Meet Alexander Wagner. He studies human ethical behaviour. In his tedtalk he wonders why people behave in a trustworthy way, even when they cannot get caught cheating. So there are values that resist trade-offs with other values, particularly economic values. These are protected values (Baron & Spranca, 1997).
But these protected values are not always strong. Despite the many initiatives to avoid or prevent derailed behaviour, fraudulent behaviour never fully disappears. There is always a risk that even good people behave badly.
Wagner argues there are two ways to avoid fraud. You can hire people who have protected values. Or you can build incentives or policies to inspire honest behaviour. Guess which of both is more sustainable.
Trustworthiness has to do with loyalty and integrity and with competence. If the lack of trustworthiness is a result of low competence, it’s easy to handle. If it is a result of lack of loyalty or integrity, it’s difficult.
Control is not the Answer
We cannot build full-proof control systems. We cannot check every moment on every person. This would paralyse an organization (where’s the agility?). It’s also humiliating to those who do have protected values and are honest.
The issue of trust and trustworthiness within an organization is extremely important. Smug bastards might say that it is important not to get caught. And so we have a tendency to put elaborate control systems in place. Because we want to eliminate risks.
There is a long list of corporate scandals. There is a long list of people who have acted in ways that were illegal, dishonest, unethical. Companies have gone bankrupt because of this. Environment has suffered because of this. People suffer because of this. And we see this happening in both regulated and less regulated environments.
And the question is why that happens. It happens because people face temptations that make them behave in a way they might not want to.
What happens when we install exuberant bonus systems to motivate people to meet the targets? We inspire them to take risks and commit fraud.
What happens when we exert disproportionate pressure on people to perform? They might take shortcuts.
What happens when the culture is such that integrity is defines as “doing the right thing for the company”. We weaken moral awareness.
What happens when all that counts is money and shareholder value, instead of including other outcomes and stakeholders in the equation. We reduce ethical behaviour.
So not only do we need to hire people with high moral standards, we have to create a context in which the erosion of morality has little or no chance to occur. That means we have to design that context according to morals too. Hiring people with character is one thing, designing a moral context is another. The context helps to protect values. And the basic principle of context design is easiness. Don’t make it difficult to commit fraud, make it easy to display trustful behaviour.
It all starts with leadership. In my Book on Sustainable Leadership I talk a lot about Trust and Trustworthiness. To me it’s the fuel of leadership. But we know that leadership both builds contexts and is a product of the context. That’s why we should base leadership on character and not on power, position or popularity. These are not sustainable sources and lead to erosive behaviour. Character is the only aspect of leadership that provides stability and trustworthiness.
Thank you for reading this blog. If you like it, please share it with your network or express your appreciation through likes and comments.
Ethics in business is important. In our competitive economy winning is important as well. And we all know there is friction between the urge to win and the need to stay ethical. But what if not the urge to win, but the winning experience leads to unethical behaviour? Research shows that winning indeed leads to unethical behavior: Winning a competition predicts dishonest behavior, by Amos Schurr and Ilana Ritov.
The authors have conducted a series of studies on behaviour in the context of winning. The results suggest that people will cheat others after having won. So the fact of winning inspires people to behave dishonestly.
Is this a problem? Yes it is. We live in a competitive economy. Whatever we think about sharing and co-creation, competition is what still defines our economic and social system. And because of that, winning is the norm. Society creates a lot of dichotomies in this respect: winners vs losers, haves vs have-nots, successful vs unsuccessful, happy vs unhappy, … Being successful is important in our society. And if winning experiences lead to unethical behavior, we can have a problem. Because this would mean that our very societal organisation inspires people to become anti-social and unethical.
There have been a lot of examples of such unethical behaviour. The quest for yields has led to unacceptable behavior in corporations like Enron, Satyam, Parmalat… We all know the enormous problem Volkswagen has created for themselves by tinkering with their emission software. The financial crisis was about systems that have faded out ethical considerations. There have been many corporate scandals that suggest a fading of norms and a tolerance or even stimulation of doubtful behaviour.
