In mid may, I facilitated a board training for a Tier 3 (small) savings and credit cooperative society (SACCO). Whereas the main topic revolved around risk management in relation to loan guarantees, the discussion drifted into how the SACCO could be able to address a “good” problem it was experiencing namely excess liquidity. Together with the directors, we started exploring possibilities such as extending the maximum loan repayment periods to enable members to borrow higher amounts, reducing the loan amount to guarantor savings ratio, introduction of mobile lending and introduction of alternative security for loans in order to ease pressure on guarantors.
During this discussion, I noted that at least seven out of the eleven participants were always approaching each possibility from an opposition point of view. We would therefore first list all the demerits about each proposal before we could list the merits of each. In my estimation, we were possibly spending over 60% of the time discussing the drawbacks of a proposal and only 40% about its potential benefits. As I was figuring out on how to point out the negativity and therefore focus more energy on the positives, the Chairman pointed out that the group was holding back the SACCO growth because of being too risk averse.
This discussion reminded me of an experience I had during my banking career where my then employer was also suffering from excess liquidity. In the bank, the risk management function had unfettered powers to veto loan approvals based on their risk evaluation. In most cases, the clients the bank turned down would access facilities with competitors and succeed in their projects with a majority eventually repaying the loans with minimal or no problems.
At one point during my time with the bank, 3 managers, myself included, approached the Chief Executive with proposals on how to improve the bank’s performance. The proposals included club membership for selected managers, promotional activities and new products amongst others. To our surprise, the CEO had an argument, mostly unsupported by data or any form of evidence, to shoot down each of the proposals. We left his office crestfallen and never went back with suggestions. When we shared this information with others, we were informed that we were not the first, and certainly not the last to suffer the fate. Within 2 years, this negativity started reflecting on the banks’ financial statement.
I have seen this phenomenon in many instances during strategic and business planning as well as other sessions. People for example focus on negatives such as weaknesses, threats, examples of similar or not so similar failed initiatives and possible losses instead of the upside of suggestions and ideas. In the process, people spread negative energy, limit personal and team perspectives as well as hinder the ability to see opportunities, creative solutions, and alternative paths to success. In addition, a focus on negatives usually drains peoples’ energy thus hindering progress since potential opportunities for growth and development may be overlooked.
Negativity also fosters a risk-averse culture since it breeds a fear of failure or an excessive focus on potential negative outcomes. This in turn hinders organizations from pursuing potentially beneficial strategic initiatives. Negativity also saps motivation and enthusiasm since people are constantly bombarded by negative thoughts and pessimistic outlooks. The resultant pessimism therefore reduces the energy and drive necessary for effective strategic planning. Lastly, the negative attitudes and pessimism also hinder communication within teams since people are constantly expressing doubts, criticizing ideas, or focusing on obstacles.
Dr. Weru Mwangi is the CEO & Lead Consultant at Ultimate Management Solutions, a firm specializing in training & consultancy in Finance, Governance, Strategy, Risk Management and Leadership Development. He can be contacted on weru@umslgroup.com
