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Trusting Delta

From Delta Airline’s Website, Delta’s Force for Global Good

“Delta is firmly committed to our environment, safety, and social responsibility. We demonstrate these commitments in hundreds of ways throughout the world on a daily basis as we partner with our employees, vendors, customers, civic, and non-profit organizations to make a difference in the communities where we live and work. Many of our programs are award-winning and industry-leading. We don’t do them for the awards. We do them because they’re the right thing to do.”

Richard H. Anderson
Chief Executive Officer, Delta Airlines

From the Atlanta Business News, July 27, 2011

Airlines Spoil Fliers’ Unplanned Tax Holiday

Airlines have complained for years that taxes added to ticket prices drive up the cost of travel. But when those tax collections stopped last weekend and airlines had a rare chance to give fliers a break, most opted to keep prices the same and pocket the difference.

For Atlanta-based Delta Air Lines, that amounts to be $4 million to $5 million a day in extra revenue, the company said Wednesday.

A Congressional stalemate led to a partial shutdown of the Federal Aviation Administration Saturday, preventing the agency from collecting about $200 million a week in ticket taxes.

Delta and other major carriers then increased base fares to cover the lapsed taxes, saying they need the extra money to cover high fuel costs. The result is that travelers are paying roughly the same total price as before, instead of getting a discount from the unplanned tax holiday.

“It just seems like it was the perfect chance for the airlines to throw a bone in consumer satisfaction,” said FareCompare.com CEO Rick Seaney…

…Delta’s official statement on the matter: “Given the high cost of jet fuel, Delta has been competitive with other airlines that increased their base fares following the expiration of funding for the Federal Aviation Administration to adjust for the taxes no longer being collected.”

How the Mortgage Crisis Made Us Immoral

If you own a house and I’m your neighbor, I’ll respect your property rights. It’s just the right thing to do. (Though if there’s a fire at my place, I might break in to borrow your fire extinguisher).

If you live in a nice neighborhood, you have little to fear from the more modest parts of town. (Though if your neighborhood doubles its average income, and the modest part of town doubles its unemployment rate, and you start putting gates around your community—well, you might be a little more fearful).

Which leads us to this US headline from Fannie Mae’s Quarter 1 National Housing Survey:

“Nearly twice as many Underwater Borrowers (27%) think it is okay to walk away from a mortgage if they face financial distress than in January 2010.”

Is this a moral issue? What does it mean that the frequency of the opinion has changed? That it has doubled in a year?

Economics and Morality

Most people still think it’s immoral to walk away from a debt. But those who think otherwise—that defaulting on a payment to a nameless morass of long-since-tranched, securitized asset-owners is as amoral as it gets—have grown by 100% in just over a year.

That’s pretty high growth for the amoral team.

It’s one thing to say that morality should have nothing to do with economics. And indeed, the sense of honor and justice and trust that underpins most moral behavior is socially useful. If we all acted solely in our immediate self-interest in every situation, the world would be a greedy, dangerous, Hobbesian mess.

At the same time, economic disparity writ large spells social unrest. In Greece, they riot in the streets. In Rio de Janeiro, they have a street crime problem.

In the US, we are witnessing a small version of things. People who used to feel a moral obligation to repay a debt are saying to themselves, “Heck, the big guys and companies do this all the time—if things aren’t working out, they just default, take the insurance payment, write it off, whatever. There’s nothing moral or immoral about it—it’s just dumb to do otherwise.”

Economics Can Wear Down Morality

You may think that honoring your debt is a moral issue. You may think it’s not. What’s clear, though, is that the ratio of those two views is being driven by economic changes.

The credit ratings services will take note of this, calling it a likely increase in the default rate, and a cause for downgrading securities.

But the people on the street—in both the nice and the modest neighborhoods—will experience it as a moral casualty of the economy.

It’s just one more area of human relations that will no longer be governed by the rules of “rightness,” but rather by the least common denominator, Darwinian terms of the marketplace.

And that’s not a change to be happy about.

Are your company values important enough to fire people over?

Warning: Rant ahead.

Odds are the company you work for will fire employees for serious criminal conduct. And maybe for sexual harassment, or BSIP (Behaving Stupidly In Public).

But does your company fire people for VVs (values violations)? You know, values like respect and integrity (from Enron’s values list), or performance, innovation, progressive, and green values (from BP’s Lubricant Business).

———–

I got a call recently from a BWKC (Big Well Known Company); it employs many VSPs (Very Smart People). Here is what they said:

We have a group of VHPS (Very Highly Paid Salespeople). They’re mainly commission-paid and very successful. Problem is, they don’t pitch-in on corporate initiatives—recruiting, people development, internal sessions.  They prefer to focus just on making more money. 

We want to incent and motivate them to be more participative. We’re looking for ideas from other commission structure industries that have figured out how to keep the high-pay but incent and motivate team behavior.

OK. This is like meat to Pavlov’s dogs. There is such a feast of things wrong with that statement: where, oh where, to begin! 

 

1. “Incenting Values” is an Oxymoron

The call came from a staff person. Which means somewhere, there’s an RDB (Really Dumb Boss) who is thinking, “How do I motivate my employees to live the company values?” Here’s what that boss should be saying:

“It has come to my attention that y’all are not showing up to do some real basic stuff. Further, I understand this is because you’re not ‘motivated’ or ‘incented’ to do these things.

