Strategy, Distorted Thinking and the Sense of Shame

I. INTRODUCTION

Why do executives who are attached to their firms and organization, who know the texture of their marketplace deeply, often fail to detect signs of their of the firm's impending failure, fail to recognize that their strategies for sustaining the business are increasingly mismatched to the current reality. If we insist on a rational view of decision making we might say that such executives simply make errors, or that they reasonably give credence to the past over the future, or that they are sensible, to prefer to run the risks of not changing strategy rather than changing strategy when they should not

The reader will no doubt agree that such a rational explanation is inadequate. When executives make such decisions they are not simply calculating costs and benefits but are managing a complex of feelings. They desire success, they wish to avoid shame, they are aware of their obligations to their employees and shareholders, they measure the limits of their own capacity to work, develop and innovate. It is surely sensible to assume that these emotional processes play a critical role in how executives reformulate strategies when markets change When tose strategies fall short, it is not simply because executives are making rational errors of judgment.

Yet having wrestled the argument away from the rationalists, it may then seem that we no longer face a very interesting or difficult question . Executives fail to spot changes because it is unpleasant or anxiety producing to see them. We can of course make this explanation a bit more elaborate. We can add for example, people in successful organizations are prone to "group think" so that when some one raises questions about the organization's present course, the group defends itself against hearing those questions by questioning the critic's commitment to the team. But at bottom all such explanations still rest on the straightforward idea that people wish to avoid unpleasantness, and thend to do so until it is too late.

This supposition ignores the simple fact that executives spend a great deal of time and money tracking and analyzing their marketplace. They do market research studies seek out intelligence on their competition and talk to stock analysts and industry experts. The explanation that failure is simply rooted in the avoidance o unpleasantness , would lead one to expect that executives would operate under the rule that "no news is good news" and would stop paying attention to the marketplace. . But in fact, they pay an inordinate amount of attention and they still miss important turning points.

We have here, I suggest, a question about how executives' interpret reality. Facts are not truths they must always be placed in context. By situating them in this way we interpret them, we say "this fact means X." But as we know from the psychoanalytic process, we use thoughts and feelings to interpret a fact. The feeling helps us give value to the fact- is it a "dangerous," "exciting" "worrisome" or "familiar" fact, while the fact in turn provokes our feelingful response to it, e.g. "if I understand the facts, our low sales means this is not a typical downturn." If our thinking is disordered, or our feelings are suppressed the likelihood that we will misinterpret a fact, that we will fail to understand its salience grows.

Indeed, the process of interpretation has never been more important. Today we describe the marketplace with words that can describe the unconscious itself. "It contains "mystery," we can't take its appearances for granted, it points to contradictory process, it is "complex," or as we would say psychoanalytically "over-determined," as we probe it, we can change it. There is thus a growing likelihood that executives, failing to integrate thought and feeling so that each supports the other will seriously misinterpret their organization's situation and prospects.

In the following paper we seek to build a model of how and why misinterpretation takes place. The paper is divided into five sections. In the first we examine the role of symbols in thinking and show how a bundle of thoughts and feelings can lead us to misappropriate symbols. In the second, we introduce the case of Apple computer and suggest that the Mac, in taking on iconic status ceased to function as a symbol of the customer's situation but was experienced instead as the customer's situation. It was we suggest fetishized. This section closes with a provisional model of how in fetishizing a product, executives misinterpret reality. In the third section, we first critique and then revise our model by showing how the sense of shame provokes misinterpretation by linking personal discomfort and anxiety to group processes. It is this group process we suggest that amplifies individual errors so that they become instead group myths. In the fourth section we apply our revised model to a brief case study of an information services company and in our summary we point to new challenges for consulting.

II THE SYMBOL

Child's Play

Let us first examine the role of the symbol in the thinking process. Piaget argued that in the first three years of life children develop the capacity for using symbols as aids to thought. Any object is first experienced as present only when it is seen, while later objects are experienced as present even when they are not visible, as long as they are part of some action sequence. A child drawn to the silver glint of a spoon will lose interest in it when it is hidden from view. Later, the child will look for the hidden spoon if she has interest in grasping it or using it to hit a plate. Finally, the child, with a full knowledge of the spoon's role in eating, may feign eating by pretending that her thumb is a spoon. Thus when a child develops the capacity to create and use symbols, she is freed from the world of objects, and can grasp concepts that have no material representation. So, in understanding the idea of "grandmothers" as against the person called "grandma," the child can then understand the idea that "every grandmother was also a daughter." Appropriating symbols, the child discovers relationships or patterns which are not linked to physical or sensuous experience. This child's capacity to apprehend reality grows dramatically.
However when children learn to think abstractly they do not simply abandon their sensuous experience, they continue to directly experience the world as they learn to apprehend it abstractly. A child who pretends that her thumb is a spoon holds two contradictory interpretations in her mind. If the "pretend" is to evoke real feelings, the child must invest belief in the proposition that the thumb is a spoon. But if the child is to gain the freedom that "pretend" offers, she has to simultaneously invest in the belief that the thumb is not a spoon. Indeed, Gregory Bateson has defined this contradiction as the sine qua non of the "play frame"

