Add another executive to the positive thinking trap club. Jeffrey Immelt, former GE CEO, was so overconfident and unrealistic that his "'success theater' masked the rot" at the company, says the Wall Street Journal.

Too many executives are scared of being seen as "negative thinkers," even though the trait, when controlled, is a marvelous tool for analysis and decision making. Even worse, as the GE story shows, the higher up the in the organization the demand for good news sits, the more deeply problems eat away at a company. Or, as the Journal put it:

This culture of confidence trickled down the ranks and even affected how those gunning to succeed Mr. Immelt ran their business units, some of these people said, with consequences that included unreachable financial targets, mistimed bets on markets and sometimes poor decisions on how to deploy cash.

According to the story, time and again Immelt and his management team insisted on a rosy view of the company, loudly proclaiming optimism that couldn't be supported by reality. Reportedly, even the board had no idea how bad things were until Immelt had retired and the new CEO, John Flannery, could bring in more realistic data. And even at that, the board bears significant responsibility. It should have questioned more directly and sharply over the years when results kept falling short of promises.

The "bad news blinders" approach isn't unusual. I've seen it repeatedly, whether in companies I was writing about or working at. There is a mania in American business that praises unbound positive thinking, as if a smile and can-do attitude will overcome everything. But they can't.

You've likely seen this yourself, either in a company or as a customer. One of the most obvious examples is when management decides to cut resources -- human and otherwise -- and then expects the remaining employees to buckle down and somehow get everything done that was already difficult to accomplish. Of course there are efficiencies to gain. But they don't last forever and people aren't infinitely extensible. Generally, the executives who direct what is possible have no experience with performing the jobs in question and have no idea what they entail.

Then you get the demand for better results, putting employees into a state of cognitive dissonance (which is, as Scott Adams once told me in an interview, the basis for all the humor of Dilbert). People find themselves between unreasonable demands on one side and unrelenting reality on the other. Instead, they take wild chances or fudge the numbers to avoid the inescapable miss of set targets.

You can ask people to go further than normal on occasion. If you do so repeatedly and even continuously, they eventually burn out and leave or undermine the company. From their view, there is no other choice. No employee owes their entire life to an employer.

If you run a company, no matter how well you want things to go, you must have a taste for bad news, both receiving and delivering it. Without such information, you only have what system engineers call a positive feedback loop. That causes you to keep moving in the same direction, even if it is toward a cliff's edge.

Bad news, no matter how unpleasant it can be, is critical. Now you have a negative feedback loop. When things are going awry, you can take notice and then direct things away from danger and toward success. However, it requires a company in which mistakes can be understood, learning from the past encouraged, and reality considered a guiding light.