Red Flags are those subtle/not-so-subtle warning signs that something or someone may not be what they appear. Ironically, while these signs seem to subtle, in hindsight they look like red flares. We tend to miss them as we want to hear or believe what we want to hear and choose to ignore the rest. Like how the young man who is with a beautiful girl seems to ignore her financial comments of debt. This should be a red flag that she may not be good with money. Or flipside: A person who swears he is a stay-at-home guy but tends to be the life of the party. More red flags.
On the Line
We then grow up and do it in our careers. A boss tells people he wants to retire but can’t as the place will fall apart without him. He usually adds something like, “I just want to leave the company better than I found it.” Yet, his actions are all about him staying on; sometimes dragging the company down with him. These people can use compelling arguments to justify red flag actions. Red flags tend to be more conflicting and harder to spot in our career. But they are there: If you choose to open your eyes, you will see them. It’s just harder to see red flags when your job is on the line and you have a family to feed.
In some cases, the demise of a company can be the result of selecting a poor leader. Like a father who hands the reins over to an unqualified son—but who is really to blame? Isn’t it the one who put him there? People simply and purposely ignore what should be glaring red flags; it is because they want so desperately to believe and before they know it they are too deep in.
Vulnerability of Blind Spots
A friend of mine, Kevin McCarthy, wrote an excellent book titled “Blind Spots.” The book is his life story on how he became so excited about an Initial Public Offering for a new company. His employer appeared to be on the fast track with celebrity endorsements and impressive venues. The excitement was palpable, yet looking back, red flags were everywhere. He turned a blind eye to these not-so-subtle warning signs.
First, he selected to hear what he wanted and then he found himself in too deep. He surrounded himself with people that supported this collective dream and that were willing to ignore the red flags. This is what he calls, “the time when good people make bad decisions.” These blind spots made people vulnerable and others know how to play on them. He noted that it is a human trait and warns us that we should always be aware of those red flags. We need information to be honest and objective, without the conflicts of emotion or greed. His wife tried to warn us of red flags but we thought we knew better. Acting on red flags is tough to do. It is especially tough when upper management is sending them and your job is possibly on the line.
Over the years, I have found myself speaking up and wondering if I would have been better off just sitting down and shutting up. McCarthy’s book was an inspiration to me on those dark days when I wondered if I had done the right thing. His advice has always been solid and I would strongly suggest you read this book if you sit on a board, trust or a finance committee.
McCarthy found out the hard way that ignoring those red flags could land you in hot water. In his case, he knew he was a good man and was sure he had done nothing wrong. Even at trial, he was sure it was the other guys in the room that acted badly. The red flags were in full flight when the FBI came to his home early one morning. He found out that being a good guy was not enough when courts examine conspiracy to commit fraud. He thought just watching others plan and conspire was not a crime. He was wrong and spent three years in a Federal prison for that mistake.
Ignorance is Not Always Bliss
My friend was a little like our young lovers—they all choose to ignore red flags. He did not plan the crime or was even fully aware of it. But he got three years to reflect and he noted that he should have said something or just walked out.
Most people are unaware of conspiracy laws and how far reaching they can be. The book is an easy and enjoyable read. It was heavy stuff with some humor. I promise it will have you watching and acting on red flags.