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  • Writer's pictureSteve Hearsum

The Farcical World of Organisational Ethics

Updated: Apr 3



In December 2021, the UK’s financial watchdog, the FCA, fined HSBC £64 million for money laundering failures. It “highlighted three key failings that were found over the eight years from March 2010 to March 2018. This included failures to consider what checks it was using to identify money laundering and terrorist financing, as well as ‘poor’ risk assessment when they were updated after 2016” (The Guardian, 17/12/2021).


That story reminded me of an earlier, even larger, penalty incurred by HSBC back in 2017, when they were fined $1.9bn (£1.4bn) in the US “for failing to prevent Mexican drug cartels from laundering hundreds of millions of dollars” (Sky News, 11/12/2017). As part of the deal with US regulators, the bank agreed to submit to an independent monitor, and the bank had a “sprawling team of outside investigators to make sure the bank was cleaning up its act” (Buzzfeed, 21/09/2021). You’d think that would make a difference, but even the outside monitor can be found quoted in HSBC’s own 2017 annual report commenting that he “believes that HSBC is not yet adequately managing financial crime risk” (HSBC annual report 2017).


Whilst there are other financial institutions that have been fined ludicrous sums of money for similar failures, HSBC is a good example of how organisations, and in particular senior leadership teams, at best misconstrue or misunderstand behaviour change at scale, and at worst play fast and loose with what it means to be ‘ethical’ or indeed to become ‘more ethical’. This is not simply about governance either, which can fancily be defined e.g. by Investopedia:

“Corporate governance is the system of rules, practices, and processes by which a firm is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, senior management executives, customers, suppliers, financiers, the government, and the community.

Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.”

That all sounds very… rational, as if by simply mandating or commanding it, ‘good governance’ will arise. However, all of this is a function of how people behave and choose to act. That in turn connects to what underpins that behaviour – our intrinsic and extrinsic motivation – what we value and how that in turn co-creates culture.

The most visible mechanism organisations deploy in the wake of unethical corporate behaviour is a review of culture, starting with values. After all, a lovely new set of shiny values clearly changes everything, doesn’t it?

 



Are your values laminated or lived?

When I first read about the 2017 HSBC fine, I took a moment to look at HSBC’s values. I recall reading them and thinking two things:

  1. I’d like to work there; it sounds like a decent place.

  2. These values bear no relation to the behaviours that appear to have gone on unchecked over an extended period.

In 2022, HSBCs values are as follows:


The one that talks about ‘responsibility’ is worth looking at closely:

“We take responsibility

What we do has a real impact on people’s lives, communities and the planet. We take this responsibility seriously.

We set ourselves high standards and are each accountable for our actions. We always use good judgement. And if something doesn’t feel right, as colleagues we speak up and act. [my emphasis]

We build for tomorrow, today. We succeed only by taking the long view, by focusing on the sustainable interests of our customers, investors, and the planet we all share.”


The link in that statement takes you to the bank’s whistleblowing policy, which, again, at face value seems utterly reasonable and indeed laudable. The problem with these things is the disconnect that is often revealed when you scratch beneath the surface of values statements. In the finance sector, a cursory review of all the whistleblowers who were shunned and scapegoated for attempting to make use of the very policies that apparently valued employees for ‘doing the right and ethical thing’ makes for depressing reading.

My own experience, both as an employee and as an external consultant, is that while it is all too easy to craft wonderful values statements, it is a whole other thing to translate that into long-term sustainable change. Why is that?


Think one thing, do another

Many clients I work with, when I inquire into their experience of their organisation’s values, talk of a gap between what is espoused and what is lived. They rapidly point to the disconnect between values statements and behavioural frameworks, and highlight not just behaviours that are not modelled, but typically the people who are most culpable of that. In most cases, it is senior leaders who are found wanting. Maybe that should not be a surprise, because in essence what we have here is a group of people who have often taken an organisation to where it is today, including setting the conditions for culture and behaviour, having to square that with their own actions. As we know, leopards do, occasionally, find it a tad tricky to change their spots.


From a compassionate perspective, this is not unsurprising, as senior leadership teams can often be challenging environments to work in. An Unholy Trinity of Shame, Ego and Narcissism permeates, so it is hardly surprising that leaders find it hard to show up differently, even if they are the ones asking everyone else to do just that.

An example of this occurred in a global manufacturing company I worked with. This organisation had gone to a lot of effort to address patterns of behaviour that were holding it back. During the financial crash of the late 2000s, their strengths of operating at speed in crisis mode made them a market leader in reducing their inventory of unsold units at a time when surplus stock was a threat to liquidity and financial sustainability. However, post the crash, when what was needed was a culture that fostered innovation, experimentation and product development, they struggled.


So, a plan was hatched for ‘culture change’. The senior leadership team mandated that this happen, and much money was poured into the project, which then began to come unstuck. One of the change leaders with responsibility for ‘culture change’ had the courage to point out to the senior leadership team two reasons for the lack of progress.