The Symbol and the Transference

When people fail to sustain this contradiction they misappropriate the symbol. Consider Freud's idea of the transference,. We say that a patient transfers onto the analyst the ideas and feelings states associated with his experience of his own parent. However, if the patient is to benefit from the transference, h must experience the analyst as a parent while also knowing while also knowing that the analyst is not his parent. The analytic process suffers when the patient is unable to sustain this contradiction. When the patient sees the analyst only as his analyst or only as a parent , we would predict that the feeling states accompanying the analysis would obstruct meaning-making or interpretation. If for example the patient sees the analyst as "just" an analyst, i.e., he or she is the professional in the chair making a living, the patient's emotional tenor is likely to be flat and uninspiring, without juice so to speak. Similarly, if the patient experiences the analyst only as a parent he may then feel too defiant to listen to the analyst's interpretation. After all why listen to your parents?
Melanie Klein (and later Wifred Bion) teaches us that anxiety can lead us to misappropriate symbols. In the above example, the patient, feeling overwhelmed by the relationship he has to his "internalized" father, attacks this relationship by ridding the symbol of its contradictory character. The analyst is only a detached professional or only his father. In the first case-- the analyst is a detached professional, the patient "hardwires" the analyst to the office surroundings, the analyst cannot be seen as a person who expresses in his or her character, the feelings and reactions of other important people in the patient's lives. In the second case, the analyst is the father, the patient hardwires the symbol of the father to the feelings a father evokes. The case of the transference points to an hypothesis. Interpretation fails us when in response to anxiety we "hardwire" the symbol to a reality it symbolizes. In this context it no longer symbolizes reality, but instead becomes it. This is how we lose the flexibility of thought that symbolic thinking allows us.

The Symbol in Everyday Life

Lest you think this hypothesis applies only to such emotionally laden encounters as an analytic session, consider the following extended example. Walking to your car you see a man apparently struggling to find a key on his key ring that will open the door to a house. You will, without awareness, interpret the situation: the man has lost the key, or unbeknownst to him the lock has been changed, or he is anxious about entering the house and so on. Each of these interpretations transforms the objects of the scene-the man, the key, the door-into symbols of a situation. They signify something that we do not see, but imagine or infer from the context. They are in anthropological terms "markers of a context," which we impose on the scene. The context helps us link the parts of the scene together in particular ways. These linkages in turn help us anticipate or predict what will happen next: the man will ring the doorbell, he will abandon his efforts, he will simply wait at the door.

If particular contexts have a great deal of affective meaning for you, e.g., you are fixed on the idea of "rejection," you may conclude, prematurely, that unbeknownst to the man the lock has been changed, which signifies that he is being rejected. Youmay well be so decided in your interpretation, that you are unable to apprehend other clues, e.g. though the man is fumbling, his face appears relaxed. Indeed, you will not only not notice these clues; they simply will not exist for you. The issue of rejection and the anxiety it stimulates, has hardwired your symbolic rendering of the situation to the actual situation. You can only see what you are feeling, and so fail to notice clues that do not cooroborate your feeling state.

This misappropriation of symbols happens frequently in the management process, where managers rely deeply on reports and figures. Imagine that you are the head sales for a consumer products company, and notice that though returns are high, indicating dissatisfied customers, sales appear to be high as well. These two facts appear to contradict each other, and this contradiction provokes unease. You may scrutinize the sales numbers, conclude that they do show that sales are rising, and suppose that the high level of returns probably reflects a bad shipment. You make a note to talk to the plant manager, but then forget to. You have made a common error here . Rendered anxious by the contradi ction you have assumed that the sales "figures" are the sales, rahter than symbols of the sales. Indeed, it is not uncommon for salesmen facing a bad year and low commission, to wheedle orders out of a customer, with the assurance that they can cancel their orders at the beginning of the first quarter. The two facts you observed are not contradictory. Each reflects the fact that customers are dissatisfied. But the anxiety you felt upon seeing the returns rising led you to hardwire the symbol of sales -- the reported sales figures, to the sale itself.

III THE CASE OF APPLE COMPUTER

Let us now return to the question we posed in the beginning --why do executives miss important facts and developments--and see what light we canb shed on the question by using our hypothesis about the links between symbols, their use, and the impact on our thinking. A real world example might help this process. Consider the recent dilemmas at Apple computer. As you know, though its sales remain high, its profits are falling, talented professionals and executives are leaving, its CEO was replaced, and it recently entertained a decision to sell out to Sun Microsystems. Analysts agree that the company faces a turning point. What is the nature of the dilemma it faces?

Some history is important. Apple early on decided not to license its Macintosh operating system to other computer manufacturers so they could produce and sell Mac clones. It was this operating system that pioneered the use of graphical interfaces, providing Apple its competitive advantage in a market dominated by IBM and IBM clones. The espoused reasoning was: If Mac clones were available, their price might fall to the point where Apple could not gain the profits it deserved for its undoubtedly high quality product.

