Groupthink

IMF evaluated its role and performance in the recent financial and economic crisis.

Cause
In a 2011 crisis report with the short title: 'IMF Performance in the Run-Up to the Financial and Economic Crisis:IMF Surveillance in 2004–07 ', IMF concludes that the main cause of their inadequate response during the crisis was:



Groupthink


IMF’s ability to detect important vulnerabilities and risks and alert the membership, was undermined by a complex interaction of factors, many of which had been flagged before but had not been fully addressed.

The IMF’s ability to correctly identify the escalating risks was hindered by:
  1. A high degree of groupthink 
  2. Intellectual capture
  3. A general mindset that a major financial crisis was unlikely
  4. Inadequate analytical approaches
  5. Weak internal governance
  6. Lack of incentives to work across units and raise contrarian views
  7. A review process that did not “connect the dots” or ensure follow-up
  8. Some impact of 'political constraints'....


Recommendations
IMF suggests some recommendations on how to strengthen its ability to discern risks and vulnerabilities and to warn in the future. Main point is to enhance the effectiveness of surveillance: it is critical to clarify the roles and responsibilities of the Board, Management, and senior staff, and to establish a clear accountability framework.

Looking forward, IMF needs to
  1. Create an environment that encourages candor and considers dissenting views
     
  2. Modify incentives to “speak truth to power”
     
  3. Better integrate macroeconomic and financial sector issues

  4. Overcome the silo mentality and insular culture; Deliver a clear, consistent message on the global outlook and risks.

Recognize Groupthink
Groupthink is not just something happening to IMF or 'other organisations'. We, financial institutions, all suffer somehow or somewhat from the Groupthink Virus.

How can we recognize Groupthink?
Derived from an article by Irving Janis, the inventor of the word Groupthink, let's take a look at some explicit signs of Groupthink:

  1. Winning Mood syndrome
    A common illusion of success (Folie à deux), invulnerability, over-optimism, unanimity and risk-taking as a consequence.
  2. Collective rationalization
    Managers, employees discount warnings and do not reconsider their assumptions
  3. Repression or Ridicule
    Direct pressure on and ridicule of  individuals who express disagreement with or doubt about the majority view or the view of the leader
  4. Fear
    Fear of disapproval for deviating from the group consensus. Fear from or doubt about expressing your opinion.
  5. Manipulating
    Remaining silent in a discussion is implicitly interpreted as agreeing.Obviously 'wrong' arguments are used to achieve a certain goal or policy.
  6. Disrespect
    Stereotyped views of out-groups or enemy leaders as evil, weak or stupid. Good or serious ideas of colleagues are rejected on basis of the source instead of 'judged by the facts'.
  7. Moral Blindness
    Unquestioned belief in the inherent morality of the in-group. Lack of discussion about ethical or moral aspects of certain decision.
  8. Miscommunication and Misinformation
    Information, bottom up or top-down is (deliberately) strongly filtered
  9. Idolization
    Idolization of the leader or of certain five star employees.


Lessons Learned
If you recognize some of the above signs in your organization, it is time for action.
Discuss it, do not accept it and if you cannot change it... LEAVE!

A humorous example of Misinformation are the quotes of Iraq's minister of (Mis)Informaton, Al-Sahaf, during the 2003 Iraq war.
Enjoy, laugh and learn.....



Make sure your board presentation is not based on' sahaf-statements' but on simple provable actuarial facts....

Related links/sources:
- 8 signs of groupthink
- What is Groupthink?
- IMF Crisis Report 2011