In whatever manner the current financial crisis on Wall Street is finally resolved and however many the causes that led to it, there is one cause that seems to lie at the root of all the rest—complacency. The Wall Street Journal and distinguished members of both major political parties have been warning for years about the dangers inherent in the practices and policies of FNMA and Freddie Mac, two institutions which supported and encouraged heavy sub-prime lending. The European Central Bank warned that mark to market accounting spelled disaster.

It is bad enough that disaster strikes from time to time. What is bedeviling, however, is how often they are foreseen and warned against:

  • Churchill was denounced in Parliament as “warmonger” for wanting to arm against a resurgent Germany.
  • Pearl Harbor—the radar officer was told to ignore the signs of incoming planes from the west. They must be the B-17s due from the northeast
  • An FBI agent’s suspicions about Middle Easterners taking flying lessons was not considered worth pursuing, though al Qaeda had already declared war on the U.S

What is it that leads urgent warnings to go unheeded, unheard, or just ignored?

For one thing, many warnings are reasonably considered crack pot. Recent scares over the new European particle accelerator creating black holes that would swallow up the earth seem like something from a Steven King novel. Others are based upon a consensus of authorities, but turn out to be just plain wrong anyhow—for example, WMDs in Iraq.

Careful planning requires sifting through the evidence and taking othing for granted—the opposite of complacency. Complacency is what brought down Lehman, Bear Stearns, AIG, and a number of major banks.

How do you keep complacency from destroying your business? John Kotter’s just published and very timely book, A Sense of Urgency from Harvard Business Press is worth a read for any entrepreneur concerned about this topic. Kotter uses a dictionary definition of complacency, “a feeling of contentment or self satisfaction, especially when coupled with an unawareness of danger or trouble.” Success itself is one of the major causes of it, he says.

What are some of the signs it may be infecting your organization? From Kotter’s list, some of those I have observed the most in client companies include the following:

  • People have trouble scheduling meetings on important initiatives—“my agenda is too full.”
  • Candor is lacking in confronting the bureaucracy and politics that are slowing down important initiatives.
  • Meetings end with no decisions except to hold another meeting.
  • People spend long hours developing PowerPoint presentations on almost anything.
  • Highly selective facts are used to shoot down data that suggest there is a big hazard or opportunity.
  • Passive aggressive behavior is common (“Oh was that due today? I wasn’t told.”)
  • Cynical jokes undermine important discussions.
  • Specific assignments around critical issues regularly are not completed on time or with sufficient quality.

If the opposite of complacency is a sense of urgency, one of the chief obstacles is a false sense of urgency, characterized by Kotter as a state of high anxiety and anger, coupled with a flurry of activity that accomplishes very little. A true sense of urgency is based upon an open sharing of data and the hard facts with the whole team, an intense attention on feedback from “outside” the company, and a constant determination to win. It also requires giving respect to skeptics, who serve a useful purpose, but neutralizing the nay-sayers (the “NoNos”) whose main agenda is for nothing to change.

While Kotter recommendations for avoiding complacency have great value, I think it is also important to dig a little deeper if we are to minimize its influence. Self-satisfaction combined with an unawareness of danger often requires forgetting or ignoring some basic realities:

  • It is often not success alone that creates complacency but an overestimation of our contribution to it. U.S. industry was a world leader after World War II, but this was in part because the rest of the industrialized world was in ruins. Once Europe and Japan rebuilt and competition was restored, U.S. auto makers were surprised to see that their quality was severely lacking. Now they face bankruptcy.
  • Nothing is forever—except for eternal things. Institutions that exist to make known eternal things, churches, temples, and schools of philosophy are themselves subject to change, even if their core doctrines endure. While committed its ideals, Lincoln was not complacent about the U.S. enduring as a Union. He saw democracy as an “experiment,” for which the outcome was yet to be determined.
  • Life is full of mischief makers. Native American Pueblo dances are very strictly choreographed and ritualized, except for one character called the Joker. He irreverently mocks all the other dancers, as if to say, “I d o not take your accomplishments very seriously.” Recently, the Joker in Batman movies has come to symbolize the nihilistic forces whose only goal is destruction.
  • We are often blind to a humbling reality—our highly developed science which affords us great ability to predict natural events actually make us less able to predict the human future than a Plains Indian who lived 1,000 years ago. He could reliably predict the world his children would live in, one governed by the cycles of nature and the movement of herds, according to sacred tribal traditions founded in times long forgotten. Our children may be living on the moon or Mars, using who knows what kind of technology under who knows what form of government.

Where does this leave us? If it leaves you uneasy, you have a couple of choices. You can reassure yourself that the unease is pointless and find a way to rid yourself of it. Or you can accept it as a kind of inoculation against complacency. This kind of unease is the opposite of the feeling that you finally “have it made.” That habit of mind is a luxury that leaders cannot afford. To cite the whimsical title of another book, this one by Andrew Grove, founder of Intel, Only the Paranoid Survive.