“Instead, y’all are getting rich at the corporate buffet by cutting in line. You’re eating scrambled golden eggs while you’re starving the goose that lays them. You’re suckling at the teats of the money-pig and refusing to clean up the pen. So I got some motivatin’ for you.

“First, TCSRN (This Crap Stops Right Now). Starting today, if I see any more of this, it’s LDHYWGLSY (Let the Doorknob Hit You Where the Good Lord Split You). Adios. 

“And if that’s not incentive enough for you, I can OUCOWA (Open Up a Can of Whup Ass) and show you the door.

You don’t “incent” values. Values are Jacks for openers, table stakes. If you’re not motivated to live by your company’s values, your company should tell you that you’ve got the wrong company. If you insist on incentive for living your company’s values, your company should politely suggest that your employment contract should be incentive enough.

This company basically has three choices:

1.    Exempt the salespeople from the values, and say so publicly; at least that’d be honest;

2.    Tell the salespeople this is non-negotiable, and a firing offense (fat chance); or,

3.    Just keep the values on the website where they belong, away from the money, now walk away, nothing to see here…

2. When Did We Start Calling Boneheadedness “Smart?”

This company is hardly unique—and you all know it. We have an epidemic in Corporate America of what I’ll call behavioralism, the beliefs that:

a.    nothing’s real if you can’t measure it;

b.    management consists largely of placing the correct amount of cheese in front of just the right rats at just the right points of the maze;

c.     really ‘smart’ people are the ones who can model, quantify and produce metrics with respect to cheese, rats and mazes.

Push this line of thinking far enough and you get entire BWKCs, with lots of VSPs, who don’t have the commonsense to spot a values issue when it personally insults them to their face. And yet we call them ‘smart.’

The word ‘smart’ has come to be, in the anthropological dictionary that is daily corporate usage, synonymous with high SAT scores, good colleges, spreadsheet-dexterity, quantitative skills and a belief that human-life-is-messy-but-fortunately-we’re-figuring-out-the-neuro-secrets-behind-it-all-and-we’re-nearly-there. 

How else to describe VSPs (and the companies who hire them) who have no other mental construct for management besides money-cheese-rat-metrics? Concepts like wise, commonsense, intuition, curiosity, empathy, relationships—these have no place in the world of VSPs.

Let’s all just give up on ‘smart;’ that word’s been co-opted. Let’s find something else. May I suggest we take ‘wise’ for a spin. And start by not using it lightly.

3. Tactics Are Not Management

Three years ago I wrote about The CEO vs. the Bankers. The CEO was an MBA from the late 1970s and was, as he put it, amazed at how little the newer MBAs seemed to know. He was talking about VSPs, too—from, as he put it, “Goldman Stanley, Morgan Sachs.” 

It’s a great read, I don’t want to spoil it for you, but the gist of it was: the new MBAs had been taught analytical techniques—tactics. The CEO had learned strategy: the wisdom kind, not the numbers kind. And when you read his story, you realize that in the real world, all those ‘smart’ models were dead wrong, and he was dead right.

Not only do we over-celebrate ‘smart,’ the concepts our ‘smart’ people are focusing on are not—systemically—wise. Our best and brightest are learning to do things that aren’t good.

What things? Looking at transactions, not systems. Believing that everyone only pursues their own interest. Believing that letting those who do pursue only their own interest somehow magically produces wealth and happiness for all. Believing that human emotions are most effectively dealt with through physical abstractions like chemistry and behaviors. 

Most of all: believing that values are something for which you can incent or motivate people.

What’s to be done? A good start would be to find out if anyone ever got fired for a values violation in your company. And if not, to seriously question how seriously your company takes its values. 

OK, end of rant-warning. All clear. Thanks for listening.

Rich Sternhell on the Evolution of Trust in Business (Trust Quotes #13)

Rich Sternhell was a Managing Principal at Towers Perrin, now Towers Watson, until his retirement last year. He was a Towers Perrin Board member, and chaired Board committees including client relationships, technology and quality; he not only consulted, he managed. He ‘sat in many chairs,’ as he puts it.

His career, post-MBA, covered four decades that saw radical shifts in employee compensation, consulting, and the role of management. Now free to indulge the thoughtful side of what he has seen, he agreed to share some insights with us.

CHG: Rich, thank you for sharing your thoughts with the Trust Matters audience. You’ve got some big-picture perspectives for us, so let’s dive right in. You started work post-MBA at New York Life in 1970. What are the biggest changes in business you’ve seen since then?

RS: Almost all the changes in business can be related to technology and the resultant increase in what I’ll call the velocity of business. Perspectives are shorter. What is often seen as “quarter to quarter” management, I would describe as management of metrics, rather than of the business. Whether it’s stock price, market cap, EBITDA or cash flow, the focus on metrics that are market-visible has monopolized management attention. We have moved from management that is passionate about products to management that is passionate about the numbers they report.

The focus on acquisitions, divestitures, etc., that can increase price multiples has created a loss of shared understanding between employees and management as to the source of value for the organization. This has also created a generation of management that is focused on management of their careers rather than their companies.

There is also a loss of organizational connectedness. Fellows in their 50’s and 60’s who would take the time to coach a young newcomer. They told stories about the past and made people who were long gone part of that newcomer’s memory bank and connection to the organization. I see very little of that today.

That newcomer is planning career moves through moving around rather than moving up. The few old-timers left have lost interest in mentoring young’uns who will be moving on to more fertile fields.

