Bad man­age­ment can cost you bil­lions

Why was an IT system that never functioned properly allowed to accumulate costs of 5 billion SEK, despite repeated warnings from staff about its flaws? Why were the doctors who raised concerns about a colleague falsifying research and carrying out procedures that contributed to patient deaths, reported to the police and threatened with dismissal, while the colleague in question was protected?

The initial decisions, to invest in the IT system and to recruit a highly regarded medical researcher with an impressive publication record, are understandable. What is harder to explain is why these organisations failed to reassess those decisions when serious concerns were raised. In one case, it took eight years before the IT system was abandoned; in the other, ten years passed before the doctor was dismissed and ultimately imprisoned.

In neither instance did internal leadership act decisively to stop the damage. Instead, change was triggered by external pressure: a system-wide IT failure that disrupted hospital operations, and investigative journalism that exposed the misconduct in a televised report.

Why do organisations struggle to reverse flawed decisions? What are the consequences of ignoring internal warnings? And how can organisations respond more effectively when early signs of failure emerge?

Criticism is downplayed

Challenging an established project takes significant effort. Large-scale initiatives often have charismatic, committed leaders that have built a strong case for their projects. When negative information emerges, it is usually downplayed and outweighed by arguments supporting the project. Moreover, project leaders expect problems and see them as manageable challenges rather than signs of fundamental failure. Combined with strong incentives to succeed and low, or none, to stop this creates an uphill battle for anyone questioning the project’s viability. For instance, Dr. Isabelle Royer at IAE Lyon found that in one case it took the retirement of a project leader before a costly industrial project was abandoned.

A culture of blame

Research also highlights two social factors that hinder the flow of critical information: information culture and blame culture. Sociologist Ron Westrum distinguishes between constructive and destructive information cultures. In healthy, mission-oriented cultures, people actively share information and collaborate to solve problems. In bureaucratic cultures, there are clear, formal channels for reporting issues and responding to them. By contrast, in political cultures, information is treated as a political asset: hoarded, suppressed, or manipulated. In the cases described, staff such as doctors and nurses reported serious issues expecting a formal response from a bureaucratic system. Instead, their concerns were suppressed, and they were threatened. When leaders foster political information environments, those who raise problems are seen as adversaries. A political information culture often go hand-in-hand with a blame culture, where organisations target the messengers rather than addressing the underlying issues.

Blame cultures are highly damaging. Not only do problems persist since problems are suppressed, others learn that speaking up carries personal risk. Over time, this shifts the cost-benefit calculation for staff: staying silent becomes safer than reporting issues. Despite this, some individuals still raise concerns, weighing the broader harm to patients, the public, and the organisation against the personal cost.

The consequences of ignoring internal warnings can be very costly. As mentioned, the failed IT system Millennium has cost over 5 billion SEK, while the Macchiarini scandal has led to damages exceeding 1 billion SEK, along with severe reputational harm.

What are effective ways to respond to early warnings of failure? 

To counterbalance powerful project champions, Dr. Royer recommends appointing “exit champions” with the authority to collect concerns and halt projects if needed. Xerox applied a related approach in its corporate venturing by using real options logic -- projects are reviewed at predefined checkpoints where continuation is not assumed, and “go” decisions can be replaced with “pause” or “stop.” Research by Dr. Mähring at the Stockholm School of Economics also shows that how a project is framed matters: presenting it as critical to the organisation’s survival increases the risk of escalation and makes it harder to terminate.

Addressing political and blame-driven cultures is more difficult and less well understood. Boeing provides a recent example of the costs of such cultures. Work by Dr. Pedro Monteiro (CBS) describes how the company’s safety culture eroded after leadership shifted focus from safety to financial performance. Formal reporting systems weakened, employees who raised concerns faced retaliation, and internal experts were sidelined. The consequences were severe: 345 lives lost in crashes, an estimated $35 billion in costs since 2019, and whistleblowers subjected to retaliation, leading to at least one suicide.

In Boeing’s case, labor unions played a key role by collecting and amplifying safety concerns. They also helped surface issues in the Millennium IT case and supported doctors who reported Macchiarini’s misconduct. When management and boards fail to act, unions can intervene but their capacity to correct systemic problems remains limited. Political information and blaming cultures are created and maintained by bad management and needs to be resolved by better management.