Antony Chesworth, founder of e-commerce software provider EKM, whose technology supports 30,000 online shops – most of them SMEs – has a message for owners. “You have to create a culture of openness and allow everyone to speak their minds, even when it’s something you don’t want to hear,” he says. “Trying to maintain the status quo because you’re scared of upsetting people is the most dangerous thing you could possibly do."

He adds: “Encourage a culture where everything can be questioned, and there are no right or wrong answers. Ensure that managers and those responsible for teams are clear that their job is to facilitate their staff – not to control or shout down people who disagree with the status quo. It’s important that all employees refuse to accept anything in the company that is wrong, bad or just plain stupid. They need to simply not stand for it.”


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