Does Your Company Suffer from the Fear of Finding Out (FOFO)

Does Your Company Suffer from the Fear of Finding Out (FOFO)

FOFO

Does Your Company Suffer from the Fear of Finding Out (FOFO)?

8 Minute Read
FOFO business leaders not listening

This cultural and psychological barrier could be stopping your company from uncovering the hidden challenges that could derail you on your track to success

What is FOFO, the Fear of Finding Out?

We’ve all seen the meme of the ostrich with its head in the sand. And I’m sure you can recall someone in your life who behaves this way, not opening that piece of mail or asking the questions they know may bring unfavorable information, shielding themselves to temporarily preserve their ‘comfortable status quo’ or carefully crafted worldview.

The “Ostrich Effect” describes peculiar human behavior where individuals avoid information, they believe may be unpleasant.

While there is speculation over who coined the term “ostrich effect” first – either behavioural economist George Loewenstein of Carnegie Mellon University or Israeli economists Dan Galai and Orly Sade (in a 2006 paper about investor behavior) – both used the phenomenon to describe the peculiar human behavior seen with investors and how they chose to stick their heads in the sand during lousy markets, ignoring information presented to them, or interpreting that information in a way that ignores potentially troubling implications.

And now cue today’s “Ostrich Effect”; “FOFO”, prevalent in so many organizations we see. Simply put, it’s the “Fear of Finding Out”, or the selective avoidance of negative information.

Could this cultural and psychological barrier be stopping your company from uncovering the hidden challenges that could derail your track to success?

Strong managers are listeners. Giving your team avenues to share problems and ideas can translate into change that matters

What is FOFO?

They say “out of sight, out of mind” but is that really true?

Similar to the Ostrich Effect, FOFO is the fear of finding out, or simply, the fear of knowing the truth. It is often used in the finance industry to describe customers afraid of opening their accounts due to the fear of poor financial health. According to a recent Barclays Bank study, 37% of Millennials had FOFO about their finances and did not like to check their bank accounts.” (R3 Consulting, Overcoming FOFO)

FOFO is also used in the medical field for those afraid to seek medical treatment and finding out they have a condition. Apparently, ‘Fear of Finding Out’ in the health industry makes up a 33% of conscious reasons why people don’t visit the doctor.

The research around FOFO from the medical industry shows that the ‘Fear of Finding Out’ mostly affects those who have an unhealthy lifestyle, and those who struggle to cope with the knowledge of a life-threatening illness. It can also impact those who do not want to be “pressured’ into making lifestyle changes.”

Fear is the foundation on which ‘Fear of Finding Out’ is built upon, and research shoes there are 3 main pillars:

  • Fear of the initiating action – 45% of women and 37% of men found the difficulty making an appointment a key barrier
  • Fear of the investigative process – 33% of adults who admitted that they had avoided a doctor visit that they deemed necessary citing ‘discomfort with a body examination’ as the primary reason
  • Fear of outcomes and implications – one of the most widely endorsed barriers to consultation in regards to cancer was found to be the ‘worry about what the doctor might find’, which was true for 34% of men and 40% of women. Furthermore, between 12% and 55% of people who undergo testing for HIV fail to return to learn whether they are infected

(Source: Cision)

Whatever the origins of FOFO, we at Swae have observed this phenomenon to be deeply prevalent in decision-makers, and the parallels in our findings hold true across all industries and organization types. What we have found is an apprehension – or sometimes even inability – to hear the truth about the problems that persist in their organization and the associated negative impacts they might have on their company’s organizational health and performance, in order to avoid conflicts or disrupt their status quo.

Everybody knows they exist, they are known but not discussable

MICHAEL BEER

We, at Swae, know organizations thrive and work better when leaders actively acknowledge potentially unpleasant information rather than run from it. We’ve partnered with numerous organizations to correct the detrimental outcomes that have come from simple “pure avoidance.”

To avoid potential disaster and confront FOFO, it is important to first understand where FOFO originates from, and why it’s allowed to persist. It is then possible to open up to the solutions to combat FOFO directly at a systems level in your workforce.
Why do leaders allow FOFO to persist inside organizations?

