Make the Most of Bad News Learn to embrace negative feedback and use it as a competitive edge.

"Here at Acme Industries we have an open-door policy. We encourage people to bring me their concerns." Those words are chiseled in stone at most companies, right next to "Our People Make Us Great" and "The Customer Is Always Right."

Your people may know that your mouth is all in favor of their bringing bad news to you, but what does the rest of your body telegraph to them? Do you show that you really want to hear the negative stuff?

It's one of the most critical things you can do if you want to become highly successful. I built a multi-billion dollar company from scratch, and we were on the top of the world. That is, until the secret actions of one executive brought the whole company down.

I was the boss, and I thought I had fostered an atmosphere of bringing concerns and issues to me, but I clearly didn't do a good enough job. At least one person in the company saw unusual activity but chose to send an anonymous letter to Wall Street rather than come to me. It's a long story, and you'll soon be able to read about it in a book I'm finishing. But let me give you five tips that cost me quite literally more than a billion dollars to learn.

1. Energetically state your policy in writing.
   Everyone ignores the typical mission-statement language, so make sure your bad-news policy stands out. Make it clear that people should feel free to talk with their manager or go around their manager if necessary. Also be clear that if they feel like they will be punished for stating their concerns to anyone, they should put a typed note in the suggestion box. Encourage them to use any method to give their feedback rather than stay silent with their concerns.
   
2. Show by your actions that you mean it.
   At first you may have to prime the pump by fabricating some challenging questions, which you can then address in public. The flip side is that if you ever hear that a manager took actions against someone who raised a negative issue, you'd better come down on that manager hard and publicly. People are watching your body language and actions far more than your words.
   
3. Don't bury your customer complaint area--honor it.
   I shake my head when I hear of companies that relegate customer complaints to the lowest-possible-level employee. What a short-sighted and even dangerous policy that is. Your customers have a unique perspective on you and your competitors. I certainly don't think the customer is always right, but I do insist that the customer should always be listened to.
   
   You don't need to give out your direct line to customers; that could become an incredible time suck. Instead, make sure your front line reads all comments and passes the unusual, odd--and especially the troubling ones--to someone with the right answers and the authority to address the customer's concerns. Again, demonstrate by your actions that you insist on bad news flowing uphill. To ensure that your system is working, perform spot audits and occasionally send a fake customer comment and see where it ends up.
4. Restate and reinforce your message regularly.
   I had an employee who signed a telecommunications contract outside his authority. It was binding to the tune of a $10 million error. We eventually got it down to a $1 million error, whereupon we had a "screwup party." Far from embarrassing the guy, I openly applauded his initiative. In the course of working extremely hard for our company he had made an honest mistake. I didn't want people withdrawing into their shells and never again being proactive, nor did I want the bad news covered up. I suggest that you turn bad news into a positive teaching moment whenever you can.
5. Move on as fast as you can.
   If your corporate reflex to bad news is to ignore or downplay it, you should replace it with a "next" reflex; e.g.: "OK, we just took a hit when the sales department lost that big competitive bid. What can we do right away to recover?" Channel all that negative energy from the disappointment into creative, future-looking actions. It's not ignoring negative reality but repurposing it instead.

Both you and your competitors are very adept at handling good news. Why not make competitive advantage of how you seek out and leverage the inevitable bad stuff?