Firstly, if employees began to behave in line with the new expectations, the existing culture slapped them down.


Secondly, amongst the worst offenders were the leadership team themselves, and, it was pointed out to them, unless they started to model the new behaviours, why on earth would anyone else change?

Therefore, leaders modelling behaviours is crucial, because they set the tone, and there are many business aphorisms that echo this:

●      “A fish rots from the head”

●      “The culture of any organisation is shaped by the worst behaviour the leader is willing to tolerate”

●      “The culture of a company is the sum of the behaviours of all its people.”

●      “…true leadership stems from individuality that is honestly and sometimes imperfectly expressed. Leaders should strive for authenticity over perfection.”

●      “Determine what behaviours and beliefs you value as a company and have everyone live true to them.”

●      “We can change culture if we change behaviour.”

I could go on, but the internet is awash with these, as are business schools, books by gurus and many a leadership programme, so they are easy to find. It seems to have been accepted as a truism that modelling behaviour is a good thing, to the extent it has become a cliché, and maybe that is the problem.

I believe many of us have lost sight of what it means to ‘model behaviour’, how that directly connects to our individual, collective and organisational values and what that means ethically.


The problem with values

Let’s just pause for a moment and take the values thing head on. No organisation I work with does not believe in having values. Many spend a lot of money on external consultants to help them define them, and some bring in lawyers to do ‘external reviews’ when things go wrong (financial institutions in particular like a lawyer-led review).

Here is one of the problems: the outsourcing of conversations and inquiry that needs to be led by the very people whose behaviour needs changing. As an organisational consultant, one of my simple rules for working with clients is to challenge them if I start to smell that there is an abdication of responsibility happening. This can show up, for example, when a client asks a consultant to make decisions that should sit with the organisation, not with an external party who does not have to live with the consequences. To be fair, many consultancies love to take that responsibility on, because it creates more dependency and colludes with the idea that they are ‘experts’, but it can be ethically problematic. That is for another article, though.

Back to values.

In a 2011 article[1], Glenda Eoyang listed ten problems with the concept of organisational values. Amongst these were several that resonate today:

  1. We feel good when we talk about them, but nothing changes. We come together around our similarities, but action is sorely lacking.

  2. Organisations don’t have values; they are a function of the extent to which people think and behave in ways that are similar.

  3. We can espouse them but not live them. During the coronavirus pandemic, no country has offered a better example of the disconnect between what is said and how people act than the UK, in the form of the well-documented behaviour of staff at 10 Downing Street.

  4. It is absurd to suggest that a few people can determine the values of many. As Glenda rightly observed: “They cannot have the insight or perspective (to say nothing of the standing) to legislate values that hold for the whole”.

  5. They are ubiquitous and same-y. Many lists of values have the same rhetoric and calls to an idealised notion of ethical behaviour but fail to get to grips with the behaviours it will actually require to bring these forth. For example, a value that talks about ‘Honesty’ is useless if it is not connected to the capabilities that people may need to develop to have open dialogue and work through differences. 


I always get curious about an organisation’s values, particularly when a client is engaging me to talk about how I might help them change things. If they want something other than ‘better sameness’, then that means a conversation about behaviours and culture, starting with their own. That requires a conversation about senior leadership behaviour, and the comparison between what it is they are saying they stand for and what they do. The extent to which the disconnect between the two is visible, acknowledged, owned and discussed is a clue as to how self-aware they are and, crucially, up for the work. One of the most high-profile examples of where that was not the case is telling.


“Take a look at this list of corporate values: Communication. Respect. Integrity. Excellence. They sound pretty good, don’t they? Strong, concise, meaningful. Maybe they even resemble your own company’s values, the ones you spent so much time writing, debating, and revising. If so, you should be nervous. These are the corporate values of Enron, as stated in the company’s 2000 annual report. And as events have shown, they’re not meaningful; they’re meaningless.” P. Lencioni, HBR 2002[2]


Lencioni goes on to make an important point: “If you’re not willing to accept the pain real values incur, don’t bother going to the trouble of formulating a values statement.” I agree, because a conversation about values that goes beyond the superficial does mean having a good rummage in your personal and collective ethics. Why? Because ethics are:

“…moral principles that control or influence a person’s behaviour.”[3]


Talk is cheap

The thing is, we all know this. I rarely meet people who do not understand the problem with the gap between espoused and lived behaviour, or who do not understand that behaviour is a function of the beliefs that people hold about the world and themselves. We know this stuff, so why do we still find ourselves repeatedly reading stories about (yet) another disconnect between ethics and values, and an organisation’s culture or the behaviour of people within it?

Even when we shine a light on unethical behaviour, and keep the spotlight on it, human beings persist in doing what they know is not okay. Remember HSBC? During the investigation of the bank, “regulators say HSBC continued to fail in its responsibility to prevent money laundering” (Sky News, Dec 21st 2021).