CHG: Let’s take that first one, management by career, not company. Say a little more about that?

RS:Those who have made it to the C Suite often have spent their energies making sure their resume gets them there. It becomes hard to change perspective to become passionate about a business you didn’t grow up in, have limited long-term relationships within and compensation highly leveraged to stock performance that has the potential of creating generational wealth.

CHG: Let me be devil’s advocate a bit here; isn’t it also a good thing that we’ve developed an ethos of mobile, project-oriented work, that fits very well with a fluid, collaborative kind of organization of work for the future?

RS: A mobile workforce is absolutely essential in an economy as technology driven as ours is. At the same time, company cultures have become fragile. But the bond that existed between management and the workforce doesn’t have the strength of shared experiences over long periods of time.

My favorite set of questions on employee engagement surveys has to do with leadership. There are always questions like, “Does leadership care about the associates?” “Does company leadership act in the long-term best interest of the organization?” Inevitably, scores on these questions come in significantly lower than questions that relate to the individual employee’s location or sphere of responsibility.

Managements fret about these results a great deal but then take comfort in the normative data that says that other companies score equally poorly. Almost inevitably a corporate communications campaign begins with messages from leadership about how much they really care.

I think these campaigns are self-defeating. Employees want to know that the management they see has “signed on” and take ownership of the messages. The direct communication from senior leadership has allowed middle management to abdicate their role in communication. When middle managers snicker at senior management messages the result is worse than if no communication had been made at all.

CHG: Many Trust Matters readers have little perspective on another major shift you’ve seen—the decline of the defined benefit plan. It can sound awfully arcane, but I’ve heard you say it was one of the tragedies of our time. Explain?

RS: The defined benefit plan was a bet by the workforce and a commitment by the company to the long-term health of the business. It was an obligation taken on by company ownership in return for the loyalty of the workforce. It provided a degree of security to employees at all levels that allowed them to think about the long term.

While our culture places a high value on individual responsibility we are asking employees to make decisions on matters for which they are woefully unprepared. The 401k has been sold as a replacement for pensions while it is clear that the numbers simply don’t work that way. In my early days as a pension consultant we talked about defined benefit plans as a company tool that enabled employees to be retired from a company with the security that they wouldn’t embarrass the company they worked for by being out on the street.

Companies no longer feel that embarrassment, and employees have been led to believe that somehow the DC plan will provide for their retirement. It can’t provide the same level of income replacement. Management looks to stock options to fund their retirement…employees don’t have the same opportunity.

Employees don’t trust the security of their job, their health insurance or even social security. In the absence of tools to manage for the long-term they act for the short term. It has become all about self-preservation.

CHG: Given those perspectives, what do you have to say about trust as it has evolved in business? Let’s start with headlines: what do the Goldman and BP headlines have to tell us about trust?

RS: Trust in business has many different components, all of which link to each other. There is trust between co-workers, trust between employee and supervisors, trust between salesman and customer, trust between salesman and production. BP is a great example of the disconnect that can grow.

Let’s start from the premise that for a business to survive and thrive it must create value for customers, and a return for its investors. It also must function within the framework of legitimacy established by societal norms. To the extent it enhances the communities within which it operates, goodwill is created which can be turned to competitive advantage.

On the other hand, damage to the community results in a destruction of the trust essential to maintaining not only a customer base, but the relationship with all the constituencies on which a business depends. This isn’t just a business case issue, justified internally by the needs of the business–it is about the underlying linkage of communities in a free market society.

Trust is fundamental to the achievement of all business objectives and its absence is the greatest threat to our business community as well as our broader society. Unfortunately, there are strong forces at work that have the effect of weakening our society’s trust in our business community and its leaders.

The village blacksmith was well aware that each implement he fashioned was critical to future orders. The quality and timeliness of his product determined his position in the community. To the extent he failed to meet his customers’ expectations, he created the opportunity for competition. To the extent he failed to manage his costs, his family starved. He didn’t manage his business for quarterly results, but for the well-being of his family, i.e., "long term selfish". The community he served also knew that their well-being depended on his success.

Common approaches to this problem are often mistaken. Accountants tend to quantify risk, giving equal weighting to probability and severity providing a reasonable estimate of quarter to quarter financial impact. Actuaries, on the other hand, give significantly greater weight to severity, recognizing the long term economic impact of the high-severity risk. Not surprisingly, the accounting perspective has gained precedence in recent years.

The re-establishment of trust among all stakeholders at every level is central to rebuilding business legitimacy. The risk of breaking trust, whether through cutting costs on deep water drilling platforms or breaking faith with customers, needs to be seen as a fundamental attack on business legitimacy, not just a cost-benefit analytic.

It’s been said that for an organization to claim a value, it must be non-negotiable….without exceptions. What does this look like? Examples include:

· A firmwide commitment to operate on principles rather than incentives

· A commitment to honor values over strategies, even successful ones

· An instinct to forgive the mistake….but to terminate for the cover-up

· A culture that commitments are sacred, whether to a colleague or a client

· A shared understanding that the long-term success of the organization must override the short-term benefit to an individual or unit

Building a trust-based organization from the bottom up and the top down is a serious commitment, but well worth the investment.

CHG: How about trust between employer and employee?