Though Apple was the second largest computer manufacturer in the late 1980s, it was still small relative to the size of the market and could hardly meet potential demand. Its size thus limited its capacity to meet demand. Moreover, as the Microsoft Windows operating system, which heavily imitated the Mac system, grew in popularity, software producers increasingly preferred to write for Microsoft-run PCs rather than for Macs, since they reached a much bigger potential audience. Similarly, component suppliers were more interested in producing parts for PCs, rather than Macs. Thus, over the last three years, Apple has found that if it expanded its market share through price discounting, its profits fell, but that if instead it kept prices high to sustain its profits, its market share fell. It could not accomplish both. The executives faced a Hobbesian choice : to sustain profits they would have to tolerate the erosion of the company's customer base and its network of suppliersm or to sustain this network they would have to lose profits.

Under the leadership of John Sculley,(once a top executive at Pepsi-Cola) Apple had tried to expamd its market share in two ways, entering the business market and forming an alliance with IBM. But the Mac dissatisfied many computer professionals, who influenced greatly a firm's computer purchase decisions. As Sherry Turkle notes, Steve Jobs had designed a machine that would be opaque to the user- You literally could not and still cannot open up its back and move chips around. The Mac was for the non-computer user who was focused first and foremost on the interface. Highlighting its innovative icon rich interface, Apple could promise simplicity of use while also protecting its monopoly over the hardware. Yet as late as 1989, before Microsoft had produced its first viable Windows interface, Apple could have cloned the Mac , reducing Micrsoft's market potential. Apple's business strategy gave Microsoft time to catch up.

What explains these mis-steps? Let us see if we cannot apply our provisional thinking about symbols and feeling to this situation. We can resurrect the rationalist's argument and say that Apple executives simply made an honest error. That is, with full awareness they concluded that the prospective benefits of licensing production appeared to be less then the costs of not licensing it. But this argument does take acount of a constellation of feelings that shaped Apple's decision making, particularly after John Scully was pushed out. As one industry analyst noted, "it got to the point at Apple where anybody proposing to change the famous Macintosh user interface and improve it, even in small ways, was regarded as a heretic. There became a term "Maclike, as in "it isn't Maclike." In other words, what had become a vehicle for facilitaing the computer-user interface became itself an icon, and end in itself. Ironically, the company that created the icon-rich interface turned the interface into an icon.

Indeed, Apple's history and culture predisposed its execuvies and engineers to elevating the interface to iconic status. Its culture fostered self-absorption, a focus on the Apples unique role in the economy and society. This is why John Sculley and Michael Spindler pursued the chimera of an alliance with IBM fantasizing that they might take over the alliance's entire personal computer business. Similarly, Mike Markkula, chairman of the board and a founder of the company saw Apple's role increasingly as a crusade against the monolith Microsoft. Strikingly, he once noted that "preserving Apple as a legal entity" was less important than preseving.... its technology and customer base." In other words the interface became more important than the company. The business of the business was displaced by a crusade, putting employees and shareholders at great risk.

We can now see why Apple executives, did not respond to the core business policy challenge; build makret share by cloning the Mac in way that brought rising not falling profits, e.g. using the larger revenue base to fund new product development. Instead, by elevating Mac's status, Apple executives could then use the Mac to signify their invulnerable relationship to the marketplace. Indeed the company could shut down and they could still win! This now defensive feeling of invulnerability,allowed executives to regard the market share challenge they faced as an abstraction, as a series of facts (which they surely understood), that lacked emotional meaning and import. The fantasy of invulnerability hijacked feelings that might have otherwise potentiated the basic marketplace facts.

The reader can appropriately argue however, that our argument, while taking us one step further, only leaves us at the same dead end. We must now ask how and why did the Mac achieve iconic status. And if we are not vigilant might we not return to our circular argument: i.e., the Mac became an icon because Apple executives felt invulnerable.

The Fetish

It is useful here to first consider the properties of an icon. Consider the analogy of the "fetish." In psychoanalysis a fetish is a fragment , a shoe, a piece of clothing , a woman's foot that becomes the person or relationship that this fragement symbolizes. We say that a man has a sexual fetish when he comes to feel for example, the a woman's foot, ankle or neck is her whole body. While restricting enormously his range of experience, the fetish protects the man from the anxiety of experiencing his sexual feelings fully. By choosing to focus only on it, he controls the desires the woman stimulates in him. In this sense, a fetish represents a failure in the use of symbols. The shoe becomes, rather than signifies, the woman's sexuality.

Apple executives and engineers fetishized the Mac. The interface which is only one part of the computing experience became the computing experience. In the early days of personal computing the interface proved decisive, but as personal computers became common, the computing exerience was linked to a wider set of activities, e.g. what software was available, how computers were linked to networks, and what they cost.

Our analogy to the fetish suggests that anxiety can fuse, or as we said "hardwire" a symbol with the reality it stands for . Once that occurs then if we manipulate the symbol we can imagine that we have controlled the reality that initially caused us to feel anxious. Anxiety lead Apple executives to construct an icon of their business, and this icon suppressed their curiosity about what they were noticing. This suggests that when executives err it is not the case that they don't see or recognize certain facts. Rather they suppress their curiosity about them, and so fail to interpret them.