According to Michael Beer – Professor Emeritus at Harvard Business School and author of “Fit to Compete: Why Honest Conversations About Your Company’s Capabilities are the Key to a Winning Strategy” – there are six reasons why leaders allow FOFO to persist inside organizations.
These ‘“silent killers”, as he calls them include:

  1. Unclear strategy, values, and conflicting priorities.
  2. An ineffective senior team.
  3. Leadership behavior – top-down or laissez-faire (hands off).
  4. Poor coordination across businesses, functions, or geographic regions.
  5. Inadequate leadership/management skills and development in the organization.
  6. Low capacity for honest, collective, and public conversations about external and internal reality.

Number 6, the low capacity for honest, collective, and public conversations about external and internal realities is closely related to how good a company is at making change happen (and stick).

If problems aren’t recognized and realities aren’t faced, then a company doesn’t have a sturdy foundation, and without a sturdy foundation how can you build a solid structure?

It’s not about whether you believe in collective intelligence or not. It’s about if you can afford not to listen to the early warning signs and delay action. Swae helps you avoid expensive mistakes and issues

From our experience at Swae, number 6 is the most important and telling factor because it closely correlates to, and in some cases has a causal relationship with, how good and fast a company is at making meaningful and structural change happen (and making change stick) to improve their situation.

We’ve spent the past 3 years deploying our idea management and decision-making platform into various organizations, cultures, and environments, working with leaders across the Globe. Through this, we’ve observed that FOFO is allowed to persist inside organizations because:

  • Leaders don’t want hear the truth because they don’t want to take responsibility over solving it;
  • Leaders already know the truth and can’t do anything about it (lack of scope or authority); or;
  • Leaders afraid of the negative consequences and potential backlash to them from raising the truth or suggesting solutions to known problems

Furthermore, our research with these leaders and decision-makers have clearly shown that organizations that are more risk-averse, who operate under rigid and multi-tiered hierarchies are the most likely to suffer from FOFO at all layers of decision-making, particularly amongst upper and senior leadership. The characteristics and red-flags that come up time and time again include:

 

  • Disregard for employee voice and/or feedback
  • Tolerance towards a persisting unhealthy culture
  • Resistance towards changing of structure or approach in the face of existential threats (new technologies, trends, cultural expectations, etc.)

What is the cost and risk of allowing problems and FOFO to linger?

Unfortunately, ignorance is not bliss.

FOFO can silently destroy a company before it even knows what’s happening. Leaders typically look at the health of the company when it comes to numbers like revenue and profit, but there are many other factors that fly under the radar. This can include measures like operational or infrastructure issues, the decline in the health of a company’s culture, marketing/sales issues that hinder growth, and more.

FOFO and The Ostrich effect can be a serious drawback to tackling costly problems in organizations. Because it’s so overwhelming to contemplate the severity and complexity and interrelationships of the issues, it’s often easier for decision-makers to just ignore them or reject their importance or downplay information that contradicts their more positive narrative.

Unaddressed FOFO is dangerous, as problems left to linger means organizations are actively eroding their foundation

How can you eliminate FOFO?

Now here’s an important question for you…

If you’ve read the above and still feel comfortable selectively avoiding hard realities and prefer not to embrace the ignorance is bliss mentality, then the next section is not for you.

But, if you want to confront the realities head on, then read on:

At the root of FOFO is the fear of having uncomfortable discussions and possibly constructive but tense disagreements about the realities that confront the organization. FOFO is about confronting the elephants in the room, and in some cases, shining a light on the real truth often to those with authority who may not want to hear it. The fears of doing this are real – the act of speaking up may have ripple effects and consequences on your standing, autonomy, and access to resources.

But, not speaking up usually means that you are prolonging the inevitable. More often than not, silence means that you’re risking your own future, your company’s future, and the future of colleagues you now call friends within your organization as a whole.

To tackle FOFO head on, you must value the potential positive outcomes and solutions that you might reveal more than the discomfort of the process of revealing the challenges. The positive consequences and results must outweigh both the discomfort of raising the issue and the pain of carrying around unresolved truths for a never ending period of time. That’s a heavy burden to carry.

In a world of empty promises, manipulation, and deception, a true leader cares for the well-being of others; she shoes commitment to advancing the best interests of those around her…Ultimately, it’s this kind of love that defines the best CEOs on the planet.”

Marcel Schwantes
Founder of Leadership from the Core

How Swae can help?