RS: John Bogle, the founder of Vanguard, has spoken often about the shift from ownership capitalism to management capitalism. My sense is that an employee’s understanding of the interest of a business owner was intuitive. The employee may not have liked the owner but intuitively he/she knew that they had an interest in the preservation of the business.

This is not true about the employee’s relationship to management, particularly when they see a revolving door in the C Suite of people from other businesses and industries who do not share the same long-term interest in the organization’s well-being. The increasing gap in pay between senior management and the average employee has exacerbated that gap in trust.

CHG: You’ve told me before you take a somewhat dark, pessimistic view of people, but it often comes out pretty optimistic. What is it that you think motivates people in business, and what does that mean for management?

RS:I truly believe most people want to find fulfillment in their work. In today’s world, concern about security—job, health, wealth–is an enormous distraction to engagement. It is an enormous challenge for management to overcome and often creates an internal conflict for the employee. Should I take the risk of doing “the right thing” or should I “keep my head down”? The more clearly management articulates “the employment deal”, the greater the opportunity for increased engagement and the creation of long-term value. I have seen values based management at work and have little doubt that there are organizations out there making it work today.

CHG: What does that suggest for management-by-numbers?

RS: The numbers are critical. Management won’t stay in place very long if they can’t deliver results. But management only by the numbers isn’t enough. Values will trump strategy over time.

The real challenge is the friction cost that loss of trust has on a business, our economy and our society. Loss of trust means an increase in a myriad of costs through due diligence requirements, procurement processes, government regulation and litigation. Sales take longer to close. Contracts take longer to negotiate. The legal aspects of operating a business have exploded.

None of these areas have anything to do with increased value of the product or service a business produces but the costs imposed are a direct result of decreased trust. Thus we have an ever-increasing number of workers who don’t contribute to creating value, but are essential elements in today’s business environment.

CHG: What can an individual TrustMatters reader do to enhance his or her ability to trust, their personal trustworthiness, or the level of trust in the business world of today?

RS: The need and desire for trust is universal. The challenge comes when we believe that it is important to act in a trustworthy manner in some situations and not in others. Understanding our interdependence with vendors, customers, employees and other stakeholders is essential. To the extent we employ situational ethics and call a violation of trust a business judgment we weaken the trust framework of an organization. Each individual has the capacity to ask themselves the critical question in every business judgment they make as to whether they are acting in a principled manner.

CHG: What do you think of the MBA Oath movement that began last year?

RS: It is certainly a worthy aspiration…much like any approach to ethical behavior. It is discouraging that such an oath would be perceived as necessary. The implication of the MBA Oath movement is that there is some degree of career sacrifice entailed with living up to the oath. That in itself is demeaning to business people.

CHG: What’s the best business book you ever read? The best advice you ever got? And what’s the one thing you’d recommend to a new MBA today?

RS: I can’t give you just one Charlie, but I’d put your book Trusted Advisor up with the best. It is the first book I recommend to anyone entering sales, consulting or professional services. My daughter is a doctor and my son an attorney. I have made sure that both of them have copies and have read it.

Another is by your co-author, David Maister. David’s writing has been formative in my thinking as a consultant and manager for almost 30 years. I’d pick True Professionalism as my favorite. A recent read has been General Eisenhower’s Report on Operation Torch. I only wish I had read it 30 years ago. Anyone who has to manage a merger or a large project with a multidisciplinary team should be required to read it.

Finally, a new book by a professor at Columbia, Sheena Iyengar, The Art of Choosing. The Art of Choosing is a fascinating book from a pure marketing perspective, but even more interesting as probably the most helpful thing I’ve ever read in understanding cultural differences.

For the new MBA I would say that business is an honorable profession as long as you practice it honorably. Every decision is a choice and knowing that the choices you make have earned you the trust of your colleagues and your clients is the greatest reward you can hope to receive.

CHG: I’m blushing, but I know you’re serious, so I’ll leave it in. And many thanks to you for spending time and sharing wisdom with us, we greatly appreciate it.

——–

This is number 13 in the Trust Quotes series.

The entire series can be found in our Trust Quotes section on TrustedAdvisor.com

Recent posts in this series include:

Trust Quotes #12: Martha Rogers and Don Peppers Interview
Trust Quotes #11: Jim Peterson
Trust Quotes #10: David Gebler

Trust, Honesty and Authenticity

A few months ago, Deborah Nixon posted an interesting question on LinkedIn. She asked: “Is there a difference between authenticity and honesty?”

She got about 35 answers, and they all make for interesting reading. Here’s what I sent in:

Deborah, I’m sure you would agree the two terms cover a lot of territory in common. The trick with these definitional things is not to discover some underlying reality, because there is none; these are conceptual models that help us explain the world. They are good or bad insofar as they help us; so I’d suggest starting there. What’s the most useful way to distinguish the two?

One way might be to say that authenticity is largely passive, and honesty is largely active. When we say someone’s honest, we usually mean they tell the truth, and go out of their way to do it.

Sometimes we also mean that they don’t tell a lie–but that’s far from all the time. You often hear someone way ‘well, he was honest–he didn’t actually tell a lie.’ In such a case, ‘honesty’ just means I didn’t utter an untruth; it’s perfectly consistent with covering up all other kinds of truth. So the casual use of ‘honest’ may rule out sins of commission, but not sins of omission.

That’s why the legal language "the truth, the whole truth, and nothing but the truth" is required in court; to prevent the ‘honest’ witness from conveniently leaving something out, or snow-jobbing the court with irrelevancies.