Signal Anxiety

Our argument appears logical, but as it is stated now it may lack common sense. The skeptical reader may wonder why Apple executives who after all invented one of the great products of the twentieth century, would succumb so quickly to the anxieties associated with marketplace changes? Surely they have more courage than we have allowed them in this argument. They should have been able to confront directly the threats they faced to their business, wihout resorting defenisvely to a fetish.
The concept of courage, however, presupposes that one faces a threat which is confronted despite the fear it generates. But what if the threat was precisely what was dreaded. Wht if it is experienced as the disaster itself? Courage would be irrelevant; the feared event has occurred as soon as the threat is experienced. We can mourn our loss, or deny it, but there is nothing left to confront. If this sounds far -fetched consider the case of the chronic worrier. The person who worries chronically is not affected by the actual outcomes of events and decisions. For example he or she can attribute good outcomes to a never-to-be-repeated streak of good luck. Why should this be? Let me suggest that for this person the worry itself is the outcome.

How does this happen? It is a fundamental assumption of Kleinian thinking that people go to great lengths to defend themselves against feelings of anxiety. The anxiety is experienced as a persecutory agent. This suggest that the worry itself stimulates feelings of anxiety, and these anxious feelings in turn signify that the the bad outcome has happened. This is also why a person feels guilty for simply wishing to do some forbidden act. The wish simulates anxiety, the anxeity is experienced as punishment, and the punhisnment signifies that the "deed has been done." Indeed, Freud called this kind of anxiety "signal anxiety," as opposed to "real anxiety."

A person defends herself against signal anxiety by supressing the worry or the wish. Wishes are frequently suppressed by what Freud called "reaction formations." If I feel guilty for desiring to cheat I construct a counter-fantasy - that for example I am pure. Similarly, worries are supressed by fantasies. If I feel vulnerable, I fantasize that I am omnipotent. But the fantasy we are describing here is a fantasy of consolation. It is not a fantasy about the future, it does not propel action or create hope, rather, based as it is on the sense of defeat -- the threat is the disaster-- it compensates for losses already incurred. This is why executives caught in the grip of such fantasieis become passive and indecisive. Indeed, one analyst, reflecting on Mike Spinlder's tenure (recently forced out as CEO), noted that he seemed to have assumed that Apple could simply produce its current set of products to succeed. Rather tha innovate, it only had to do a good job.

A model

We now have at least a model of the mental operations associated with the failure of executives to detect/respond to signs if trouble. It involves the following steps:

1. There is a perceived threat

2. In the decision maker's mind the threat is fused with the perceived threatened event

3. Anxiety emerges as the signal that the event has transpired

4. This anxiety is persecutory, it becomes the punishment for the failure

5. To quash this anxiety the executive creates a fantasy of consolation. This fantasy works by substituting a part for the whole, by crreating a icon that is worshipped, fetishized.

6. The icon induces passivity and withdrawal.

7. Turning away from reality the decision maker fuses the icon with the reality it once symbolized.

The Group Level

I think the reader will acknowledge that this model is logical but will be rightfully troubled by steps 2-4. How do executives insure the survival of any business if every threat indeed becomes the event it signifies, if every anxiety becomes persecutory? Surely, we are making a faulty analogy if we compare the troubled individual in analysis or the person hobbled by chronic worry with well-functioning individuals who occupy positions of leadership.

It is important here to shift our attention from the individual to the group; after all, executives make decision in the context of interpersonal relationships We know as well from common experience that group process shapes an individual's thinking. Individuals may feel pressured to conform to the majority's point of view, or people thinking together may amplify each person's feeling of anxiety. This is one basis for crowd panic. But we need to exercise caution here. When Freud first critiqued LeBon's theory of the crowd, he noted that explanations of crowd behavior deriving from the notion of "contagion,"for example that a feeling of aggression is contagious and therefore spreads, are superficial if not tautological. In place of the concept of "contaigon" he created the first psychodymamic model of the group. People in a crowd behaved similarly because they all identified with the same leader. Identification replaced the idea of contagion , setting the stage for a structural understanding of group behavior. This notion explains, for example, why soldiers facing danger may panic when their commander is killed. The nature of the danger they face has not changed. Rather, they lost the leader whose stature helped them contain their own anxiety. The leader had become the symbol of their safety and under stress, his symbolic value is confused with his actual capabilities.

Similarly, to explain the group context that leads to distorted decision making we want avoid explanations of contagion, implying that "group-think takes over." This last proposition describes the effect but not the cause. In this context let us extend Freud's concept of identification.

IIII. SHAME

Shame and the Ideal

I want to draw your attention to the concept of shame. The earlier discussion of the links between anxiety, the symbol, and the reality it signifies described the common situation of a person who feels guilty for having simply fantasized violating a norm, taboo or rule. The anxiety associated with the guilt becomes the punishment. The existence of such punishing or persecutory anxiety confirms to the person that indeed he or she had committed some transgression.

Let me suggest that the same phenomenon applies to the mechanism of shame. Shame, as Piers and Singers have noted ,is at bottom a feelingful response to one's failure to live up to an idealized image of one's own character. The failure signals that one is "defective." Moreover the phrase "I am ashamed of myself," rather than "I shamed myself," suggests that one's failings need not be exposed others to feel shame. A professor submits an article that she believes will establish her originality to a journal. Though it is blind review, she feels deeply ashamed when the reviewer recommends rejection. She is not the scholar she felt she was; therefore her scholarship was a pretense. She is defective.