It’s quite understandable in many ways we find this challenging. When you open a conversation about the gap between what someone says they believe in and what they actually do, you are highlighting something in the shadow. It invokes the Unholy Trinity I mentioned earlier, in particular shame, and sometimes ego and narcissism kick in as defensive mechanisms. Then there is a further barrier to be considered: the perennial need to manage anxiety by finding a Silver Bullet solution, a quick or guaranteed fix for a problem that is not easily fixable.


Working with organisational ethics, culture and values is dirty work

Many of the people that are called on to help organisations in the context of governance or culture reviews are also amongst the worst offenders in a functional collusion that exists here. It is a collusion between those desperate for certainty and those willing to sell them it, even if they know it does not really exist. Whether that be large management consulting firms, accountancy practices or a myriad of other ‘experts’, the external partner who refuses to collude with a client’s need to just make the pain go away is, I suspect, rarer than we think. In no small part that is because to do so means saying to your client that things are messier and dirtier than they may want to accept.


Dr. Richard Claydon makes a useful distinction between dirty and clean consulting.

"The dirty consultant enters an organisation ready and willing to uncover the dirty reasons for the organisation not performing. This involves two processes:

(1)   Working out where the inefficiencies and absurdities are and

(2)   Finding out who knows how to solve them.

 

This is a dirty process because it can uncover all manner of things that can cause emotional and psychological strain."[4]

This idea of absurdity is important. Human beings are pretty good at seeing absurdities, particularly around them, in others, although sometimes less so in themselves.

To do that, we need to accept that we may be wrong, that we are fallible, that we still have things to learn, that we may need to have conversations we would rather not. That requires humility and courage.


One example of this was a client I worked with a few years ago. They had several teams in varying degrees of conflict, and they had tried various interventions, but things were not improving. My colleague and I suggested they might find this model helpful, or that one, or indeed several others, before making our final pitch: unless they were willing to do the work properly, to have the conversations that were really needed, in other words to get into the dirtiness and absurdity of their collective experience, then little was likely to change. We also made it clear that we would not work with them unless they were up for that. They were.


What it really means to ‘live your values’

We know what living one’s values is when we see, feel and hear it, and we know what it looks like, feels like and sounds like when someone doesn’t. When that happens at scale, across a leadership team or an entire organisational culture, we know that too. That is the easy bit, and in a way, it is simple: we see what needs to be attended to, and the conversations required, but we often shy away from them.


I don’t have an answer because there isn’t one, and anyone who offers you a quick or simple fix is either lying, deluded or both.


What we do have is what we know to be true. That there are things we need to jointly inquire into, with as many people as possible who have a stake in the endeavour under discussion, with permission to ask any question, of anyone or anything, regardless of position or standing. If you are thinking you are a million miles away from that, then you are fully aware of where the work needs to start.


The messiness of this work was brought home to me recently by an exchange I had with a client who I spent a year working with as part of a supervision programme for internal change and Organisation Development (OD) practitioners in a health sector organisation in the UK. I asked her how she was getting on, and she said, “I have been challenging a few things at work so that has been interesting stuff.” I then asked her what she was learning, and she replied:

 

“I kept on chipping away at the culture of the place when I was told not to worry about it and told my OD help was not needed. I managed to get some support from a colleague who also had similar concerns; this resulted in more senior people meeting to help challenge some of the internal, ingrained, unhelpful culture.

 

[We are] working together as different professional groups to see what we can do and what needs to be addressed. It is very early stages but positive… it was more about having courage to stand up and challenge the status quo. Face the fear.”

 

Think about that for a moment. How, exactly, do external governance reviews, fancy PowerPoint decks from suited and booted consultants, and the rhetoric and certainty of many of those peddling ‘culture change’ fit with that?... The disconnect between what senior leaders and the consultants who whisper in their ears think they need, and reality, is stark.

 

Addressing the ethical tearing and moral dissonance that is at play when ‘culture’ is not working is exactly what my client said:

 

  • It requires a willingness to chip away, over time and space;

  • It means finding support (real support, not the fair-weather transactional HR kind);

  • it means getting the people who actually need to be having a conversation into the same room to talk; 

  • It requires courage – often a lot of courage in the face of those who would rather not have the discomfort of someone shining a light on things that are too unbearable to acknowledge as true;

 

Crucially:

 

  • It means facing fears, your own and others, and working with them.

 

How ready are you and your colleagues to do that, for real?

This is not easy work, although occasionally can be easier than you think – fear is funny like that. The question is, would you rather live with the consequences of beginning to have those conversations, or continue with the status quo?

 

[This article originally appeared in the magazine of the Nabel Foundation in July 2023]


Endnotes

[1] Human Systems Dynamics Info Letter, October 2011

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