Trust vs Control
And the thing which strikes me most, is that most companies where fraud has recently been committed, did have a corporate governance and rules in place. In recent years we have installed many control systems to prevent this from happening. But control is never 100% and we know control destroys trust.
If we can generalize the results of the study, we might think that we are wrong in focussing on trust. Should we focus on control instead? It’s not a binary story. You always need some control but you need to keep it as minimal as needed. And trust has to be as high as possible.
It’s a matter of balance. As always. And personally I have trouble believing that winning a game will lead to unethical behaviour. But what could solve it, is to install a climate where failure is acceptable; where winning is not a solitary but a collective game. If you need a certain level of control, let it be social control, more than procedural control. Anyway, zero tolerance for deviant behavior is essential.
Ethics and Trust
This zero tolerance is difficult to set up if you do not have the right people. So this is a plea to hire people you can trust. Trust is about competence, loyalty and integrity of people. You need to hire people with high ethical norms. If you do that you do not need to impose ethics. Ethics will be part of your culture.
Belgium is going through tough social times. November and December have been particularly intense in terms of manifestations and strikes. And it may not be over yet.
Union leaders say that people are very worried and afraid for all the (possible) consequences of the government’s intentions. They say it was not really difficult to mobilize their members to strike. Union members are – according to the union leadership – very ready to strike.
I fully respect the worries and emotions of people but I doubt whether strike is the proper solution. We’re not going to solve that in a blog. But the aspect of fear occupied my mind this week.
Why are people afraid ? Is it fear that drives them into striking ? Why don’t they have faith ? Faith that using other ways (e.g. dialogue instead of strike) will lead to better solutions ?
And if there isn’t any faith or trust left between unions and government, how has it come that far ?
Many questions. No simple answers.
I use sometimes the “SCARF” framework, developed by Dr. David Rock in 2008.
It explains that when our Status, Certainty, Autonomy, Relatedness and Fairness (SCARF) are at stake, our brain releases reactive energy. Our brain makes us use our energy in trying to defend and keep what we have. “Let’s not loose !”
Whenever the same aspects seem to be improved (the opposite of being at stake), also exactly the opposite happens: our brain releases proactive energy. Our brain makes us highly engaged and collaborative to adopt the change. “Let’s win !”
So we move away from the change in the first case. And move towards the change in the second case.
Any simple communication on change can be enough to start this movement. Our brain continuously screens for physical, social threats and rewards. It tries to decrease danger and maximize reward. It makes decisions about everything you interact with in the world.
This is important to understand:
Resistance may take various forms. One can fight (e.g. by striking) or flee or freeze. It is not a rational process. People react out of their emotional brain. They act threatened and feel being victims.
We use rational statements to articulate our preferences but tend to rely on our feelings when we actually make choices.
Fear drives us away from change. What is needed to drive us towards change ? Even if the change may impact our SCARF negatively ?
The faith of winning on the long-term, if we’re prepared to “loose” on the short-term ?
The faith that dialogue instead will bring us faster and more efficient in that future ?
The faith that together (unions and government) everybody wins more and faster than each one staying on their own SCARF ?
I get the impression this necessary faith or trust is no longer where it should be between parties. Have some people chosen for radical self-destruction ? I do not understand why the efforts to restart dialogue and trust building, have been so low on the priority list for such a long time
What is needed to reinstall this faith ?
So far we’ve seen very “macho” behavior: government versus unions and unions versus government. What is going on behind the macho-masks ? Fear at both sides ? The feeling of being powerless ? The conviction the “other side” needs to take the first step ? An honest and vulnerable declaration, like “please, let’s stop this, please let’s listen and talk to each other” may help. No matter from which side it’s coming. Let’s hope these things do happen behind the screens.
Does the one side really cares for the other ? And for the general benefit ? Is the government truly feeling the worries of people ?
Are the unions truly worried about the economy on the long-term and about necessary efforts to be made ?
We need both to survive: happy, engaged people, embracing change, and an economy to work in.
In stead of yelling to and fighting with each other on the streets, one could consider to listen. Listen, not to reply, not to give solutions on the short-term, not to recommend, not to decide, and certainly not to judge. But listen, just to listen.