Indeed, all of us have had the experience of feeling deeply ashamed by a small failing, which others may hardly notice or may just as easily forget, but which puncture our own self image. For example people have puzzled over the recent suicide of Jeremy Boorda, the US Navy's highest ranking officer. Newsweek magazine had discovered that he had for a long time worn two medals which suggested falsely that he had been in combat. He removed the medals when the National Security News Service learned of his error or infraction To many his error appeared minor or could haveen explained as a lapse which he then corrected. Why would he kill himself. The psychodynamics of shame were operating here. He was not ashamed of his infraction, which indeeed may have been minor but rather that he was revealed as the kind of person who, desipte his accomplishments, feels unsure of himself, of his worth. He confronted the gap between the image of himself- as a successful naval commander and the reality that he was so lackikng in self-confidence that he had to wear medals he did not truly earn. This was his defect

This is why these and other apparently small events have the power to engage our feelings so fully, to cause us to blush, to create unhappy memories. Let me suggest here, without elaborating a complete theory of shame (and I draw centrally on Helen Merrell Lynd's classic book "On Shame and the Search for identity"), that in feeling defective, we feel ugly. Our body image is revealed to us for a moment as representing an ugly body. The small incongruity revealed to us in the experience that stimulates our shame is amplified as an incongruity in our body. In this sense, feelings of shame can in turn quickly evoke feelings of self-disgust

Because these feelings are frequently intolerable, we quickly transform them. We construct punishing, but more tolerable fantasies, that do not implicate all of whom we are, but rather a part of us. We susbsitute the part for the whole. For example, the professor described above may berate herself for having been sloppy. It is not that she is defective but that she transgressed the rules for producing complete, and "clean work." Guilt over transgression replaces shame. If our sense of shame is too great, we find strategies for protecting the whole of who we are. For example, the professor may transform feelings of being defective into the feeling of having been "unjustly" rejected. She is being unfairly punished. Finally, she may express simple contempt for the reviewer's evident limitations. The reviewer, not she, is defective.

We are now closer to understanding how weak signals of distress or threat can be amplified. The threat is experienced as embarrassing, and the embarrassment as we have suggested is out of proportion to the salience of the actual threat. An executive who then feels embarrassed protects himself by projecting his experience of being defective onto others around him, particularly his subordinates, who are less free to resist his projections. This gives rise to a new social process, as subordinates and others work to protect the executive from embarrassment. This is why people in organizations develop practices for stage-managing the executive's appearances. Its function is not primarily to suppress dissent but rather to minimize the likelihood that the executive will feel embarrassed.

Whose Shame?

But why subordinates should so willingly protect the executive from embarrassment? We might first imagine that they do it simply to protect themselves. If the executive cannot contain the discomfort he experiences upon feeling ashamed, he can, as we have suggested project these feelings outwards so that others, particularly subordinates, are labeled defective. But this argument ignores the ways in which subordinates ' self esteem is represented for them by the executive's self-esteem. They internalize his stature to idealize themselves, and when he is embarrassed they too feel ashamed.
Consider the following example.. Two consultants working with an executive team, advised its director to not attend regular staff meetings, to let team members "manage themselves." They did not share their diagnosis with the whole team, so the director's disappearance was never fully explained, though some team members no doubt felt elevated in stature by the director's absence. At a debriefing meeting a month later, one of the consultants "blurted out" the advice they gave to the director, and there followed an embarrassing moment in which everyone considered the meaning of such a thoughtless manipulation of the team's process. But far from criticizing the consultants, key team members shrugged off the incident . signaling that the import of this event would not be considered.

We must ask here why the team let the consultants off the hook? At first blush we might say "team members did not want to embarrass the consultants." But this ignores the impact on team members' self esteem of the consultants' apparent status. The temporary social system, composed of the director, the consultants, and team members, had created its own idealization, namely that they were all engaged in a serious consultation to improve team functioning. The consultant's confession deflated this idealization, revealing the amateurishness that characterized the consultation itself.

Organizational Identity

Let us return to Freud's original discussion on the relationship between a crowd and its leader. Crowd members have in common particular impulses and feelings because they all identity with the same leader. Identification, not contaigon, accounts for the crowd's integrity. Our discussion adds to this analysis. We would say that group members have in common paticular impulses and feelings because they share in the common set of idealizations represented by the leader. This is why the latter's embarrassment becomes their own.

What is the nature of these idealizations? We might be tempted to think of them of them as general markers of status and power. People identify with the leader as their examplar of what it means to be powerful and important. Howard Schwartz, if I read him correctly, makes this assumption. The organizational ideal, he says, is at bottom the ideal of being included among the elite. I want to suggest, in contrast, that ideal has considerable more texture to it and is linked to features of the organization's business process or product. I will call this idealization the organization's "identity." Let us examine this concept in some detail.