Authenticity, on the other hand, I think usually implies a lack of attempt to control another’s perception. It means letting others see us as we are, warts and all. I think it also goes one more step: it means letting everyone see us in a way that’s no different from how anyone else see us: that is, we don’t play favorites in terms of constructing alternative fictions to respective people.

At a corporate level, a company might support a claim of honesty by pointing to the truthfulness of its statements, or the lack of court cases against it. Again, ‘honesty’ conveys a sense of ‘never knowingly told an untruth.’ Whether it includes consciously allowing other people to make incorrect inferences by not telling them something–well, that’s not entirely clear.

Authenticity is a whole ‘nother level. It means not hiding out, opening the door in things that are not excluded through standard rules of privacy, letting the chips fall where they may. Further, I think it usually entails a commitment to be authentic, not just a convenient lifestyle.

Seems that of the two, we might say that authenticity is broader (i.e. it encompasses being honest, but goes beyond that to proscribe sins of commission).

On a practical level, people who strive to be honest often talk of it as a struggle: to resist temptation, to not gossip, to say things that can be embarrassing if they are true.

People who choose to be authentic have, in a way, an easier time of it.  For someone who is authentic, the daily default way of life doesn’t involve decisions or will power: the default is openness, there is no issue of control vs. transparency.

Things are what they are, and there is no threat about them.

What’s trust got to do with it?  To trust a person or a company, honesty is table stakes.  If you suspect they’re lying, trust is stopped dead in its tracks.  But even if they’re honest, that’s nothing compared to authentic.  Think how much more BP, Toyota or Goldman would have been trusted even in the presumably honest statements they made, had they not created an historical pattern of inauthenticity. 

A Tale of Two Books: Jill Konrath’s SNAP Selling, and The MBA Oath

If you’re a regular Trust Matters reader, I believe you expect high standards from this blog. I’m not about to let you down by recommending weak books. Here are two new books of which I think highly.

SNAP Selling, by Jill Konrath.

I know Jill. She is smart, sassy, Midwest-values based, Minnesota-friendly—and in-your-face New York blunt. It shows in her books, her blog, and her articles. 

Jill is a salesperson turned sales consultant, trainer and author. She has all the tactics and specifics you’d hope for from a good sales book—but she’s grounded in the kind of deep, ethical perspectives on sales that I respect.

SNAP stands for Simple, iNvaluable, Aligned, and Priority. Okay, another acronym; but a good one. Her premise is that everyone is hard-pressed these days, thus every interaction has to count. Every interaction has to meet those criteria.

Jill has tons of practical advice; but I confess I’m even more drawn to the premise underlying all her work. For example: she’s down on ‘always-be-closing’ tactics; sales is ‘no longer a numbers game,’ and my favorite: “sales is an outcome, not a goal.”

I believe you can judge an author by the people who agree to write a blurb for the book itself. Here are a few for whom I have great respect: Mike Schultz,  Keith Ferrazzi, Mahan Khalsa, Dave Stein, Sharon Drew Morgan. And I’m honored to be on that list too.

The MBA Oath, by Max Anderson and Peter Escher.

I first wrote about the MBA Oath a year ago, in early June, 2009. I was very favorably impressed.

I later sought out Peter Escher, co-author, and interviewed him last November. 

In January of this year, I participated in a “pro-con” Debate Room article on Businessweek.com. I took the position that the Oath would be effective. 

I have to confess, I was shocked at the vehemence of the cynicism reflected in the responses to that article. They accused the oath-propagators of being cynical, stupid, venal, naïve, ignorant, and—in one case—anti-capitalist. 

Well, this book—The MBA Oath—is the answer to every one of those complaints, if the complainers will only take the time to read it.

I expected this to be a quick book; it was hurriedly written and produced—but it has depth way beyond books written over years.  

Perhaps this is due in part to the early influence on the authors of the faculty member who’s just been elected Dean of Harvard Business School, Nitin Nohria, a man who had considered just such an oath years ago.

I also suspect the influence of a legend in publishing, Adrian Zackheim.

Anderson and Escher are generous in their acknowledgements to these and many others. But there’s no denying a truth: these two have written a helluva thoughtful book. There are a dozen places in this book touching on topics I’ve blogged about where I thought, “Darn, they said it better than I did.” 

To many, the most powerful part of the book is the second part, where the Oath’s statement of purpose and 8 promises are detailed, with a chapter for each. These are thoughtful, nuanced discussions about issues like ethics and the law, man’s relation to man, and the purpose of business.

They are as comfortable citing Immanuel Kant and John Rawls as they are taking apart Milton Friedman, while still knowing their marketing history and staying current with Michael Jensen and Dan Ariely

But I find Part I, The Profession, the most compelling. Here the authors diagnose just what went wrong. None of these insights are unique, but they are very well assembled. Consider:

Markets rely on rules and laws, but those rules and laws in turn depend on truth and trust. Conceal truth or erode trust, and the game becomes so unreliable that no one will want to play…We will be left to rely increasingly on governments for the creation of our wealth, something that they have always been conspicuously bad at doing. Charles Handy

Sociologist Robert Merton argued that codes have enormous influence on behavior because they provide guidelines. They can produce negative emotions of shame when the code is broken or positive feelings of pride when it is kept…

In 1908, when Harvard began the world’s first two-year masters program in management education, it was called a “great, but delicate experiment” by Lawrence Lowell, who went on to become president of the university…

When HBS opened its campus in 1908, Owen Young, the president of General Electric, said… “Today the profession of business at Harvard formally makes its bow to its older brothers and holds its head up high…Today and here business formally assumes the obligations of a profession, which means responsible action as a group, devotion to its own ideals, the creation of its own codes, the capacity for its honors, and the responsibility for its own discipline.

