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3 Common Reasons Businesses Fail--and How to Avoid Them

There's nothing better, or worse, than hindsight: the 20/20 vision that shows you where you went wrong. After every disaster - Lehman Brothers, Deepwater Horizon, WaMu, Fukishima and 50 - 80 percent of M&A deals - participants look back and see all the warning signs they missed at the time. What made them so blind?

Multiple psychological, neurological and social causes explain willful blindness. But some of the biggest causes of disaster are among the simplest to avoid. Here are three:

1. Too little sleep

Most of our companies work people in ways that are completely inappropriate to the way our brains work. Just because we can keep turning up to work, we assume that we're still competent. The brain science says otherwise. When tired, most of our energy goes to keeping awake; what we lose is our capacity for critical thinking. From the perspective of evolutionary biology, this makes sense: confronted by a tiger, it's more important to be alert and run like hell than to analyze the color of its stripes. But critical thinking is what we most need when doing deals and making crucial decisions.

2. Too much money
Lots of companies - not only banks - pay ridiculous salaries. The executives don't protest, of course, and BNET readers are often loathe to criticize, I'm guessing because they're hoping they might receive these whopping pay packets too. But there's a mounting body of evidence that shows that, the more money you have, the less socially engaged you are. You simply stop caring about other people. This is not a great mindset with which to do business.

3. An aversion to conflict

People often imagine that the happy family is the one that never quarrels and the happy company is the one without conflict. Wrong. Conflict is a vital way to test new ideas and forge new thinking. The challenge isn't to avoid conflict - but to learn to do it well. The National Transportation Safety Board estimated that 25 percent of all aircrashes could have been prevented if the pilot had been challenged when making an error. Silence isn't golden, it's dangerous.

More sleep, less pay and a little more debate: that can't be that hard -- can it?

Watch my interview on the BNET Live show on this topic here:


Further Reading:

The #1 Leadership Problem
The New Performance Killer
Money and Motivation
image courtesy of flickr user, codepinkhq