Earlier this week I was invited to speak at a Central Government Department at their inaugural Procurement Fraud and Corruption Conference. The aim of the Conference was to engage with the Industry to share leading practices and identify potential ways as to how the Department and its key suppliers can work together to address fraud and corruption risk.
I was delighted to sit on a panel and lead a highly interactive and participative discussion on the role of ethics, culture and behavioural change in combatting fraud and corruption. The session had a great buzz with plenty of interaction, collaboration and practical questions from the floor. The extract below outlines my opening words to the delegates.
Over the years I have worked closely with leaders of all types of organisations to help them define what ‘doing the right thing’ means to them. I help them to understand what it takes to bring ‘doing the right thing’ to life by creating the right conditions for people to exercise judgement, to feel empowered to question and to execute good decisions. Some of this work includes defining the right policies, procedures and controls that need to be put in place.
However, much more of my work is focused on why things keep on going wrong and why the right thing has not happened. Why there are so many near-misses? Why there are incidents of non-compliance such as fraud, anti-trust, or bribery and corruption, despite having all the requisite frameworks in place, mandatory training courses being rolled out and the instruction manuals (or codes of conduct as we like to call them) on the office shelves?
I would love to say that my work is straightforward and after 26 years as a consultant, the last 12 years of which have been spent specialising in business ethics, compliance and governance, that it is easy to find out why things go wrong. In fact, it can be quite the opposite. Let me explain. The policies, procedures and controls ARE relatively easy to design and develop. Yes, they do take a bit of work if you’re starting from scratch, as you need to define the boundaries, establish the standards and create a set of rules to which you can point to as a common platform for an organisation to operate within the law and refresh as required.
But, these ground rules, or basic hygiene factors as I call them, actually have a minimal impact on the ability to deliver what are arguably the two most desirable outcomes of an ethical culture: (1) that of enhanced business performance and (2) high levels of integrity. And what it takes to achieve these two optimal outcomes is where the work becomes much harder and requires deeper systems thinking. Yet these two outcomes of business performance and integrity are exactly the ones that many senior leaders covet in a world of unparalleled pace change brought about by demographic and social change, technological breakthroughs, global uncertainty and rapidly declining trust between people and institutions.
Experience, and the front pages of newspapers, have shown us that if the emphasis is overtly placed on laws and regulations as the panacea of good decision-making and driver of ‘doing the right thing’, these same laws, controls and regulations can have exactly the opposite effect.
Don’t just take my word for it. A couple of years ago I was part of a team conducting research with the London Business School entitled ‘Why you can’t scare bankers into doing the right thing’. The research showed that a get‐tough approach to poor performance in financial services has created a climate of fear. This manifested itself in an increased risk of breeding more unethical conduct, not less; exactly the opposite of what regulators, businesses and the public actually want. The research data proved that the threat of fines, bonus clawbacks and even prison won’t on its own prevent further mis-selling and market‐rigging scandals.
So, how has this happened? The research proved it is because anxiety disrupts people’s capacity to make good decisions, often leading them to behave less ethically. The conditions in which they are operating within encourages high levels of stress, lower levels of trust and unhealthy amounts of competition which lead to decisions of lower integrity, not higher; more siloed working, and less collaboration and consultation. This eventually results in potentially disastrous consequences at many levels.
The key challenges associated with creating an ethical culture and underlying behavioural change
I believe the overriding key challenge is a leadership one. Leaders must play a vital role by putting the spotlight on the positive outcomes of good behaviour rather than the penalties for behaving badly. Yes, it’s essential that people understand what’s acceptable and what isn’t – and that wrong‐doers at all levels are appropriately sanctioned. However, the focus on disciplinary action, aimed at punishing the minority of people who are prepared to commit deliberate fraud or wrongdoing, breeds anxiety in those who are genuinely seeking to do the right thing, but who now head into work every day fearful of making a mistake. These kinds of pressures have the potential to push well‐meaning people into behaving less ethically than we, or they, would like.
It is down to leaders to create the right conditions and a climate where people feel safe to be themselves in a workplace that values inclusion and embraces difference or challenge. Where individuals and teams feel empowered, entrusted and are held accountable for their actions with adequate and accessible levels of support in place.
In this type of environment, people are equipped to exercise judgement. They can make informed decisions that are aligned to a common purpose and set of cultural norms that they have emotionally invested in. The complexity of this challenge is clear – these working conditions don’t materialise overnight and leaders, through their actions, can make or break a culture of ‘doing the right thing’ in just a minute.
