Living Inside a Pariah Company

Doggie at Door Exile iStock_000042122536_smallLast week I wrote a very critical blogpost about Volkswagen. I was, of course, hardly alone in doing so; the scandal has created tremors beyond even recent examples.

But in the days since, I’ve been trying to think in different terms – in particular, what must it be like to be an employee of VW in these difficult days? What is the view from inside the glass, looking up and out? What tensions must it cause people – and what can they do?

The Pariah Organization

My good friend Matt Nixon started writing a book last year, tentatively titled “Working for the Pariahs: Can Good People Stop Organizations Going Bad?”  He send me an early draft outline last year, and I’m re-reading it again now.

Matt has the credibility to write this book: an MBA, he spent over a decade in consulting (Accenture, Towers Perrin), then another decade as a VP at Shell Oil and later an MD at Barclays. He knows something about whereof he speaks. Combined with a classical English education and a wide network, the book makes for illuminating reading. [Matt – when are you going to finish this book?]

Matt suggests that being a pariah organization (think “outcast” and “exile”) is a phenomenon on the increase (just because you’re paranoid doesn’t mean they’re not out to get you, it’s really true).  He also points out that pariah-dom is about much more than individual moral failings – it is trackable at an industry level (another gut feeling ratified by data).

He provides some diagnostics and descriptive models to identify and predict pariah-like conditions in organizations. Particularly telling is his critique of “false metamorphosis,” the consultant snake oil of “transformation” that has been overblown. True change, he suggests, requires a lot more, and is a lot more uncommon.

But what about VW’s employees? As Matt notes from other pariah organizations, a great many people in such companies feel bewildered and unfairly treated.  They see themselves, and their company, as largely ethical, and remain quite positive about staying with the organization they are part of.

The overwhelming criticism of their organizations feels like torches and pitchforks.

At a time of crisis, Matt suggests employees go through a predictable sequence of emotions – shock, followed by anger and shame, swinging back to resurgent loyalty, and ending in a blend of guilt, responsibility, and denial. He talks as well about three “tribes” of employees: Loyalists, Mercenaries, and Heroes. The three tribes react differently to the four phases.

What Can Be Done?

I hope Matt finishes his book. It’s got some great insights for organizations and leadership. For me, for right now, I want to focus on what an individual at VW might be thinking about, what they can do, and what we can do to support them.

Human beings are delicate creatures. We process information that is critical of us in very self-protective ways. We will take advice from a friend that we would never take from a stranger.

As outsiders, this means we have to temper criticism with the recognition that exceeding few employees assume personal guilt. The vast majority feel very little personal accountability for the sins of the organization, and personalizing accusations doesn’t help them come to grips with any objective truth.

The increasing demand for personal civil and criminal accountability of leaders in pariah organizations is, I think, a good thing. But it must be tempered by some focus on responsibility – our criminal justice systems are easily inclined to focus on the underlings, and not the leaders. Indiscriminate demonization of employees is counter-productive. In the VW case in particular, the role of culture and corporate environment seems a strong contributor, rather than a simple case of “bad apples.”

As employees, the challenge is to see this as a “Santa Claus” moment: as in, “there is no…”  This did not happen in a vacuum; as Matt notes, the cult of leadership is partly to blame for obscuring the truth that corporate cultures “eat strategy for breakfast,” not to mention well-intended but impotent compliance programs. It’s critical to employees – for their own psychic health, as well as that of the organization – to be constructively schizophrenic.

They need to both feel secure in their own good intentions and, at the same time, be able to objectively see how things could have gotten to this point. As Henry Mintzberg angrily points out, this kind of phenomenon is best seen not as a scandal, but as a syndrome. And only insiders have access to the “real” story.

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Moral outrage has its place in the reform of business. So does shaming, by bringing business issues outside narrowly proscribed economic boundaries and into the social realm as a whole.

But blame and shame are two-edged swords, and very hard to control. At a social level, their overuse just promotes entrenched ill-will; look no further than the current state of US national politics.

At an individual level, blame and shame keep us from seeing and accepting reality, as it is. In a very real sense, as my friend Phil McGee puts it, “Blame is captivity – responsibility is freedom.”

As we look at the VW scandal/syndrome, we need to balance our outrage with a sense of respect for other individuals, and our defensiveness with a willingness to see things as they are.

6 replies
  1. Tony Faustino
    Tony Faustino says:

    Charlie, when I think of pariah industries, I think of one I recently left — Big Pharma. The people I worked with and advised in this industry were and I believe continue to be good people were mid-level to senior-level managers. I didn’t have direct access to the “Winterkorns” of this industry, but I remember how beaten down these former clients felt because the industry is constantly under siege.

