Here’s a quick test of your organization’s health. When you need to find out the truth, where do you turn?

Do you get it straight from the leaders?

Or do you have to rely on gossip and rumors at the water cooler and in the hallways to figure out what’s going on? Usually these discussions begin with, “Don’t tell anyone you heard this…”

Ed Catmull, founder of Pixar said, “If there’s more truth in the hallways, you have a problem.”

No leader likes to announce bad news. No leader likes to admit a strategic or business failure. No leader likes to admit when there’s been bad behavior among employees.

But the truth will always come out. It’s only a matter of the path that truth will take and how much rumor, gossip, and wasted time will be generated along the way.

A leader has two choices. The first is a quick and decisive delivery of bad news. Yes, it will be painful and embarrassing, but I swear if there’s one thing employees want, besides perhaps getting paid more, is a leader that will call it like it is and not hide behind bullshit or company policy.

The second choice, and the choice that many leaders make, is to assume their people are just plain stupid, naïve, or gullible. Deny and cover up the bad news, and figure people will just accept it, get back to work, and move on, because if the leader says everything is ok then it must be ok. It’s management by condescension.

When people don’t get the truth, they know it, and they don’t move on. Instead, they double down on trying to find out what happened, which makes it even a bigger issue than it already was.

As Basecamp founder Jason Fried says, “Own your bad news. When something goes wrong, someone is going to tell the story. You’ll be better off if it’s you. Otherwise, you create an opportunity for rumors, hearsay, and false information to spread.”

This reminds me of the Barbara Streisand effect. In short, Barbara Streisand didn’t want photographs of her home published, and she made such a big deal of trying to conceal it that more people ended up seeing these photographs than would have if she had not tried to hide it. Bad news is the same way. Try to cover it up, and you’ll ignite a fervor among your people to find out the truth.

But it gets worse for leaders. Not only is hiding the truth a major communication issue, but now it’s a credibility issue as you look like a spineless coward. No one expects leadership perfection, which is why it’s so perplexing that leaders try to maintain this aura of invincibility. If you want your team to lose confidence in you, just keep burying the bad news. Now your team will be in the hallways, not only talking about the bad news, but your incompetence as well.