By Martin Vogel
How do you set right a corporate culture beset with “systematic dishonesty” – as Barclays has been described by its former chief executive, Martin Taylor?
The scandal at Barclays over its rigging of financial markets seems to represent a turning point which will require all banks to take a long, deep look at how the ways in which they operate may contradict the public interest. Were we not already in the worst financial crisis in living memory, the computer failure at RBS – which has prevented customers accessing their money and is still ongoing at Ulster Bank – would count as a monumental banking failure in its own right, evidence itself of the incompetence, negligence and greed that over many years has overwhelmed an ethos of stewardship at the major banks. On top of that, came news last week that the big four banks had committed serious failings in their mis-selling of interest rate hedges to small and medium-sized businesses
Small wonder that the Governor of the Bank of England has described the banks as “shoddy” and “deceitful”. Or that the Director-General of the Institute of Directors has said the banks “should feel deep shame for the damage they have done”.
Although Bob Diamond, the now ex-chief executive, has said the corruption at Barclays involved only 14 people, the episode seems to have solidified a consensus that there are deep-rooted and widepsread problems in banking culture. From our own discussions with people in the financial sector, it’s apparent that the leaders of these organisations have been aware of these problems. But the organisations are now so complex, they have have had no idea how to put them right. Hence, they resort to cosmetic schemes like corporate citizenship initiatives and sponsorship programmes to create a positive veneer which conceals an institutional reality that remains fundamentally flawed.
I wonder though to what extent the leaders of large banks are allowing themselves to consider an alternative? With their tremendous wealth and power, they inhabit a world which normalises decisions, lifestyles and values which to the rest of us seem outrageous. Detached from the norms of wider society, they can all too easily lose their moral bearings. The corporate cultures of the banks are a perfect breeding ground for what the writer and entrepreneur, Margaret Heffernan, has called “wilful blindness” – by which leaders implicitly foster ethically questionable behaviour but insulate themselves from direct knowledge of wrongdoing. As Heffernan, referring to another recent corporate scandal, has put it:
“It is the responsibility of the powerful to ensure that they surround themselves with independent thinkers and critical allies who have the freedom and moral courage to tell them the truth. When leaders choose not to do so, they embrace blindness and the moral darkness that goes with it.”
Another management thinker, Robert Greenleaf, spotted the risk of ethical failure emerging in complex modern institutions as long ago as 1977. He posited a model of “servant leadership” which contrasts starkly with the self-serving, self-aggrandising model which eventually dominated so many corporate cultures.
Greenleaf’s ideal leader is servant first, leader after: someone who cares for people’s higher level needs such as growth, health, wisdom and autonomy; who is motivated by the nobler choice (not the noblest, which is unknowable); who is a great listener, eliciting imagination in others. Reading Greenleaf, one is struck by the premium he places on leading from a place beyond conscious rationality – a stance which is at odds with much of corporate culture today, but more closely aligned with what we’ve subsequently come to know since Greenleaf’s day about how the mind works.
He is strongly in favour of intuition in leadership. He says the willingness of leaders to trust their intuition to fill the information gap that is inherent in all decisions is, in part, what marks them out as leaders.
“The person who is better at this than most is likely to emerge the leader because of the ability to contribute something of great value… Leaders, therefore, must be more creative than most; and creativity is largely discovery, a push into the uncharted and unknown.”
Intuition is enriched by cultivating awareness – being open to a much broader range of inputs (sensory, emotional, etc.). This, says Greenleaf, “stocks the conscious and unconscious mind with a richness of resources for future need.” Awareness and intuition facilitate foresight – which Greenleaf calls the central ethic of leadership:
“The failure (or refusal) of a leader to foresee may be viewed as an ethical failure, because a serious ethical compromise today (when the usual judgment on ethical inadequacy is made) is sometimes the result of a failure to make the effort at an earlier date to foresee today’s events and take the right actions when there was freedom for initiative to act… Foresight is the ‘lead’ that the leader has. Once leaders lose the lead and events start to force their hand, they are leaders in name only.”
Greenleaf’s model strikes me as a good point from which to begin to think about how to set right current institutional flaws. This is for two reasons. Firstly, his focus is on how institutions can be used to generate some public good – which is precisely the challenge facing the banks, and other corporate cultures beside. Secondly, rather than proposing technocratic or structural solutions, he is concerned with the responsibility of individuals. Precisely because the cultural failings the banks face are so deep-rooted and widespread – so systemic – Greenleaf’s model provides a more conceivable way to begin the contemplation of relevant change. Leaders and members of staff individually do not need to wait for corporate programmes to crank out reform. They can each, individually, recognise that something different is required of them – something that connects them to the public good – and begin to ask themselves what that means for how they work. From there, financial institutions can begin to mobilise for reform the tacit wisdom that’s embodied within their organisations rather than trying to design cultural change in the abstract.
It can be done. Take this story about Ford, from The Economist two years ago:
“Soon after Alan Mulally arrived as Ford’s chief executive in September 2006 he organised a weekly meeting of his senior managers and asked them how things were going. Fine, fine, fine, came the answers from around the table. ‘We are forecasting a $17 billion loss and no one has any problems!’ an incredulous Mr Mulally exclaimed. When he asked the same question the next week, Mark Fields, head of Ford’s operations in the Americas, raised his hand and—in what once would have been a moment of career suicide—admitted that a defective part threatened to delay the launch of an important new car. The room fell silent, until Mr Mulally began to clap his hands. ‘Great visibility,’ the new boss added.
“Four years on, Ford is making record profits. Its revival began with this new willingness to recognise its faults.”
Such is the culture that challenges wilful blindness.
To my mind, ethical bearings are not so far removed from emotional intelligence. They require a willingness and ability to see how decisions at work might be viewed differently outside the self-reinforcing company culture.
Gary Hamel, whose book What Matters Now I reviewed last month, provides in it five rules on thumb for retaining a moral compass:
“First, your widowed mother has invested her life’s savings in your company. She’s the only shareholder and that investment is her only asset. Obviously, you’ll do everything you can to make sure she has a secure and happy retirement. That’s why the idea of sacrificing the long-term for a quick payout will never occur to you.
“Second, your boss is an older sibling. You’ll always be respectful, but you won’t hesitate to offer frank advice when you think it’s warranted – and you’ll never suck up.
“Third, your employees are childhood chums. You’ll always give them the benefit of the doubt and will do whatever you can to smooth their path. When needed, you’ll remind them that friendship is a reciprocal responsibility. You’ll never treat them as human ‘resources’.
“Fourth, your children are the company’s primary customers. You want to please and delight them. That means you’ll go to the mat with anyone who suggests you should deceive or take advantage of them. You’ll never exploit a customer.
“Fifth, you’re independently wealthy. You work because you want to, not because you have to – so you will never sacrifice your integrity for a promotion or a glowing performance review. You’ll quit before you compromise.”
Organisational cultures are often conceived as systems – an engineering metaphor that evokes machines. But they are also about values, emotions and relationships. Everyone plays a part in upholding sound corporate cultures. If you work in a culture where you sense something is awry, know this: the change begins with you.
Servant Leadership: A Journey into the Nature of Legitimate Power and Greatness by Robert Greenleaf.
Image courtesy Nana B. Agyei.