Two Insights to Prevent Your Company from Unknowingly Becoming Another Theranos

I’m an optimist. I believe everyone starts with a good heart and good intentions.

But in business, in order to improve their lagging results during desperate times, leaders sometimes take desperate measures that are immoral and illegal.

A great example is Elizabeth Holmes, the founder of Theranos. She was recently convicted of four federal charges of wire fraud for exaggerating to investors what her blood testing company’s machines could do, how widely those machines were being used, and how much money the company could earn.

She created a culture of fear and lying. And that’s a shame.

Here’s how to prevent your company from unknowingly becoming another Theranos.

1. Thank your employees for giving you bad news.

“Jay, I have bad news for you. We won’t be able to meet our shipping deadline this Thursday. I know we promised it to you and our customers, but it’s not feasible without cutting corners, which we don’t think is the right thing to do for quality reasons.”

Do you know how happy I was when someone told me that? 

They could have easily lied to me or told me an exaggerated truth to “get me off their back.” But she stood up there and gave me the bad news in front of the entire leadership team.

That takes guts. But it shouldn’t. Not if you’ve got the culture right.

There is an inherent bias from employees to give only good news. And that could create myriad problems for you and the company. You’ll actually never know the truth, and then have the opportunity to correct what might be systemic problems.

So instead of facilitating people to give you only good news, you should thank people for giving you bad news. Let them understand the proper behavior you’re expecting from them. 

I would always go out of my way to make sure my employees saw me give both good news and bad results in front of investors and executives at Home Depot, our parent company. This way, they knew it was OK that things didn’t always go as planned.

I would occasionally attend some key decision meetings to see if there was group-speak happening, or if the team was blindly following a leader’s decision they didn’t agree with.

This may seem like a small issue, but it grows over time, and it often happens unknowingly!

2. Teach your employees to experiment without fear of failure.

Experiment is a powerful word to use internally. Instead of calling something a project, which by definition assumes it is expected to have a positive outcome, you should try to call some projects “experiments.” Experiments, by definition, mostly fail. 

You should create a culture of expecting most experiments to not go right.

Make sure your employees tell you the truth by establishing the foundation that truth is mandatory. Seems like a reasonable thing to ask, doesn’t it? And set the expectation that lying and overstating progress or results are inexcusable.

Don’t be found guilty of doing otherwise. Because the truth wins, always.