In other words, the foundation of Harvard Business School sounded one helluva lot like The MBA Oath.

The authors brilliantly point out a major inflection point: major reports by the Ford Foundation and the Carnegie Corporation in the 1950s. They examined business education, and found it wanting. Specifically, they said it needed to look more like regular academic education.

That was the beginning of the end. As the authors put it:

The purpose of business schools changed. It was no longer to turn management into a profession; it was to turn management into a science. Professors became more like academics elsewhere, researching increasingly narrow and obscure areas so they could publish and win the esteem of their peers. The focus on training leaders who could competently and responsibly manage complex organizations was almost lost in a new age of training analysts with the newest financial formulas. The “great, but delicate experiment” of turning management into a profession had ended.

This book deserves a lot more readership than its admittedly necessary title will probably grant it. Anyone with interest in corporate ethics, regulation, the law, general education, industrial economics, corporate strategy and general management would in my opinion be well-advised to read it. 

Among other things, the book itself goes a good way to restoring the moral currency of the MBA degree.

I’m Just a Soul Whose Intentions Are Good

I’m just a soul whose intentions are good;
Oh Lord, please don’t let me be misunderstood.

Don’t Let me Be Misunderstood, by Benjamin, Caldwell, Marcus 

So goes the song (written for Nina Simone, made famous by The Animals). Heaven forbid: Oh lord, please—don’t let me be misunderstood.

Being misunderstood is a terrible thing, we say. My intentions are what’s important, we say—look at my intentions, not at my actions. Then you’ll understand me.

The US criminal justice system, as we’ll forever be reminded from Law & Order reruns, has two parts: the police, who investigate crime, and the district attorneys, who prosecute the offenders.

At least in the TV version, cops who are interested in understanding intention—intention leads to motive. It helps explain behavior, and leads to discovery.

In the courtroom, the crime is partially defined by intent. Killing someone with intent is generally considered more heinous than killing with no intention to do so. Sentencing, too, is affected by intent, as in ‘he still shows no remorse.’

We fear being misunderstood, of having bad motives attributed to us. Yet we attribute bad motives to others all the time. He has it in for me…he never listens to us…he only cares about getting his own…and so forth.

There is a constant interplay between intent and perception. It’s the territory that’s inhabited by PR firms and political consultants. And it’s that interplay that heavily determines trust, among other things.

Big Oil and Its Intent

While consuming gasoline this weekend in the great American pastime of driving while radio channel-flipping, I heard John Hoffmeister, former president of Shell Oil, respond to a question (I’m paraphrasing here by memory): “If BP really didn’t want a massive spill like this, then how can you explain their failure to have adequate prevention mechanisms in place?”

Hoffmeister then spoke some truth (again, by my memory): “Of course I wasn’t there, but in such situations, it’s often not the equipment—steel is steel—it’s the human, managerial part of the equation that goes wrong.”

It usually is. I sincerely doubt that a single employee of BP wants, desires, intends to spew hundreds of thousands of gallons of oil into the Gulf of Mexico. I sincerely doubt that anyone in BP is indifferent to the pain and suffering of living creatures and the ecosystem in coastal Louisiana. Yet those motives and worse are easily attributed to Big Oil. And hardly without reason.

The face of evil is far more mundane than the conspiracy theorists suggest. The excellent Wall Street Journal series  documents, at a micro-level, how good intentions can co-exist with disastrous decisions.

You can also destroy good intentions with an ongoing climate of fear, confusing goals, and conflicting pressures; see David Gebler’s account of unethical behavior.

How Good Intentions Get Subverted

It’s hard to do good from bad intentions. But Eric Burdon’s plea notwithstanding, good intentions not only won’t keep you from being misunderstood, they are impotent in the face of failure to act on them. The road to hell, it is said, is paved with good intentions.

What are some of the most common ways in which good intentions go bad? Here are a few.

1. “It’s not illegal.” Those who invoke the law as a way to justify their good intentions are scraping the bottom of the ethical barrel. Laws are simply the extreme version of social sanctions. Their presence means some proscription has gotten so odious that society chose to ossify it in a law. The absence of such ossification is so distant from evidence of good intentions as to be absurd. We rightly shame people who try to make the connection.

2. “It’s our policy.” Variations on the theme include “I was just following orders,” and “that’s just how things work.” At its best, this an evasion of personal responsibility by blaming things on a ‘system.’

3. “I had no choice.” On the face of it, like number 2, but accompanied by an anguished plea of being caught between rocks and hard places—there was no time, everybody was yelling at me to finish the job, it’s been done before…”

It’s a basal human trait to desire to be understood. More evolved human traits include the ability to detach from that desire, and at the same time do things in a ways that ensure good intentions are in fact clear.

How do investment bankers defraud entire nations? How do oil companies poison entire ecosystems? How do companies come to be mistrusted?

One step a time. One small, innocuous, seemingly inconsequential step at a time. The devil may lurk in our hearts, but he lives in the details.
 