The potentially devastating consequences of FOFO can be neutralized when leaders learn how to face the truth, even when it hurts.

Swae was designed to help leaders and employees create a “speak up” culture for everyone’s benefit, without making significant structural changes to how they manage the organization.

By implementing a technology platform like Swae, this enables an organization to source insights and ideas from more people more often, leaders can easily tap into the hidden problems that people are facing and open the funnel to discover winning and decision-ready solutions for solving issues — from the bottom-up.

Simply put, when more voices are heard, leaders see and know more, and they become empowered with new insights consistently. It’s becoming quite widely accepted that our best ideas and solutions can come from an organization’s people (regardless of hierarchy), the same few people don’t need to decide the fate of many.

If you feel your company suffers from FOFO, start by implementing any of these solutions above and you can start to correct your course. A path that’s unique for your people and for the purpose of your company.

If you want to overcome your FOFO, Swae is a turnkey solution that can give your employees a safe and streamlined way to express their feelings, raise problems and give you their best ideas. 

We’d love to hear from you!

As we continue to dig deeper and deeper into this subject matter, we find FOFO is something that resonates with so many of our clients, colleagues and friends. If you find the above all too familiar, we would love to chat and learn more about your specific experience and would love 10 minutes of your time to chat.

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3 Ways to Improve COVID-19 Relief Programs for the Startup Sector

3 Ways to Improve COVID-19 Relief Programs for the Startup Sector

Part 2 of 2: We Must Protect the Years of Investment Made to Creating a Strong ICT Sector in Canada

swae-tech-startup-ai-platform-better-decision-making

Suggested proposals for Improving CEWS and other relief programs

Based on part one in this series, we reviewed the fundamental issues with COVID-19 crisis relief programs, primarily looking at the Canadian relief programs CEBA and CEWS.

Recently, Soushiant Zanganehpour, CEO of Swae, was invited to provide his perspective alongside other startup Founders/CEOs on this topic to Canada’s Ministry of Innovation Science and Economic Development.

His commentary and recommendations, among the other startup founders present, were focused on the CEBA and CEWS relief programs specifically, and their ability to fit into the startup legal structures and operating circumstances.

3 Potential Solutions to Improve the Relief Programs

The following solutions were the recommended adjustments to the CEWS program to provide the right level of support to those that have been highly affected by the pandemic while supporting economic recovery:

Proposal 1: Redesign the CEWS eligibility criteria to include investment or debt alongside revenue

To help make the CEWS program compatible with how startups within the ICT sector are structured, it has been recommended that the revenue test for eligibility for the CEWS be reframed or expanded to include investments or debt accrued during that time. So, startups that were in the pre-revenue stage and are now in the post-revenue stage, they would be able to demonstrate how they lost financial opportunities resulting from COVID-19, and how they can take advantage of the CEWS specifically to not fall through the cracks.

If the test can reframe revenue to also recognize investment or debt as part of the revenue measure, then many would then be eligible and could benefit from this relief program to be able to survive.

At this time, other than taking on debt (with personal guarantees), without access to the CEWS wage subsidy program or other grants/investments, many like startups like us have a very limited runway to be able to get through this crisis. The fact of the matter is that B2B customers are not in a position to make buying decisions for at least 6–12 months and investors are not in a position to make high-risk investments when they’ve lost 40–60% of their own investment portfolios.

Proposal 2: Expand the range of relief programs beyond CEWS

Alongside Soushiant, there were five other startup Founders/CEOs that were invited to offer potential solutions to Canada’s Ministry of Innovation Science and Economic Development group. Together, they came up with the following list to help expand the programs available:

  1. Businesses can be eligible to get government-backed credit at 0% to 2% interest over a fixed term. The maximum credit amount would be a percentage of the business’ expenses on the tax return for their most recent fiscal year-end and should be capped up to a maximum per company.
  2. Businesses can choose to get money directly from their bank (similar to CEBA or BCAP), or as a credit or grant from the government directly (in this case, the Canadian government).
  3. Business owners should not be required to provide a personal guarantee as is currently being required.
  4. There shouldn’t be a strict revenue reduction qualifier. This introduces complex accounting overhead which has already caused confusion for all involved.
  5. There shouldn’t be a strict requirement for it to be used for payroll or even credited against payroll accounts.
  6. Special non-repayment incentives should be put in place when businesses use this credit to hire back or retain existing employees, hire new employees, or invest in R&D efforts.
  7. Punishment should be extreme for abuse and fraud. Administering banks and grant administrators should be required to inform on the misuse of funds.

