Why do smart executives make dumb decisions? Why do boards of directors head off in certain directions when you know the result will be spectacularly bad?

A lot of it is because of Groupthink, the term coined by Yale psychologist Irving Janis. He defined it as the "psychological drive for consensus that suppresses disagreement and prevents the appraisal of alternatives in cohesive decision-making groups.''

It's the subject of an interesting piece, Group Therapy, from Alix Stuart in CFO.com.

Janis showed that Groupthink had resulted in such US foreign policy fiascoes as Pearl Harbor and Bay of Pigs. Decades later, these intelligence failures can only be matched by the Bush administration's surreal vision of conquering Muslim hearts and minds and transforming Iraq into a western democracy.

While the urge for cohesive thinking is part of the normal group process, an encouragement of diversity and different points of view dilutes its impact. This was not the case however at such places as Enron and WorldCom. In each case, the result was an organization where delusions were shared, where dissent was stifled and communication lines put under strain or ignored and where the operations and attitudes were out of kilter with the real world.

In his book Groupthink, Janis wrote: "A considerable amount of social science literature shows that, in circumstances of extreme crises, group contagion occasionally gives rise to collective panic, violent acts of scapegoating, and other forms of what could be called group madness. Much more frequent, however, are instances of mindless conformity and collective misjudgement of serious risks, which are collectively laughed off in clubby atmosphere of relaxed conviviality ...The group members know that no-one among them is a superman, but they feel somehow the group is a supergroup, capable of surmounting all risks that stand in the way of any desired course of action: "Nothing can stop us!"

Stuart looks at possible solutions to the problem: building more diversity into the group so that you get a range of opinions and better brainstorming. That's a good start but you can also start by looking at how the fabric of Groupthink is woven into every organization.

Take, for example, the jargon of "mission" and "vision" statements, of "team players" and "singing from the same song sheet". Stuff that is now embraced not only businesses but also public sector organizations, including schools and hospitals, and non-profit organizations. And stuff that makes Groupthink part of the organization.