The Language of Moral Education in Business: a NYTimes Moment in Time

Yesterday, May 2, the New York Times initiated an interesting global experiment: asking huge numbers of people, all around the planet, to take a single photograph—all at precisely the same time, 15:00 GMT. Read more about it here

A cool experiment? Indeed. Imagine the impression of thousands (hundreds of thousands?) of photos, all of precisely the same moment in human history. I can’t wait to see it.

But that’s not what I want to point out. Because the way in which the Times announced the contest tells us about how to develop a sense of morality, a shared sense of ethics, in a large group: in this case, a world population.

Here’s that link again:

If you read it, you’ll be struck by the language, as were many of the early commenters on the article. Here is some sample language:

Do I have to take my picture at exactly 15:00?
No. We don’t expect atomic-clock precision. And we’d rather you send a good picture taken one minute after the hour than a mediocre picture taken exactly on the hour.

What if I cheat?
Come on. Why would you?

Look, we trust you. Besides, there aren’t enough cups of coffee in New York to keep our tiny staff awake for the time it would take to peruse the metadata in every single JPEG we receive. So we’re relying on you to understand that any significant departure from the benchmark hour only subverts the communal enterprise.

Of course, if we’re presented with evidence that your entry wasn’t taken close to 15:00, we’ll remove it from the gallery.

What about adding or subtracting or combining elements?
Again, don’t…

And if I do so anyway?
Really, why would you? We’re not going to pore over submissions looking for fakery and fraud. But we will remove any photographs that are demonstrably manipulated. Please, just spare us.

The Language of Moral (Business) Education

The Times is attempting to deal with a group. In this case, a remarkably global, diverse, and very loosely connected group. If even small numbers of people behave badly, they have the power to subvert the project.

I suggest this is a typical situation for moral education. What do you do to encourage members of a group to behave in a way that encourages the greater good for all?

  • You could simply depend on the free market of ideas, believing that if the photography idea is a good one, it will survive the market; and it doesn’t survive the free market, then it was a bad idea that didn’t deserve to live in the first place.
  • You could define a set of incentives to encourage the right group behavior, define metrics to measure the right group behavior, then tune the incentives to maximize it. 
  • Alternatively, you could enact a set of regulations about the contest. You could then have a government agency enforce them.

Or–you could choose the tools of moral education.

You acknowledge your powerlessness to compel the behavior of others. Instead, you appeal to their conscience.

What about cheating? You go directly to the potential cheater and say, ‘Really, why would you?’ What’s to keep someone from cheating? Again, make it personal: say, ‘Look, we trust you…We rely on you…to not subvert the communal enterprise…Please, just spare us.’

This is the language of moral education. Appeal directly to the individuals. Appeal to their innate sense of community. Acknowledge the absence of your power to compel their compliance. Indeed, acknowledge your dependence on their willingness to comply.

That’s the language of moral education. It’s disarmingly honest, transparent, and vulnerable. It acknowledges an individual conscience.

And it works.

Amazing, isn’t it, how infrequently we think of applying it to our challenging business situations.
 

David Gebler on Ethics in Business (Trust Quotes #10)

David Gebler is a thought leader, speaker and seminar leader on the subject of ethics in business. Trained as a lawyer, David is a Senior Lecturer at Suffolk University where he teaches Business Ethics and sits on the International Advisory Board of the Graduate Program in Ethics and Public Policy; he is also a principal at Skout Group, a firm focused on culture change.

With globally significant public and private sector clients on his resume, David brings a broad perspective to questions of ethics in organizations.

CHG: David, thanks for joining us here. Tell me, why is it so hard for companies to get their heads around thinking about ethics?

DG: While ethics issues are of critical importance to organizations today, “ethics” as a business function is perceived as quite amorphous and hard to define. In many organizations ethics is synonymous with “compliance,” narrowing the focus to ensuring adherence to stated standards of conduct. In other organizations “ethics” is treated as a vague platitude without clarity as to how it drives behavior.

CHG: You told me once there were three approaches to business ethics: behavioral, philosophical, and legal. Can you briefly explain what those categories mean?

DG: Philosophical business ethics focuses heavily on the intention of one’s actions. Aristotle wrestles with character and virtue, while Kant is unequivocal in the need to always do the right thing, regardless of the consequences. A theoretical look at intent is often irrelevant to business which is more focused on employees’ actual behavior.

American businesses often look at ethics through the lens of compliance. “Doing the right thing” only means observing the law and the company’s code of conduct. However, there may be conflicting “right things” about which employees need guidance.

Behavioral ethics draws from social psychology and looks at what motivates behavior and what an organization can do to remove roadblocks to employees being honest.

CHG: You have come to view ethics in business as largely a function of corporate culture; you looked at the top 20% and the bottom 20% of companies in an ethical cultural study—what did you find?

DG: Most employees have a good sense of their moral values and actively seek to live those values at work. Ethics risk emerges most often when employees face pressures and external influences that drive them to do things they regret.

If an organization surveys employees only to find out if they know what they should do (i.e. the top 20% knows there is a code of conduct and a helpline), they may be missing key data on whether employees would even raise an issue if it arose.

I worked with a large global company that asked me to conduct focus groups with divisions in the top 20% and bottom 20% based on results of an ethics survey. In meeting with employees at one of the top 20% divisions, it was true that when I asked if they would report misconduct everyone said yes (i.e. top 20%).

