There is an old saying in business that bad news doesn't get better with age.
I would add something to that:
Bad news usually gets more expensive with age.
In today's volatile business environment, that may be more true than ever.
Organizations are more matrixed. Teams are dispersed around the world. Employees report into multiple functions. Supply chains are interconnected. Decisions that used to happen around a conference table now happen across time zones, Teams calls, emails, Slack messages, dashboards, and project management systems.
We have more ways to communicate than ever before.
And yet, somehow, critical problems still don't get escalated.Imagine This
A supplier tells someone on your operations team that a critical component may be delayed. It isn't a disaster. At least not yet. The operations team believes they can work around it.
So, they don't escalate.
A few weeks later, the supplier confirms the problem is worse than originally expected. Now production could be affected. The operations leader doesn't escalate because the team is working on alternatives and doesn't want to unnecessarily alarm senior leadership.
A few weeks after that, the commercial team begins to hear that a major customer's delivery might be at risk.
They aren't told the whole story because everyone is still hoping the problem can be solved.
Eventually, somebody has to tell the customer. Except now the customer doesn't have three months to react. They have three weeks. And suddenly a relatively manageable supply-chain problem has become a customer crisis.
Everyone involved can explain why they made the decisions they made:
- "We thought we could fix it."
- "We didn't have all the facts yet."
- "We didn't want to overreact."
- "We didn't want to bother senior management."
- "We wanted to bring the problem and the solution."
Those statements are understandable. They can also be incredibly expensive.
The Business Acumen Cost
One of the most important elements of business acumen is understanding how seemingly small decisions ripple through the entire business system.
Failure to escalate is a perfect example.
What starts as a $100,000 operational problem can quickly become something much bigger.
Expediting materials increases costs. Overtime increases costs. Alternative suppliers may require premium pricing. Production schedules get disrupted. Inventory gets moved around. Other customer orders may be delayed. Margins decline. Cash flow gets impacted.
And then comes the really expensive part: the customer.
A missed commitment can lead to penalties, lost revenue, reduced customer satisfaction, or the loss of future business.
Think about that for a moment.
The original problem didn't necessarily cause all of those financial consequences.
The delay in confronting the problem did.
That's an important business acumen distinction.
Every day an organization waits to escalate a serious issue, it potentially reduces its available choices. And fewer choices almost always means more expensive choices.
The Leadership Cost
There is another cost that doesn't appear anywhere on the income statement.
Trust.
When senior leaders finally discover that a significant problem has been known for weeks or months, their first question usually isn't:
"How did this happen?"
It is: "When did we know?"
That's when an operational problem becomes a leadership problem. If the answer is that several people knew but nobody raised the issue, leaders begin to question the organization's ability to surface risk.
Customers do the same thing. A customer can often forgive a supply chain disruption, a manufacturing problem, a technology failure, or an unexpected delay.
What is much harder to forgive is discovering that you knew about the risk and didn't tell them. Now the issue isn't just performance.
It's credibility. And credibility is an incredibly valuable business asset.
Why Smart People Don't Escalate
I don't believe most people hide problems because they are irresponsible. Usually, it is almost the opposite. They want to solve the problem. They want to protect their team. They don't want to be perceived as someone who constantly raises alarms. They don't want to walk into their boss's office without an answer.
And sometimes, they work in a culture where delivering bad news hasn't historically gone particularly well.
That's why leaders have an important responsibility.
You can't tell people, "I want transparency," and then punish them every time they bring you something uncomfortable.
If you want problems escalated early, you have to create an environment where early escalation is viewed as good business judgment rather than a failure.
Based on recent research and observations on this topic, I’ve put together some ideas for leaders to take action on.
Five Things Leaders Can Do
1. Reward the early warning.
When someone raises a legitimate concern early, recognize the behavior before debating the problem. "I'm glad you brought this up now" is a surprisingly powerful leadership statement.
2. Separate escalation from failure.
Escalating a problem doesn't mean someone failed. Sometimes it means they recognized that the risk exceeded their authority, resources, or ability to solve it on their own. That's good judgment.
3. Stop requiring people to bring you the solution.
"Don't bring me problems, bring me solutions" sounds empowering.
It can also be dangerous. Sometimes the entire reason to escalate is that the person closest to the problem doesn't know the solution. They need resources, expertise, authority, or perspective from somewhere else in the organization.
Bring me the problem early. Then we'll work on the solution together.
4. Teach people to understand the business impact.
Not every problem needs to go to the CEO.
Employees need the business acumen to recognize when an issue crosses an important threshold. Could it impact revenue? Margin? Cash? A critical customer? Safety? Reputation? A strategic commitment?
If the answer is yes, the escalation threshold should probably be pretty low.
5. Never punish the messenger.
This may be the most important one. Leaders create escalation cultures one reaction at a time. Roll your eyes. Shoot the messenger. Publicly criticize someone for raising an issue. Ask why they couldn't just handle it themselves. People remember.
And the next problem stays underground a little longer.
The Price of Silence
There will always be problems in business. Suppliers will fail. Forecasts will be wrong.
Projects will fall behind. Customers will change their minds. Technology will break. People will make mistakes.
Great organizations aren't necessarily better at preventing every problem.
They are better at seeing problems, surfacing them, understanding their business impact, and acting while they still have choices.
That's business acumen. And that's business leadership.
Because the most expensive problem in your organization today may not be the biggest one. It may be the one your leadership team doesn't know about yet.