When a executives believe and project the belief that the business is or will become successful, , executives produce a theory of the business' legitimacy, of the reason it attracts resources in exchange for its products and services. Serving to sustain members' self-esteem or idealizations this theory, in turn becomes the basis for how people experience distinctive character or identity. Thus for example when Apple was successful, it developed an identity based on the image of a "people's company," that in contrast to Big Blue (or "big brother") IBM, it produced computers "for the rest of us." Its famous television commerical; a woman olympic disc thrower, smashes a screen with "big brother' s" image on it while hordes of conforming executives look on, crystallized Apple employees' feelings about the company - i.e., that Apple represented the sensibilities of the sixties' youth culture coming to terms with as well as transforming the nature of adulthood. Indeed the reference to the Orwell's novel 1984 was reveling here. It conveyed the image of youth overcoming totalitarianism- a central motif of youth culture in the sixties and seventies.

Organizational identity as a psychic phenomenon can be compared to what Klein called "phantasies" (with a 'ph') A "phantasy" is a set of stable and sustained scripts or stories that people carry about in their head, and that express the primary ways in which they relate to others. A phantasy is not an abstract idea like "don't trust people," but a vivid and specific image such as "men dominate me by physically intimidating me , like my father did." A person will project the nature of the relationships embedded in the phantasy onto real people and real relationships. The phantasy is, so to speak, an enduring transference. The organizational identity is just such a phantasy, whose sources spring not from the early events of childhood but from events and their continued representation in the organization's history. Personal phantasies and organizational identity then come together in a rich stew through which organization members internalize the organizational identity on their own terms. Thus when Apple employees dressed in jeans, ate pizza at their desks, and slept on the floor, they were enacting both personal and organizational phantasies about their relationships with adults.

Identities, like phantasies can be more or less primitive, they can for example be or more less suffsued with images of aggressions. Consulting groups who help clients "re-engineer" their operations can present as tough guys who tolerate no bull shit, can take the heat and "tell it like it is." They imagine themselves to be ruthlessly honest. Each consultant doing such work will internalize the tough guy fantasy in his or her own way. One person may identify with its stree-wise honesty, another with its aggression. Finally, people can introject an organization's negative identity. For example social workers in child welfare agencies work in under-funded institutions that often fail to protect children from parental abuse. Many of course quit under these conditions, but others can appropriate the agency's negative identity by finding relief in being a victim who is morally unimpeachable, or by feeling superior to people who have escaped contact with such family horrors.

A SECOND MODEL

I hope the reader has been patient with this intellectual excursion into the nature of organizational identity. It helps us complete our model about how executives fail to respond to important changes in their marketplace. Emending Freud's conceptions of identification we argued that followers identify with leaders as people who represent in their person the organization's identity: the phantasy that explains the organization's worth or value. This led us to argue that organizational members wish to protect the leaders from embarrassment because they delimit in this way their own sense of shame. In turn we expect such protection mechanisms to be powerful and ubiquitous because the experience of shame itself is universal , and often out of proportion to the magnitude of the failure or error. We are now in a position to complete our model, outlined earlier, of executive decision making

1. There is a perceived threat

2. The threat (though not all threats) is an attack on the idealizations embedded in the organization's identity

3. The threat stimulates feelings of shame.

4. Shames amplifies the salience of the threat, so that the experience of shame itself becomes the disaster. The threat becomes the threatening event. Shame is the "signal" of the disaster's occurrence

5. Organizational members created a fantasy of consoloation represented in the icon. An icon, by definition is fused in the mind with what it represents or signifies

6. The icon and the phantasy it represents reify the organization's

identity. The identity is no longer a psychological phenomenon but is experienced as something concrete and tangible.

7. The executive and organizational members now feel both calmed down, contained but also passive.

8. Feeling passive the executive turns away from looking at reality

Shame and its Repression

The reader may sensibly wonder why, if shame is so powerful an affect, is so linked to threats of failure and so shapes perception and thus decisions making we don't hear more about its mode of action. Psychoanalysis teaches us that absence may signify negation, that when we don't experience a feeling it has been repressed. Indeed, the less available the feeling is to awareness the more salient are its consequences. This suggests that the phenomena of shame and its management have been so suppressed that we no longer observe shame but rather the consequences of its suppression. Under these conditions shamefulness itself becomes shameful. In "macho" culture, for example, this is the source of the inhibition against men crying when they fail.

It is interesting in this context to consider Japanese culture and its impact on the management process. There is explicit recognition in Japan that the potential for shame is ever present and the social practices should be organized to minimize the chances that a person will "lose face" In other words, in contrast tot he United States, there is no shame in shame, instead the executive who fails is guaranteed that once his shame is acknowledged its impacts will be minimized. This also explains why the most senior executives facing an organizational embarrassment, resign or in extreme circumstance kill themselves. The suicide restores the organization's honor, thus saving the face of all its members.

Indeed, I have been struck by a statement that has emerged lately in writings on management and leadership. It has almost the quality of a mantra. In describing organizational learning, scholars, consultants, and executives repeat frequently the idea that "we should learn from failure." This phrase is asserted blithely, with no follow-up consideration of the very important psychodynamics (as well as social dynamics) that shape how the blame and failure are both experienced and "distributed." One is reminded here of Freud's observation that when a patient says "no no' he means yes, and may we add, that when a person says "yes yes" to a request he often mean no! Repetition can play the role of negation. It is reasonable to conclude from this that by repeating the mantra-like statement "we should learn from failure" without actually considering its implication, writers are in fact acknowledging their reluctance to consider the emotional consequences of trying "to learn from failure."