However, my very next question was “If you found out early in the quarter that you were not going to meet your plan, would you report that to your boss?” And no one said yes. Doing such a thing would be a “CLM” (Career Limiting Move). Open communications and a willingness to raise difficult issues are more critical ethics determinants than knowing whether there is a helpline.

CHG: What kinds of culture, then, are associated with high ethical behaviors? And what can a serious manager do about it?

DG: There are several common traits of ethical cultures:

1) Open communication and respect – employees at all levels feel that they are spoken to truthfully and are respected as people.

2) Personal responsibility and a sense of control – employees are held accountable for their actions and their commitments to others and are engaged in tasks that matter.

CHG: I was surprised to hear you cite the Federal Sentencing Guidelines as a key source for investigating ethics in business. Can you say more?

DG: While business ethics and ethical companies have been around for many, many years, the focus in the US began in earnest in the 1990’s. As a result of the defense industry scandals in the 1980’s, the US Sentencing Commission developed guidelines for corporations to avoid criminal liability if they put into place an effective compliance program. These guidelines have become best practices for US companies. In 2004, as a result of the Enron legacy of scandals, the Guidelines were revised to add language focusing on ethics and organizational culture.

CHG: You mentioned that you were struck by the lack of remorse in post-financial melt down financial industry executives. Say more?

DG: The bottom line is that today’s financial market is only a numbers game. Concepts such as the fiduciary responsibility of one party to another have been lost. While leaders talk about the need for trust to grease the wheels of capitalism, there is very little of it in the system today.

CHG: What’s the difference between ethics and morals?

DG:  Social psychologists have long told us that behavior is a function of the person and their environment. Morals address one’s character, the person. Ethics addresses the ethos, the environment in which we make decisions.

CHG: I was shocked when you first told me, “In my 15 years of work, only one client once asked, "How do we define the right thing?"  So business ethics is largely about how do you get people to concur with what the agreed upon guidelines are.”

DG:  Many companies use the “newspaper test” as a decision-making model. How would you feel if your actions were reported on the home page of cnn.com? While we have a societal set of standards, there are often tough issues that pit right vs. right. Superficial guidelines of being honest may not be enough. For example, every company takes certain risks, even with quality and safety. What guidance do leaders have to know what is “reasonably” safe enough to go to market with a product?

CHG: What’s the difference between ethics and compliance? And does anyone care about the former?

DG: Compliance is the adherence to prescribed standards of behavior. Compliance training educates people on what behavior is expected of them.

Ethics is the determination of whether people will engage in the desired behavior and what should be done to encourage people to do things they know they should do, but often don’t.

CHG: Here’s a biggie for mid-level people in a number of my clients; what should an individual mid-level manager do in the face of what they perceive as “tough” behavior by their superiors, i.e. the “career-limiting move” of speaking out about things?

DG: When faced with a tough situation, managers often look at the issue as being black or white: “Do I do what’s expected of me or do I do what’s right?” Effective use of ethics would be to see whether the issue can be reframed so that it’s not so drastic a choice. Managers in tough spots need not be heroes, but they do need to be savvy:

  • Who else can I bring into this situation to guide me?
  • Who else in the organization would support me in doing the right thing?
  • How can I have a conversation with the person who is forcing me into this situation? Perhaps there is a “third-way” I haven’t thought of.

CHG: What seems to be the American take on ethics in business?

DG:  Americans are unique. We combine a rules-based culture (ever seen the NFL Rule Book?) with a cowboy heritage of heroes and independence. Americans are very results-oriented and in general, are less focused on how we got the results than are other more social cultures.

Therefore, I find that American business leaders are more interested in ethics when they can see that being ethical helps the bottom line: less time and money spent on investigations and fines, and more time spent by engaged employees doing productive work.

CHG: Doesn’t that create a tension—justification of ethics by subordinating it to the bottom line? Or are you saying it’s not so much about particular actions as it is about a culture—creating an ethical environment, which in turn tends to be more profitable?

DG: Let me give you an example from today’s headlines. Toyota shouldn’t be forced to make a trade off between safety and profit. Both are necessary because each one supports the other. Toyota’s brand is based on safety. It won’t sustain its profitability if its products aren’t safe. Similarly, safety has to be addressed in the context of products consumers can afford. We are willing to accept some degree of risk.

Ethics comes in to guide how Toyota balances these two objectives. In leading up to the recent scandal key questions must be answered: Who had information but didn’t report it up to senior leadership? Why not? Which stakeholders, internal and external, were not included in the decision-making process?

This is number 10 in the Trust Quotes series.

The entire series can be found at: http://trustedadvisor.com/trustmatters.trustQuotes

Recent posts in this series include:
Trust Quotes #9: Chris Brogan
Trust Quotes #8: LJ Rittenhouse
Trust Quotes #7: David Maister

The Trust Primer Volume 6

Every 2 out of 3 months we publish an issue of the Trust Primer, an ebook series highlighting three recent provocative and insightful topics and conversations from the TrustMatters blog. 

Catch up on posts you missed.  See what we think is worth highlighting, and agree or disagree with us.  Pass it along to friends you think might enjoy it.  It is free, after all, and it looks pretty cool, if I do say so myself.

In this issue we touch on three different aspects of relationships: the relationship of a company to society, the relationship of a company to its several stakeholders, and the relationships between ourselves as individuals.  The individual posts are:

But you can get them all at once in .pdf ebook format by clicking below:

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