I’ve been reading a lot about sick / rotten corporate cultures over the last few weeks. Will Hutton wrote a heartfelt article in The Guardian on 30th June under the heading:
…. and opened with a statement that will resonate with many: “Investment banking is an organised scam masquerading as a business…..”. Hutton goes on to ruthlessly expose the woeful practices that are at the heart of big finance – the “…enemy to honest endeavour…”, but remarks that “… a rotten culture does not emerge from thin air. It emerges from structures that encourages rotten behaviour…”.
By structures Hutton means organisational models, the mechanisms for key activities and the ownership and governance structures of banks.
Andreas Whittam Smith writing in the Independent on the 5th July highlighted that it wasn’t only investment banks that were suffering from sick culture syndrome:
“GlaxoSmithKline – and you thought the culture at Barclays was sick; The culture of modern business is the problem. Corrupt practices have spread far and wide.”
Whittam Smith goes on to point out that the traditional response of tighter regulation to fight corrupt practices cannot prevent criminal behaviour and that “…attention has also to be paid to the spirit in which business is conducted, what is often called its culture.” He goes on to suggest that codes of conduct based on the principle of “treating customers fairly” should be mandatory for all companies above a certain size.
This is all very well but an interesting blog from the Parzival Project – a consortium of individuals who believe that personal development lies at the heart of sustainable and authentic leadership – about integrity and the Libor scandal made the point that “…leaders do not acquire integrity by signing up to a code of practice, although it helps. They achieve it by volunteering their ego for redundancy and placing themselves in the service of a greater good.”
Both Hutton’s and Whittam Smith’s articles link culture and behaviours but it’s hard to determine which comes first, whether the culture propagated the behaviours or the behaviours created the culture.
In my previous musings on the role of corporate culture (touched upon in my former posting “Corporate Values : Corporate Compass or Corporate Codswallop” April 2012) I referenced prominent organisational cultural theorist Edgar Schein who had identified five primary leadership behaviours that were responsible for creating and reinforcing organisational culture:
- Attention focusing (i.e. the identification of priorities)
- Reaction to crises
- Rewards allocation
- Hiring/firing criteria
Schein is clear that in the chicken and egg scenario that is corporate culture and behaviours, it is the behaviours, and specifically the leadership behaviours, that come first.
Even if Bob Diamond’s career path had not taken him suspiciously close to the seat of the rate-rigging scandal and he may justifiably have claimed not to have known what was going on, he still needed to be held to account as something he was doing, or not doing, made such activities acceptable in that environment.
Bob Diamond said many admirable things about ethical behaviours and good corporate governance but, as Edgar Schein pointed out, if your actions don’t mirror your words in those five critical areas of influence, all your fine words are irrelevant.