Proposal 3: Offer a matching investment facility for startups

(A proposed solution from Soushiant Zanganehpour)

This proposal relates to expanding the eligibility requirements of the BDC Capital Bridge Financing Program, to allow non-VC backed ventures to also access the investment facility.

Currently, the BDC Capital Bridge Financing Program only entertains funding requests if a deal is referred and already backed by a pre-qualified Canadian VC firm. If you are referred to this program by a VC firm General Partner (GP), you as the entrepreneur are out of luck (even if you have syndicated a group of accredited investors yourself and have already raised over the $500K threshold).

This financing program suffers from a fundamental flaw. Historically, over 90% of accredited Canadian VCs do not invest in very early-stage ventures (pre-seed, pre-revenue, or post-revenue) and typically concentrate their investments to ventures who are looking for Series A sized investment round and have Series A metrics and achievements to show ($150K+ MRR).

As a consequence, most startups who are backed by accredited angel investors will not be able to benefit from this bridge program, and the government will also not benefit from the potential upside of being involved in such deals at such an early stage.

This leaves a large gap to fill and a lot of high potential companies without access to resources to continue growing and derisking their ventures.

Soushiant recommended that access to the investment facility should be limited only to technology ventures backed by accredited Canadian VCs and ventures that can syndicate their own accredited investors. He recommended that the Government of Canada should offer a Matching Fund Facility through a Convertible Note, and if an entrepreneur or venture is able to syndicate a set of accredited Canadian investors to commit a minimum of $250K or above, they could benefit from this matching funding facility.

Expanding the scope of this facility or building something complementary has multiple benefits:

  • It allows other accredited professionals to lead a round, allowing the government to take advantage of the diligence already done on the venture by professionals;
  • It allows thousands of other startups to benefit from funding in a risk-adjusted manner
  • It may provide additional assurance to accredited investors to invest more in the ICT sector during this particularly challenging time
  • It helps the government benefit from any financial upside experienced by promising early-stage companies, as they are involved through a convertible note, not a wage subsidy or through a grant.

 

 

Are you a startup or small business facing this same challenge and are concerned about your ability to survive like we are? If so, what are your thoughts on this? We want to hear from you [click here]!

Why There’s a Fundamental Issue with the COVID-19 Crisis Relief Programs

Why There’s a Fundamental Issue with the COVID-19 Crisis Relief Programs

Part 1 of 2: Simply, Past Revenue Is Not the Right Measuring Tool

swae-challenges-covid-relief-programs

Background and Types of Relief Programs Offered

financial relief programs around the globe kick in with the main goal to stimulate businesses, in Canada, many in the Information and Communication Technology (ICT) sector are feeling left out and misrepresented.

After assessing the various programs offered to companies affected by COVID-19, our research has found that most companies are unable to benefit from a variety of relief programs offered by the government. The issue lies in the way that the programs are structured, and how the companies that make up the ICT sector have financed their growth to-date which is being overlooked. Or, these same companies are being penalized by the government programs that were supposed to help them in a time of crisis.

There’s a serious problem here because there’s a lack of answers around important concerns relating to the fundamental design of the programs, and the bottom line is that many feel the policy makers are ignorant of how technology startups and companies grow. This is leaving founders in the ICT sector feeling unfairly penalized for their legal structures and for the strategic growth decisions they’ve made.

Currently, the most significant relief programs offered to businesses (under 500 people) affected by COVID-19 by the Canadian Federal Government are the Canada Emergency Business Account (CEBA) — a $40,000 interest-free, government-backed loan that includes a $10,000 grant if you spend and pay back the full loan amount. And, there’s the Canadian Emergency Wage Subsidy (CEWS) — a 75% wage subsidy up to a maximum of $847 per week.

To be considered eligible to receive the CEWS, an employer must demonstrate a drop in revenue of 15% or more for March 2020, and 30% or more for April 2020 and May 2020, when compared to their revenue for the same period in 2019. This means that if your revenue did not drop by at least 15–30% more than you made last year, sorry, you’re not eligible.

