Archive for May, 2010

On leadership, ethics and trust

11th May 2010

Organisations are complex things so it follows that leading them is at least as complicated. Of the many definitions of leadership which exist, we regularly come back to the Social Identity approach espoused by Alex Haslam and others which places leadership in the context of the led as well as those that lead: “The development of a shared identity is the basis of influential and creative leadership” * and we have had cause to reflect on this in the context of ethics and trust prompted by some recent events.

6a00d8354bb40b69e2011571ef7aab970b-800wiIn the UK, sneaking in under the smoke and noise created by the demise of the last Government, we have the Bribery Act due to become law in October 2010.  This makes it an offence to give or receive bribes, particularly in the case of foreign public officials, and will make it easier for the Serious Fraud Office to convict companies and individuals who will be respectively liable to unlimited fines and ten years in prison.  Similar legislation is passing worldwide and in America the Obama administration is using a post-Watergate law – the Foreign Corrupt Practices Act – to run 150 current prosecutions compared to just eight in 2001.  Some high profile cases are also making the headlines:  Britain’s BAE Systems were fined $400m in February, Germany’s Seimens have been forced to cough up an eye watering $2.5b and Daimler received $185m worth of penalties in March 2010.  According to Transparency International, an NGO set up to tackle corruption worldwide, prominent firms do not score well in their “anti-corruption practices” with Belgium the worst performing European country.  Stories such as that of Ikea and their refusal to get their hands dirty with corrupt practices in Russia are fewer and farther between than the scandals of wrong-doers caught.

Even more prominently we have recently been subjected to the unedifying spectacle of Goldman Sachs executives being skewered on the righteous indignation of a senate subcommittee over their part in creating the conditions for the credit crunch.  Like the executives of Enron and countless other firms over the years their defence –  “we broke no laws”  - looks unlikely either to be true or sufficient in the face of public disgust at both what they have done and what they personally gained from it.  The same may prove to be true for BP’s Tony Hayward who took over leadership of the organisation on a pledge to fix a worsening accident record in 2007.  Now he sees his business, beneficiaries of $5.6b profit in the first quarter of 2010, struggle with the deaths of 11 workers and the opprobrium of a Louisiana population watching spilt oil wreck their livelihoods and their landscape.

Of course most managers, most of the time in most organisations are well away from such high profile territory but their moral integrity is equally important and this is where the Social Identity model is helpful.  Most employees would not consider themselves corrupt.  Whatever the evidence gained from the amount of company stationery found in their homes, they think of themselves as fair and honest and they expect the same of their leaders.  Fair and ethical behaviour is the (usually) unstated prerequisite for trust and although this might be calibrated differently in different people at different times, there is a threshold through which a leader cannot fall and still expect to lead.  Worse for managers and leaders is the fact that opportunities to test their moral fibre happen more regularly than for their staff and that the test that the staff apply is on what they perceive their own behaviour to be rather than what it truly is.  In this light, the scandal over UK MP’s expenses and the subsequent hung parliament make perfect sense and the success of the coalition Government is crucial for the future of politics as well as the economy, ‘though turning their current ideals into policy and practice is the key - ‘Action is eloquence’ as Shakespear pointed out.  It is in this light also that the actions of most managers over more daily issues –  selection for promotion and training, managing performance and completing their own expense claims – matter more than it may first appear.

It is into this complex mix that the MBA Oath arrives.  This is a pledge created by MBA graduates at Harvard Business School to address what they see as the absence of a code of ethics for managers.  Interestingly, their oath was inspired by the school’s Chair of Organisational Behaviour, Nitin Nohria who is also the man set to take over as Dean in July this year – the first such appointment in living memory outside of the fields of Finance and Economics.  The oath may be criticised as niave and a bit worthy but the attempt deserves applause.  Probably of greater long term value will be the appointment of Prof. Nohria who will surely bring at least the opportunity for future senior leaders to consider their duties as well as their rewards and, as so often in the past, where HBS leads may other business schools follow.

* ‘The New Psychology of Leadership: Identity, Influence and Power’ Haslam, Reicher and Platlow.  Due for publication in August 2010