In my time as a cog in the wheel in "corporate America," I've been witness to some seriously bad decisions. In my time as a ground-pounder, I usually saw a limited but detailed view of a larger effort. I was usually the one who filled up the water tank, kept the lights on, and generally just made things go.
When you're in this position, you have an amazing view but limited power. You can do the best job you can, and report findings to your superior when things go wrong. When shit really hits the fan, you see it in gory technicolor detail. You realize just how bad things are, at least in your little part of the world. You're not entirely sure if your reality is similar to your peers' realities, because often it's impossible to know in larger organizations. But things are clearly FUBAR from where you stand, and your immediate peers seem to think so too.
When you report your bad news to management, sometimes they'll take it seriously and change things. More often, they will not. Their rationale for not changing something that is obviously broken is predictable: what you're seeing is a small part of a greater whole, and yes, it's screwed up, but it's just not important enough to change right now; you'll just need to suck it up.
There are several problems with this answer. The first is this: if it's not important enough to fix, it's not probably important enough to do. So why are you continuing to ask me to do it? The second is this: how do you know it's not important enough to change right now? If it wasn't that important, I probably wouldn't have mentioned it to you. And if you think the stuff I'm reporting to you isn't important, and that I can't and don't prefilter stuff that's trivial, why'd you put me in charge in the first place? Just fire me and get it over with.
Personally, I think answers along this line are usually just cover. The real issue is usually that bad managers don't like to hear bad news. Often, these people are blind to facts because they have some sort of ax to grind or an agenda to follow that isn't necessarily in line with doing the objective right thing. Your news just doesn't fit in to their notion of how the world should be working if they are going to reach some goal.
I hereby pronounce this phenomenon "management self-importance". The phenomena is clearest when you consider the agendas and legacies of people like Donald Rumsfeld ("smaller military at all costs") and Doug Feith ("we need war with Iraq"). But it's the same when it's not so dramatic. They believe that they're so brilliant that they can ignore facts without consequence. And it often turns out they can't. As Jamie Zawinski says: knock that shit off.
It sucks to work for a manager with self-importance. The best managers tend to put customers first. The best leaders tend to put people first over policy.