by Lauren E. Faulk

​When Elizabeth Holmes founded Theranos in 2003, she captured the imagination of Silicon Valley, investors, and the media. Promising to revolutionize the healthcare industry with a device that could run hundreds of blood tests from a single finger prick, she was hailed as the next Steve Jobs. But behind the bold promises, black turtlenecks, and high-profile endorsements, lay a fundamental flaw in Holmes’ leadership approach; a complete absence of participative observation. Rather than engaging directly with the real work of the company, Holmes distanced herself from its day-to-day operations, fostering a culture of secrecy, division, and fear. The story of Theranos is not just about fraudulent science; it is a cautionary tale about what happens when leaders become detached from the reality of their own organizations.

​

Participative observation refers to a leadership approach in which leaders actively engage with the processes, culture, and daily operations of their teams; not to micromanage, but to learn, understand, and make informed decisions based on reality. This involves interacting with employees across all levels, observing work processes firsthand, listening to feedback directly from the source, and gaining unfiltered insight into what is truly happening within the organization. Leaders who practice participative observation are better equipped to understand organizational challenges and build trust among their teams. In contrast, those who avoid this approach risk relying on assumptions, filtered reports, or idealized versions of reality that leave them disconnected from critical issues.

​

So, how did Elizabeth Holmes violate the principles of participative observation? Holmes rarely engaged directly with her engineering and scientific teams. Instead of participating in lab meetings or reviewing raw technical data, she focused on high-level investor pitches and public relations. Multiple employees testified that Holmes avoided technical discussions and preferred to hear simplified summaries from a few loyal lieutenants ,particularly COO Sunny Balwani, who had no medical or scientific background. Key information about the device’s failure to produce accurate results never reached Holmes, or was willfully ignored. Anyone who isolates themselves from the core operation in their business is doomed to fail.

​

Holmes also did not fail to foster a culture of both fear and secrecy. Theranos was infamous for its strict non-disclosure agreements, aggressive legal threats, and internal silos. Employees were discouraged from discussing projects with colleagues in other departments. Feedback loops were destroyed. No one felt safe sharing problems, and leadership remained blind to critical flaws. Whistleblowers such as Tyler Shultz and Erika Cheung reported intimidation tactics, surveillance, and legal harassment after raising internal concerns. 

​

The company’s core product, the Edison machine, never functioned reliably. This is quite ironic if we compare it to the history of the infamous battle of Edison and his inventions against Tesla's brilliance in the 19th century.  But instead of observing product trials, quality control checks, or lab performance directly, Holmes continued promoting the device publicly. She appeared on TV shows, magazine covers, and investor panels, touting the Edison as a game-changing success. “This is the most important thing humanity has ever built,” Holmes once said, despite internal documentation proving otherwise. Holmes made strategic decisions and public claims based not on evidence or observation, but on aspirational narratives.

​

Rather than engaging with internal voices: (engineers, lab workers, and technicians), Holmes surrounded herself with powerful external figures: former Secretary of State George Shultz, Henry Kissinger, and General James Mattis. These board members brought credibility but had little to no knowledge of biotechnology. The illusion of credibility masked a lack of technical verification. Holmes relied on influence and image, not substance.

​

Theranos exemplifies a classic case of top-down, vision-driven leadership gone unchecked. Elizabeth Holmes’ leadership style prioritized controlling the narrative rather than confronting the reality of her company’s technological and operational challenges. Instead of engaging directly with the technical process or encouraging transparency, she insulated herself from day-to-day operations, avoiding accountability. Rather than fostering a culture of curiosity and open communication, dissenting voices were suppressed, and legitimate questions were often met with silence or intimidation. Secrecy was scaled aggressively, while functional systems and internal checks were neglected. Participative observation ,where leaders actively engage with the actual work of their teams, could have changed the course of Theranos. While it may not have fixed the flawed technology, it could have preserved the company’s integrity, reputation, and future. Had Holmes immersed herself in the technical details, encouraged feedback, or simply walked through the lab asking critical questions, the fraud may have been identified internally and resolved before escalating into a public and criminal scandal.

​

There are several key lessons leaders should take from the Theranos failure. First, presence is insight. Effective leadership requires more than just showing up for photo opportunities or public presentations; it demands being present where real challenges occur. Walking through the lab, sitting in on team meetings, or shadowing employees can uncover issues that formal reports might obscure. Second, transparency builds trust. Organizations thrive when they cultivate a culture that values honesty, admits mistakes, and strives for improvement. In contrast, environments that punish truth and prioritize image ultimately erode morale and credibility. Third, inquiry is responsibility. Leadership is not about having all the answers, but about remaining curious, asking questions, and holding oneself accountable to the truth. When leaders stop seeking clarity, they risk disconnecting from the core realities of their organizations. Lastly, emotional intelligence matters. Holmes demonstrated a lack of empathy for employee struggles and failed to recognize signs of burnout or distress within her team. Strong leaders listen with humility, read emotional cues, and make thoughtful adjustments. These four principles: presence, transparency, inquiry, and emotional intelligence, form the foundation of ethical, participative, and resilient leadership.

​

Theranos did not collapse solely because its technology failed; it collapsed because its leadership refused to look closely at the reality within the organization, to listen deeply to those raising concerns, and to act with honesty and responsibility. Elizabeth Holmes constructed a castle of illusion, carefully guarded from meaningful observation, genuine feedback, and real accountability. This lack of participative observation was not just a minor leadership oversight; it became the very fuel that sustained and accelerated the company’s ethical and operational breakdown. As a reminder to all leaders: the higher you rise, the more essential it becomes to stay connected to the ground, where truth, insight, and responsibility live.

​