And even if we do that, I think there is still a long way to go. But at least we will be going towards each other, and not away from each other.
Fear and Faith are Allies
Fear and faith could be excellent allies to make us move from the “away” side to the “towards” side. Vulnerability, empathy and listening are the keys for a successful marriage between fear and faith.
In this movie David Rock himself explains the SCARF framework.
In business there are two golden rules that help you to keep a straight line during your career. As a business leader one might be tempted to take decisions that are in violation with personal values or ethical standards. Throughout your career those standards might change gradually and you may wake up a certain moment not recognizing the person in the mirror. And discovering this might be dramatic. But even when you do not have this problem, you might experience decision stress, especially when taking a decision that has moral dimensions. By asking yourself two basic questions every time you need to take a decision, you can avoid both issues. These questions are:
Is there a good reason to do something?
Can I do this in a good way?
By asking these two simple questions you can keep a clear head and avoid decision stress, even when the decision is difficult.
The tricky part lies in the word good. What is good and what is not good? There is no way to decide for everyone in any situation. However there are some reflections that might help.
The goodness of the reason should be looked at in a broad way. Some companies define “good” as what is good for the company. So you might take a decision that is good for the company but that is harmful or unfair to others. An example is a decision that helps boost profits – which is good for the company – at the expense of others e.g. because of ecological problems. Another example is changing suppliers to decrease costs, but at the expense of local communities that are underpaid, working in bad conditions or forced to do child labour. A third example on another level is moving headquarters from one town to another just because the newly appointed CEO happens to live there. It is not always possible to overlook all the social, ecological or moral consequences of all decisions, but one need to do an (ethical) impact analysis prior to taking the decision. This requires a fair attempt to map all consequences.
The goodness of the way is even more difficult to evaluate. Difficult decisions leading e.g. to lay-offs or delocalization of business have a large social and emotional impact that make it difficult to execute them in a good way. In any case, people who are affected by the decision will not be able to appreciate the goodness in the decision that was announced. And sometimes there is not really a good way, but then again there might be a best way. One way to improve the manner in which a decision is executed is by establishing a clear communication style. E.g. whenever a plant closure is decided upon, it’s best that the CEO does the communication and is highly involved and available throughout the project. Doing a hit-and-run is not a good idea as it aggravates the emotional impact of the decision. Always bear in mind that the situation for people who are impacted by the decision is usually worse than for the business leader.
Sometimes you are instructed to execute a decision taken in some distant headquarters. If you do not understand the decision you should ask yourself why you should do this, even when there is a good way. You should ask questions and make sure you understand the reasons. You do not need to agree with the reasons and maybe you can suggest alternatives to the decision. You can use your influence to improve the decision. If you think that the decision is harmful to the company or one of the stakeholders, you should make sure that this is noted and that decision-takers are aware of some of the adverse effects of their decision and see the potential of the alternatives you propose. This is in the best interest of the company.
Avoid decision stress: the decision matrix
You can combine both questions in a matrix. If there is a perfectly good reason for the decision and there is a good and decent way, there is no decision stress. But in all other circumstances action is required. In all other situations taking and/or executing the decision will cause decision stress.
The question is why you should bother? A bad decision is better than no decision? And sometimes your personal influence is limited. Nevertheless you should try to improve the quality of the decision as much as you can. You owe that to the company. And there’s also something in it for you. By asking yourself the two questions you stay awake. Every time you are tempted to take a decision out of personal interest or to take a decision that is harmful to the company or any of its stakeholders in the short or long run, you risk to lose your integrity and your credibility. And once you have lost either, it is very difficult to restore them. So it’s worth while considering to ask yourself those questions.
Doing this will not make you popular. In the chain of command someone who asks questions like these may be seen as a disturbing factor. You might be seen as a maverick or just a burden. You might be seen as a part of the problem and not part of the solution. However, in all cases it’s your duty to come up with alternatives and to improve the decision. So this is not a call for resistance or for passivity. It’s a call to make an ethical judgment of the decision you are about to take or execute. It can only help yo to stay a trusted and respected leader. So go ahead and ask yourself these two basic questions every time you need to take a decision. Your values are worth it.