But if shame's mode of action is suppressed, how can we recognize at least its fingerprints? Don't we risk creating a tautology by assuring ourselves that the absence of shame is proof of its presence? Consider the example we gave above of the professor who in dealing with her humiliation over rejection manages her feelings by locating her failure in a transgression, for example, her sloppy habits of revision. In this situation, as Helen Merrill Lynd argues powerfully, guilt itself can become a defense against shame. We isolate the roots of our failure, so that our failing no longer implicates who we are, but rather signifies our violation of a particular rule. (e.g., a publishable articles must go through three drafts). Thus just as a wish leaves its fingerprints on a dream fragment that obscures our vision of the wish, we can conclude reasonably that shame leaves its fingerprints on the defenses against shame, particularly those that isolate us from experiencing the meaning of our failure. These defenses fragment our experience, by investing a part of our experience with the meaning that attends to the whole.

Consider the following examle, In assessing the future of medical schools, professors, physicians and administrators invariably, almost ritualistically, say that they are committed to three activities, clinical service, research, and teaching. The presenting issue is most often, "how can we strike an optimal balance between these three activities." But this approach to thinking about the future masks a more complicated issue. It seems increasingly evident that the image of the medical school professor as scientist and healer, researcher and clinician is no longer viable. To make money clinicians must commit full time to the care of patients, while research is increasingly difficult to finance within the confines of a medical school's budget. Indeed, leading-edge research in the biological sciences is migrating to the base science departments of large universities, or to pharmaceutical companies that have or can raise the capital to fund it.

However, when the prospect of the physician-healer role's decline is broached, many physicians invariably emerge to attack the very expression of this prospect, its very elucidation- as a violation of their sense of the right, the just, and the ethical. They feel aggrieved and label the idea, and its messenger as, repelling. Just as the Mac interface was treated as a holy object, the image of the scientist-healer is a holy one and cannot be questioned.

The image of the scientist-healer is at the root of the medical school professors' organizational and professional identity. To some faculty its erosion is a matter of shame, reflecting the transfer of leadership in medicine from physicians to a much wider group of actors, including scientists, pharmaceutical companies, public health professionals, and insurance companies. To manage the emerging incongruity between the professional ideal and the actual reality of the declining status of medical school faculty, they create a new cultural taboo, an injunction against expressing a shameful idea. The taboo in turn uncouples shame from the forbidden words, because the feelings associated with a shameful reality, particularly the sense of having been "stupid" or "blind," can now be projected on to those who violate the taboo.Thus, instead of having a sense that they have been "stupid," or "blind," faculty can identify the violators of the taboo as blind of stupid. The original shameful feelings are now transformed into anger at those who transgress the injunction against saying certain words.

I have witnessed a similar process among leaders of an organization charged with promoting community development in several large cities. While well funded it faced the familiar obstacles of trying to mobilize poor people in a time of great social despair. As the leaders wrestled with the limitations they faced, they became preoccupied with the words they were using to characterize their effort. The word "infusion" became a kind of incantation. If they could no directly influence a community's agenda they could "infuse" it with themes they knew were important. They began to talk of infusion as if it were an actual practice, a process of negotiating or collaborating with community groups, when in fact it remained only a word to cover over the complicated puzzle they faced: how actually to provide leadership to community groups when they had not been asked to lead. This dilemma undermined their identity as "social revolutionaries. To ward off the shame associated with their failure to live up to their ideal image of themselves, they invested the word "infusion" with magical powers- as if by saying it, they had overcome the obstacles to which it alluded.

We can sensibly ask how the construction of magical worlds or tabooed words fits with our evolving conception of why executives miss critical turning points or signs of trouble. In both these cases the magical power of a word or phrase represents a failure to distinguish between a signifier and the reality its signifies. Shame and its suppression thus set in motion a failure in the thinking, and this failure in thinking delimits the executives' ability to observe and learn from their actual experience.

IV. THE INFORMATION SERVICES COMPANY

A sense of shame and a consequent failure of thinking lay behind the strategic failure of a large information services company. It grew rapidly in the first two decades of its existence due to the talent and commitment of its computer system professionals. But the nature of the business began to change in the mid-eighties. Their clients had their own talented in-house computers professionals, while computer systems no longer gave firms a competitive edge: you simply had to have them. Increasingly, clients wanted help in re-engineering their production and distribution systems. These systems were computer- dependent to be sure, but their rationalization required considering a much broad range of questions, e.g., where is the key value created in the system, where are its key constraints, what social processes support its functioning ? While computer work still accounted for 80% of the firm's business, future growth, it appeared, would have to come a new set of offerings. The firm found that it could not rely on its computer professionals alone, but instead had to hire management consultants.

Over time senior management came to believe that if these two professional groups, computers experts and consultants, could work together "seamlessly"" then the firm could offer higher quality services than many of its competitors. After considerable study the executive team announced a new organizational design, a new "architecture" as they called it. The company would be divided into both industry segments and professional functions. Teams composed of members of the two professional groups, would come together to address the needs of clients. The account associated with each client would in turn be managed by an account executive in one the industry segments. Finally, the sales and marketing group would support the industry segment leaders in developing plans for selling the firm's services. To help implement this design , the managing partners of the firm reconstituted the executive team so that it included consultants, computer experts, and account executives.