The power of leaders as role models
Marian Wright Edelman, a children’s rights activist in the US, articulated the role model challenge of leadership very well. She said, and I quote, ‘you can’t be what you can’t see’.
Without leaders, at all levels of the organisation behaving as role models or ‘real models’, being consistent on what they say and do on a constant basis, then the likelihood of these working conditions emerging is minimal. After all, as an employee, I would be very reluctant to act in a way my leaders would like me to if I did not observe those behaviours being played out around me by others more senior than me. What I actually witnessed was that their actions were mis-aligned with what is being espoused. The normal human response to this lack of congruence would be a desire to conform, to follow the pack and not to speak or act out of turn. Why would I want to be different to everyone else and outside the ‘in group’? If people more senior than me, who have power and influence, don’t believe in behaving in a certain way, then why would I?
Leaders need to create a culture of opportunity rather than fear, of inclusion rather than exclusion, and demonstrate their purpose and commitment in alignment of what they do, why they do it and how they do it, not just by what they say.
So how can leaders create these conditions in a world where doing the right thing today may not be the right thing to do tomorrow; where the boundaries of what is right and wrong are continuously shifting, and where global cultures often clash and conflict with one another inside an organisation.
There is no magical silver bullet to address these genuine dilemmas. I have not witnessed any organisation who has got it truly nailed. But, realistically, I don’t expect to either. I question any leader who says their job on culture ‘is done’. Culture matters and it is always important. It is dynamic, contemporary and continuously fluctuating. By its very nature it is not a binary condition and it cannot be pinned down. However, this does not mean that, as a leader, you should not strive to create a work place that, when faced with ethical choices or a dilemma, employees feel inspired to make the right decision.
Let me bring this to life. Where I have worked with leaders and observed decision-makers who get it right more often than not, there are three things that stand out to me as key factors of success:
- Firstly, the senior leader actively places the design of an optimal culture at the heart of their leadership role. He/she builds an internal belief system across the organisation for all to contribute and engage in, that he/she are personally committed to and are willing to be held accountable for. Whether during the good times or the not so good times in the business, he/she will endorse a consistent eco-system where people feel secure, knowledgeable and skilled to be able to make an informed and right decision at that point in time, with the full support of leadership.
- Secondly, internal and external trust are positioned as desirable business outcomes by leadership and perceived as a catalyst that enhances business performance, binds people together and shapes the way they relate to each other. It takes time to earn trust between leaders and employees. Put very simply, we trust things or people that behave as we expect them to, because there is a sentiment of trustworthiness that is built up over time through consistent patterns of behaviour aligned with purpose and character. Where I have seen leaders genuinely playing their part as trusted role models, walking the talk and cultivating trust as an essential part of their role, they have made the point of explicitly demonstrating consistent and trustworthy behaviours over a prolonged period of time.
- And last but not least…. leaders recognise they cannot do this by themselves. At its essence, in order to make a real difference, arguably every leader of every institution needs a number of very different people to co-operate and a desire to be part of something that is the best of their collective selves and is bigger than the sum of the individual parts. Where I have seen leadership show courage and a clarity of vision, reinforced by their humanity and the ability to express emotions such as care, pride and shame, then this is when the power of an ethical culture is unleashed across business and transcends global cultural differences. This is when people are emotionally engaged and inspired to play their part in doing the right thing, not because of what the code of conduct says, but for themselves, their workplace colleagues, their customers, their suppliers, their families and for wider society.
We need to think about ethics, culture and behavioural change differently
It is Albert Einstein who said, and I quote, ‘we can’t solve problems by using the same kind of thinking we used when we created them’.
I would encourage us all to think differently about business ethics as a force for societal good, about how to embed winning behaviours and how to change culture through design. To think about how you and I, as leaders at any level, or as influencers of the leaders in your organisations, can actively shape an optimal culture by acting as outstanding role models and creating a reinforcing belief system that unlocks talent, maximises business performance and levels of integrity. An ethical eco-system that highlights opportunities and does not magnify fear, and places trust at the very heart of what it stands for.
This type of environment is inclusive by nature, delivers value beyond expectation, and is a force for good for all of us, whether as employees, investors, customers, governments or for wider society.
This is a culture that is resilient, adaptive, and is able to make more sense than not of what doing the right thing means each and every day as the world continuously changes around us, wherever and whoever you are.
And, ultimately, this is a culture that not only mitigates risk such as fraud and corruption, but also other types of reputational risk. It is critical to organisations who aspire to achieve those desired goals of enhanced business performance and higher levels of integrity.
Who wouldn’t want to create some of that magic?
For any questions on this article please contact Tracey at askme@intelligentethics.com