    In the the 1980s, when Merck dominated Fortune’s Most Admired Company Rankings, people were proud to say they worked in the pharmaceutical industry. Nowadays, not so much. It will only get worse as November 2016 approaches.

    The only way I see real change taking place in pariah companies and their respective industries is to send the corporate chieftains or executive offenders to jail for violating the public trust. Per your previous post on the VW emissions case, this organization-wide scandal, and it’s coordinated cover-up, are evidence of a systemic problem within VW. Forcing the CEO to resign and/or barring them from the industry isn’t enough. His golden parachute will open, and he’ll land softly in a mountain of cash.

    I respectfully disagree that the question is what we can do for these employees while they’re working for these pariah organizations? I think the question is what can we do for these employees when they’re fired or layed off due to the extended recovery time and poor company performance resulting from a tainted brand? How do we help those individuals professionally reinvent themselves and re-package their existing skills so they can substantially earn a living working in non-pariah industries?

    That’s a conversation for another day …

    Reply
    • David Heath
      David Heath says:

      as a ‘foreigner’ I have to ask, what is so special about November 2016? I can only think of the presidential election, but I’m not sure of the relevance to “Big Pharma.”

      Am I missing something?

      Reply
      • Tony Faustino
        Tony Faustino says:

        David, excellent question. You’ve locked in correctly on my inference about the upcoming US Presidential Elections in 2016.

        Here’s the direct link between November 2016 and Big Pharma and the Biotechnology industry. The issues around market access and pricing and reimbursement will be hotly debated issues among US presidential.

        Specialty pharma and biotech companies will receive significant negative publicity and public relations coverage from US presidential candidates during the 2015-2016 campaign process. The focus of US presidential candidates (and their respective political parties) will continue to intensify.

        A recent example how US presidential candidate statements and political rhetoric negatively impacts the industry’s financial performance is documented in these 09/28/15 Wall Street Journal articles: (1) Dow Industrials Sink 313 Points; (2) Lawmakers Seek Answers on Valeant’s Price Increases.

        Hope that helps David. My apologies for taking a too US-centric point-of-view.

        Charlie and his blog have earned a global audience’s trust. I promise to do a better job next time in being more aware of the geographical context in which I frame my comments.

        Thank you for your request for clarification.

        Reply
  2. Rochelle Moulton
    Rochelle Moulton says:

    Thanks for this ever-so-thoughtful post Charlie. Having been at Andersen during Enron–and the ensuing implosion–I can relate to Volkswagon employees all too well. There is a range of emotions not unlike Kubler-Ross described so well. I would encourage Matt to finish and publish his book. I’m quite sure there are many of us would love to read it!

    Reply
  3. David Heath
    David Heath says:

    As I read this and similar commentary… I’m drawn to all those people who would rely on The Nuremberg Defence – “I was only doing what I was ordered to do” or in the business context, “I was only doing what my manager asked me to do.”

    That this defence was deemed irrelevant at the time of the Nuremberg trials always troubled me, especially in the light of the various Stanley Milgram experiments that followed.

    It seems that ordering a person to do something somehow transfers all responsibility (and I use the word in its most legal-possible interpretation) away from the orderer, severely corrupting any significant analysis of the power relationship between the two people.

    Just my $0.02 worth. Don’t spend it all at once.

    Reply
  4. Matt Nixon
    Matt Nixon says:

    Many thanks to you, Charlie, for this post, and to those who commented also. Good news (I guess!) is that the book is going to be published next year. If you’re interested in seeing a few of the things I have posted recently on these topics related to current scandals such as VW, please take a look at my LinkedIn profile here: https://www.linkedin.com/pulse/activities/matt-nixon. My belief is that this is not a phenomenon limited to the private sector, although it’s easy to identify with banking, big oil, pharma etc. The patterns look very consistent across all sectors: where there is high growth, big brand and success and praise, the hubris can take hold, especially where regulation and governance is weak. It’s a form of tyranny, really, an abuse of power that has become acute with globalisation as well as the instant transparency of the internet age. It’s a titanic struggle. Which is exactly what the Greeks were thinking about when the concepts of hubris and nemesis took hold in the 5th century BC – the idea of democracy as a bulwark against abuse of power was brand new then. It still needs refreshing from time to time. I have stuck with the idea of Pariahs despite quite a lot of opposition from publishers and lawyers and others who don’t like offending the powerful and their PR agents. I think it’s time those of us who have been there tell the truth; it’s just not sustainable to run a huge organisation that is deeply hated and mistrusted without paying a terrible price in terms of social cohesion. That said, I imagine many of us can and must spend many years of our lives doing what we can to help leaders manage these behemoths responsibly. The alternative isn’t good…for trust or our societies.

    Reply

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