It was difficult to make this structure work. The management consultants in particular valued their own close relationships to the clients they worked with, and were reluctant to give over their selling responsibilities to the new industry segment managers. They resented the flow of marketing resources to the industry segments, and began to develop their own parallel infrastructure for supporting their selling efforts. Executive team members did not function well together and the managing partner began holding a series of separate meetings with the industry segment leaders. Increasingly, it appeared as if they were to be the managing partner's true confidants while the management consultants were to be consigned to perfunctory governance activities. Revenue per partner failed to grow and the managing partner, Warren, began to project the idea that the computer professionals were troglodytes, that they lacked the skills and polish to consult to senior executives. It was if they were the contemptible "proletariat" of the business, even though they had built it.

The marketing and sales director, Henry, developed a beautiful set of materials as well as some innovative selling programs to support the industry segments. He created videotapes that were distributed internally to communicate the idea of the firm's new architecture, he published article on the new structure in the firm's internal magazine, he placed ads in newspapers and magazines that highlighted the firm's architecture as signal that it was offering distinctive professional services.

After almost a year of activity, and feeling that Warren had authorized him to expand his marketing activities, Henry developed an even more ambitious market plan. It required that the industry segment leaders present the firm's new structure to clients while conducting face-to-face meetings on the structure with the firm's own professionals. But at a critical meeting of the managing partner and the industry segment leaders, the latter got cold feet. They did not want to launch these internal and external marketing efforts. They killed the advertising program. As Henry reflected on this event, he came to believe that the industry segment leaders had never really "signed on" to new roles and that he had been seduced by the clarity of the organizational idea, and overly absorbed in the production of advertising copy.

What was going on here? We can understand how Henry might become overly involved in ideas and images associated with the organization redesign rather than its substance. This is the occupational hazard of the marketing professional. But what about the leaders of the firm? How and why did Warren, and the industry segment leaders, get overly absorbed in the idea of the new organization as against its substantive reality?

Shame, we suggest, has left its fingerprints on this narrative. Warren had invested his credibility in a vision of inter-professional teams working together through a market-oriented delivery system. Representing in this sense the best features of the modern organization -- a business unshackled from traditional divisions and therefore responsive to particular client needs -- Warren had promised that revenues would grow significantly. I suggest that when revenue per partner stagnated, Warren suppressed his growing sense of shame by projecting his feeling of failure onto the computer professionals whose failure to "get with it" was dragging the firm down. By suppressing shame, Warren, his team, and Henry fell prey to a process of distorted thinking. They began to conflate the symbol of the firm, as represented by its formal structure, with the reality of its functioning. In this sense the term "organizational architecture" was deeply misleading. We can walk into a building and see its architecture - but when we enter an organization, where do we find the "organization's structure or design"? The organization of course is a construction based on people's conceptions of how they should or are relating to one another. As people take up their roles, they experience boundaries in the mind which help they decided where one unit begins and another ends. The official design, be it represented on paper, or even in a new configuration of offices, or new reporting relationships, are really just symbols of the boundaries people enact when they do their work with another. The organization design "really" resides the interpersonal transactions, everything else is a pointer or sign of these relationships. Since the three groups- the computer experts, the consultants and the industry segment leaders-had not succeeded in developing a new set of relationships, firm leaders, to deny the signs of their growing failure, overemphasized the salience of the internal and external advertising campaigns, the projection of images, and symbols at the expense of seriously assessing the obstacles to the firm's development. Only when faced with the prospect of spending a great deal more money did the industry segment leaders withdraw their support and, indeed, Warren resigned shortly afterwards.

V. IMPLICATIONS FOR CONSULTING

We now have a working model of why executives fail to notice important signs that their marketplace is changing. The sense of shame, which experienced in its own right as a disaster, leads them to locate and isolate blame in some person, group, idea, or phrase. This sets the stage for distorted thinking in which symbols and images become reality instead of representing reality. This gives rise to icons, and taboos, as an overemphasis on communication strategies, messages, and marketing. Inducing passitivity, these icons and taboos obscure executives' vision of the marketplace reality surrounding them. The organization has set upon the path to failure.

How might we consult to such an organization, how we can use the psychodynamics insights gained here to help executives function more realistically when facing difficulty? Let me suggest as consultants we would face one primary task: how to help our clients transform feelings of shame into feelings of normal disappointment. Disappointment represents shame sublimated. It means that shame has not been denied but rather its impacts have been delimited because the executives have been able to overcome the excessive personalization of their failure. In contrast to the impacts of taboos and scapegoats, the memory of the failure remains alive; it is not buried and forgotten, but has been sufficiently detoxified so that people can indeed learn from it. We need to develop a technical apparatus for helping executives move developmentally from shame to disappointment.

The challenges we have outlined will grow in salience. Increasingly, larger number of people are participating in "strategic conversations." Executives aware of the difficulties of developing or changing organizational practices want to involve people in their design. But by expanding the numbers of people engaged in strategic thinking, executives also increase the risk that they and others will feel increasingly shamed when signs of their failure to improve begin to emerge. Paradoxically, the democratization of strategy thinking can lead to its suppression. The wider the conversation, the less the genuine knowledge acquired.