Where the Canadian Federal Relief Programs Have Design Flaws

And herein lies the fundamental flaw: the design of this program using the revenue test used to establish eligibility overlooks the way startups finance their growth and development.

Let us further explain…

The majority of technology startups do not start their business with revenues to report early on, and growth is based on investments in order to develop a product and find a market for that product to sell to.

Most startups grow through bootstrapping or raising grants, equity investments, and/or debt. In the rare case that a startup begins generating revenue on day number one, under normal growth circumstances they would have less revenue generated last year than they would have this year. In a technology venture, revenues are expected to increase exponentially year-on-year, not remain stable and stagnant for years on end (like a traditional brick and mortar small business or storefront).

If a technology venture generated $100K in revenue last year in 2019, and this year they projected to generate $500K, even a 30% loss would not qualify them for the CEWS program because they have earned well over their 2019 baseline for the same period. This venture must have lost much more than 30% to benefit from this relief.

What the Canadian ICT Sector thinks of the Relief Programs Offered

Following the announcement of the CEBA and CEWS relief programs, the Council of Canadian Innovators (CCI) — a national advocacy organization and business council led by the CEOs of Canada’s fastest-growing companies — conducted a sector-wide survey, to see how the various programs would impact startups and the ICT sector.

We weren’t at all surprised that they found that:

  • Around 39,000 Canadian ICT companies are ineligible for the CEWS because of how they evaluate a reduction in business activity.
  • 94% (609 CEOs) said they would be ineligible for CEWS based on the previous 30% reduction in wages year-over-year.

Like the other technology startups surveyed, Swae is in the same boat, and like other startups, we did not start our business venture with revenues to report early on. We have grown based on investments in order to develop a product and then find a market for our product. Though we incurred significant losses due to COVID-19, we had no revenue to report during this 3 month eligibility period in 2019 so we do not qualify for the program.

What’s at Stake if Relief Programs are Not Improved and Do Not Increase Accessibility to Liquidity

Given the impact of COVID-19 on most economies globally, stimulation through financial relief is required if there’s going to be any “economy” left when COVID-19 subsides. This isn’t just about Canada, but the entire globe.

Governments could help stimulate technology companies and startups if they were creating programs using suitable measuring tools, and really understood the recipient’s circumstances and the kind of relief needed.

Across Canada, more than 60,000 workers a year are joining the tech sector and the innovations of these startups fuel a network of advanced industries that collectively drive 17% of the national GDP and 11% of national employment. That’s a giant network of customers, clients, and suppliers that stand to lose big time if the startup ecosystem fails.

Many tech startups can only keep going and raise funds based on assumptions around sales that are now becoming null and void during this COVID-19 crisis. This concern has been voiced by many technology entrepreneurs.

For example, Gordon Casey, Founder of Brave Technology Coop in Vancouver, BC said, “We have a team of 7 FTE. Our runway is based on assumptions around sales that are all irrelevant now. So we can either let everyone go to put a pause on the business in every sense and attempt to “time travel” to the other side of COVID. Or, we can keep paying those employees while we pause revenue and sales-generating activities.”

Either way, it’s not a winning scenario for Brave Technology Coop.

They’re not the only ones stuck in that position. Many companies, including Swae, are stuck between pre-revenue and post-revenue generation stages and have no reliable predictions on when a stable and receptive market will happen. It’s a difficult situation no matter how you dice it.

These concerns must be addressed and alleviated to ensure no one is unfairly penalized for their existing legal structure and the growth decisions they’ve made to-date.

Canadian tech entrepreneurs have made tremendous gains over the past 15 years, thanks to the support of all levels of government. From incubators, grant programs, investment funds, to trade missions — all of this nurturing has helped to build a vibrant ecosystem that’s driven huge growth in jobs, investment, and economic activity.

If relief stops due to technicalities and flaws in how programs are designed to help the startup sector at this moment of crisis, our future economy will start from zero afterward.

More importantly, nuanced support is required to help protect the many years and millions of dollars of investment made by the Canadian government in creating a strong ICT sector all across Canada.

In part 2 we’ll be discussing 3 solutions that we’ve found to combat this major problem. Stay tuned!

What do you think, do you agree? We’d love to hear from you, go here to let us know your thoughts!

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