Published October 2001

‘Plausible denial’ a tool
for world and biz leaders

American presidents have always kept a part of their plans and actions secret. During the Cold War, these secret operations, often conducted by the CIA, became so much a part of our foreign policy that a phrase was coined to describe the president’s relationship to them: “plausible denial.” The term applied to the things that presidents needed done but couldn’t afford to take responsibility for — especially if the operation went sour.

The concept was simple. If a covert operation was exposed, there would be no visible evidence of any official ties or backing to it, and the explanation would go something like, “Yes, things happened, but they weren’t authorized, and the U.S. government was not involved.”

Your business plan may not include trying to foment unrest in distant lands, but there is a place for “plausible denial” in the day-to-day management of business. And it is linked to the familiar idea of delegation.

Most managers and entrepreneurs are quite willing to dish off “grunt work” but slow to delegate authority. There are two definite advantages, though, to delegating some responsibility for management decisions.

The first is that it locates the decision closer to the point of action. Even in a small company, the CEO often lacks the familiarity with the details that might be important in a decision. And, in personnel-related management decisions, a CEO or entrepreneur may not always have the best and fullest information about a worker’s strengths and weaknesses.

The second, and more significant, advantage comes from “plausible denial.” If a decision by a subordinate turns out to be a bad mistake, it often can be reversed. The CEO can undo it, or, if possible, simply not sign off on the deal. A bad decision made by the CEO is much harder to unwind.

Decisions covering key elements of a business, such as building or equipment leases, can easily make the difference between success and failure. Retailers, for example, often find to their dismay that key provisions of the lease covering their premises will end up determining their profitability more than any other factor. Analysts call this the “front-end rule” — and what it boils down to is that it is not really possible to manage your way out of a bad lease.

The importance of such a decision often leads CEOs and entrepreneurs to keep those responsibilities for themselves. That very importance, though, is all the more reason why the preliminary work should be delegated.

Delegating allows the decision maker to follow the progress of the preparatory work, whether that involves research, bid solicitation or negotiations, without getting caught up in the moment. That distance can keep you from becoming prematurely committed to a particular technology, brand, location or facility, or salesperson.

Delegation of this type is effective, but not easy. Salespeople can be persistent in seeking out the final decision maker, and delegation can produce problems within your organization if you don’t handle your role correctly.

For instance, the person you delegated the responsibility to may feel that you don’t trust them or that, since you are going to make the final decision anyway, they can get away with a half-hearted effort.

A good CEO or entrepreneur can make the delegation process work by doing two things:

• Bring the person to whom you are delegating responsibility in on the process. Let him or her know why you are doing it and what advantages “plausible denial” has for the business.
• If you have to reverse a decision, make sure you explain why, and how the preparatory work made the better decision possible. It is important to communicate the value of keeping any ego, including your own, out of company decisions.

“Plausible denial” is really a form of insurance for your company. Like insurance, you really don’t want to use it, but it is a good thing to have.

James McCusker, a Bothell economist, educator and small-business consultant, writes “Your Business” in The Herald each Sunday. He can be reached by sending e-mail to otisrep@aol.com.

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