In 1989, my media agency bought a small consultancy operating in a similar area. The task of the consultancy was to guide an ad agency used by Sainsbury’s, one of the clear market leaders at the time, on its targeting – all those TV spots the agency was buying may have been cheap, but were they reaching the right audience for Sainsbury’s?

An exec at the ad agency showed me the work they were doing and said: ‘Isn’t this interesting: Sainsbury’s is stronger than Tesco everywhere except with young people. We’ve just analysed this year’s research and the gap is widening.’ That client was happy to use the research to target the advertising at an older, middle-class demographic, but didn’t see the bigger picture: Tesco, by winning the battle for young adults, was starting to control the future of the market.

We told Sainsbury’s at a time when the situation was salvageable. They didn’t listen and a succession of top executives lost their jobs as the Tesco machine ground past them to open up a gap that couldn’t be closed.

That was a long time ago but the warning signs emitted by a floundering company are timeless. In the past two years I have found myself having lunch on different occasions with four CEOs. I was wearing my consultancy hat and, with a mixture of research, experience and instinct, I knew each of their companies was in trouble.

Two of them agreed with me, but reassured me that the remedial steps were well under way. One blamed his team and was clearly distancing himself from events, and the other flatly denied there was a problem at all.

All four subsequently lost their jobs in the space of a year. Their mistakes can be broken down as follows:

* One didn’t really understand his market. He had a clinical, text-book approach to management, but didn’t engage with his team at all
* One had hired too many second-rate people in senior positions who spent all their time playing politics
* One blamed his team and didn’t distance himself fast enough. The company’s chairman, after two bad quarters, decided to demonstrate tough leadership to his shareholders by firing that CEO
* One misread the market and was clinging to the hope of an upturn to put things right.

In all cases, the CEOs were denying the seriousness of the problem and didn’t get personally stuck in to sort it out. They either allowed less experienced staff to execute decisions poorly or let the situation drift aimlessly.

The blame game is another sign of being in denial. This is more prevalent among directors in a company, rather than the overall leader. The bad situation is always someone else’s fault: ‘I will blame them, keep my head down and work only with my own team in my own department.’

I’ve seen this happen several times and on each occasion the company goes into a downward spiral with no-one able or willing to pull it out.

Avoiding the problem

Sometimes denial will reveal itself through displacement therapy. I know a director of a well-known company who has serious sales problems on a number of his products. To avoid confronting the issue, he does more industry work and is always on platforms with wise things to say. Meanwhile, Rome burns.

The digital world has provided spectacular examples of denial. In fact, with the first dotcom bubble in the late 90s, just about the whole industry spoke of ‘burn rate’ – all it meant was ‘rate of expenditure’ and yet it was a badge of pride for many.

I even remember interviewing a prospective sales director for a digital software business of which I was chairman. He spoke impressively of large numbers, way beyond ours, for what he called ‘gross new business wins’. Staggeringly, when forced to explain, this meant the total value of all the business he’d pitched for, whether he’d won it or not.

However, it is only fair to end with an example of my own denial. It was in the mid-90s at CIA when we were in a dispute with ITV. We were accused of ‘over-trading’ – promising deals we couldn’t deliver.

The situation was very confusing, but the underlying truth was we’d tried to be too clever and our systems were rubbish. To put it bluntly, we’d fallen flat on our face.

I wouldn’t accept defeat and put a huge amount of personal capital into the fight. It took some straight talking from one of my non-execs, who knew the market very well. ‘Chris,’ he said, ‘unless you settle this, it’s going to bite you in the bum.’

And bite it did, to the tune of well over £1 million. My hubris proved to be a costly mistake. We could have avoided a lot of damaging publicity if I had accepted reality in the first place.

Chris Ingram has considerable experience of building and managing rapid-growth firms and is widely regarded as the inventor of the modern media agency. He started CIA in 1976 with three people and £10,000. It grew into Tempus Group and was sold to WPP for more than £430 million in 2001. In 2002 he launched Genesis Investments, a private equity business, and in 2003 The Ingram Partnership, a strategic brand-building and communications consultancy.