In business, silence is not golden:

“If you can’t say something nice, don’t say anything at all.”

That timeworn maxim may cool sibling tensions and head off playground battles. But in the world of business, silence is not so golden. In fact, says Harvard Business School Associate Professor Leslie Perlow, not saying anything can be downright toxic.

In her new book, “When You Say Yes But Mean No: How Silencing Conflict Wrecks Relationships and Companies … and What You Can Do About It” (Crown Business, 2003), Perlow probes the consequences – from minor misunderstandings to bankruptcy – that can result from small but cascading acts of silencing. Although the intention of avoiding conflict is often to help maintain relationships and get work done expeditiously, silencing can do exactly the opposite, she says.

Perlow’s silencing study sprang from her 19-month observation of Versity.com, an online education company started by four University of Michigan undergraduates in 1999, when she was on the faculty there. A corporate ethnographer, Perlow conducted the same intense field research with this start-up company that an anthropologist might undertake with a little-known culture. From her vantage point as an outsider gathering straight talk from multiple sources, she watched the company flourish, flounder, and, ultimately, collapse as its principals avoided speaking directly and honestly.

“With this type of silencing, which turns out to be quite pervasive, these people really, truly, genuinely wanted the organization to succeed and they cared desperately to make their relationships work,” says Perlow. “They were doing what they thought was in the best interest of getting the work done as quickly as possible, and preserving their very important relationships. … [B]ut what it ended up doing was undermining them.”

The short life of Versity.com

Perlow did not set off to study silencing at Versity.

When Clyde, one of her undergraduate students at the University of Michigan, asked her to supervise his independent study – launching Versity with three other undergraduates – Perlow agreed. The more she watched them though, the more she was drawn to the students and their business. “I thought I’d spend the afternoon, and I was so impressed that I started going back,” says Perlow.

Originally, she was interested in continuing her work on work-life trade-offs, the subject of some of her previous research. She quickly discovered that an Internet start-up was uniquely unsuited for that line of inquiry; Versity was founded and staffed by energetic young entrepreneurs who happily traded sleep, health, and life outside for the short-term goal of making it big. Still, the opportunity to explore the corporate culture of a dotcom was appealing to her.

From a corporate ethnographer’s perspective, Versity provided an unparalleled opportunity. In just 19 months, Perlow witnessed the complete life of the company, from its launch by four college dropouts to its value at $125 million to its ultimate demise.

“It turned out to be great, because I have the entire life cycle of the company,” says Perlow. “I got to see the whole ride.”

And what a ride it was. Versity – short for “university” – was born of the technical savvy and entrepreneurial vision of three University of Michigan friends, Howie, Aaron, and Daniel; and the financial acumen of Daniel’s roommate Clyde. Its initial business plan was to provide free class lecture notes on a Web site, which would be supported by advertisers interested in the lucrative college market.

Fueled by $875,000 from angel investors and family members, Versity rented office space, recruited note takers and campus managers from many Big Ten schools, and within a few months hired six additional staff. With the next round of venture capital funding came a team of professional managers and a move from Michigan to California’s Silicon Valley.

Speed kills … and so does silence

But even as business steamed forward, technical issues, competitors, and professors’ resistance to professional note takers threatened to derail Versity. As their cultures clashed and their visions grew unaligned, the founders and managers increasingly worked at cross-purposes. The accelerated pace of business, meanwhile, demanded rapid decisions. Versity acquired a competitor, then was bought by another company that moved Versity’s operations to San Diego, and, three months later, filed for bankruptcy.

Along the way – Perlow noticed later when she reviewed her notes – Versity’s key players avoided conflict by silencing their disagreements. When Howie and Clyde clashed over the performance of one of their first employees, they silenced their true concerns in favor of maintaining their important relationship as founders. Peter, the professional hired as chief executive officer, never fully articulated his concerns about the competition or the ethical implications of the company’s core business. The founders never spoke up about their increasing concern over Peter’s motives for selling Versity.

Everyone, however, was talking to Perlow. “One of the interesting things about being an ethnographer is that you hear different perspectives,” she says. She heard the conflicts and concerns that the Versity managers were not telling each other. And in retrospect, as she reviewed her binders full of interviews, she realized the destructive power of their silencing.

“From the beginning, they weren’t speaking up about these little things,” she says. “It wasn’t obvious until they got to much bigger issues.”

The breakneck speed of the dotcom culture exaggerated the phenomenon; Perlow watched key players keep their thoughts to themselves as deadlines loomed. Speaking up, it seemed, threatened to slow the business in an industry that thrived on being first and fastest.

Beyond the dotcoms

Did Versity fail solely because of the toxic silencing of its principals? Unlikely, says Perlow, citing other factors – not the least of which was the bursting of the dotcom bubble – that contributed to its demise. Yet she emerged from her study convinced that silencing was a significant problem – and not just for Versity. Interviews with individuals from a wide range of other businesses, from bricks-and-mortar retail to nonprofits to the military, bore out her hunch: Silencing is pervasive and problematic beyond the dotcom culture.

“It’s a huge problem,” says Mike Beer, Cahners-Rabb Professor of Business Administration Emeritus at Harvard Business School. “If you want to try to understand almost all organizational problems, this is one of the uniform problems that underlies most of them.”

Beer, who has researched this issue extensively, adds that the ability to create an open dialogue that engenders trust is essential for a healthy organization. “That takes a lot of work and requires a lot of patience to do. There are some companies that do it and do it well, but they’re not pervasive,” he adds.

Perlow’s tale, with its ethnographer’s insight into the unspoken conversations at Versity, is more cautionary than prescriptive. Yet she’s hopeful that her fine-grained examination of one young dotcom will resonate broadly with employers, managers, and employees and get them talking – preferably to each other.

“We recognize the risks of speaking up,” she says, “but we don’t recognize the risks of keeping quiet.”