These days, we can’t seem to go more than a couple of days without a headline broadcasting the ethical misconduct of some prominent leader or company. Dishonesty has become such standard fare that we rarely get shocked anymore when it shows up.
My recent fifteen year longitudinal study of more than 3200 leaders on organizational honesty revealed factors that predict whether or not people will withhold or distort the truth within an organization. As it turns out, Socrates warned us of these concerns thousands of years ago. Even then he recognized humanity’s proclivity for self-deception. The continued carnage from widespread dishonesty suggests his cautionary admonitions were well founded. In my role as executive consultant and advisor, I was sitting across the conference table from the executive vice president of strategy for a $30B global company in 2014. His company had just been through a failed acquisition– a terrible turn of events. But what he told me that day stunned me: they’d suspected all along it would go bust.
“We spent nearly $1.5B dollars,” he told me, and “we all privately feared the deal would fail. It didn’t fit our portfolio, and we knew we didn’t have the capabilities needed to complement theirs. But we did it anyway. Deal fever kicked in, we embellished data, denied our concerns, and exaggerated the upsides we secretly doubted would ever materialize. In hindsight, we were too afraid to admit the risks, and the truth that we’ve lost our core identity while the world of food had dramatically changed. And because we don’t really know who we are anymore, we’re grasping at straws and trying to make things up as we go.”
The carnage in the wake of this failure was extensive – damaged careers and families, demoralized employees, cynical customers, distrusting and angry shareholders, and the loss of public trust.
Why did a group of reasonably smart, well-meaning people so readily lie to themselves, their employees, and their shareholders? How is it possible that such destructive choices can be made by leaders commanding that much resource? Why couldn’t they just be truthful with each other about their prospects of failure?
I wanted to know why, when it mattered most, they were not able to tell each other the truth. Because clearly they weren’t an isolated incident.
Volkswagen. Wells Fargo. 21st Century Fox. United Airlines. Once respected household names, now hated household villains. What their scandals all have in common is the complex web of deceit and lies they had to construct – in some cases for decades – to conceal their horrendous behavior. In the last decade alone, corporate disasters left more than $300 billion of financial ruins. Corporations once represented the pinnacle of professional success and public trust, and all that was good about capitalism. No longer. But closer examination of these scandalous moments reveals that they were not just the result of individual bad actors. Systemic factors are now emerging as co-culprits in these corporate disasters. Not all systemic dishonesty leads to this degree of devastation, but it almost always begins with choices no one imagines leading to widespread integrity compromise.
Here are three of the findings our research uncovered for which ancient wisdom has brilliantly advised us.
Strategic Clarity: Be Who You Say You Are. Inscribed on the Temple of Apollo at Delphi is the Delphic maxim “Know thyself.” Socrates later expounded on this phrase by saying, “The unexamined life is not worth living.” His intent was emphasizing the importance of ruthless self-honesty about identity. Whether as individuals or organizations, when we don’t know who we are, we fabricate. Our findings suggest that when there is dissonance between a stated identity and how that identity is actually embodied, you are more than three times more likely to have people withhold or distort the truth.
As fundamental as it sounds, too many organizations still produce vision and mission statements as mere sloganeering purely for external consumption. Congruence between stated mission/values and the market understanding of those you serve and employ is essential to perceived integrity. The more inconsistency between actions and words, the more dishonest the organization is perceived to be, and the more permission people feel to follow suit.
The painful result of widespread misuse of company mission and values statements, according to one major study, is that only 23% of U.S. employees strongly agree that they can apply their organization’s values to their work every day, and only 27% “believe in” their organization’s values. Another comprehensive study based on more than 1,000 firms in the Great Places to Work database reveals a strong correlation between corporate financial performance and the extent to which employees believe their company’s espoused values are practiced.
18th Century Scottish philosopher David Hume in his philosophical honest expressed that self-honesty was key to being authentic, that only those who could genuinely “face themselves” could develop a persona that was grounded in truth.
Accountability: Meritocracy grounded in justice. In a strong response to Thrasymachus, Socrates sheds insight on the nature of justice. For him, justice was a function of character and intelligence. “Justice implies superior character and intelligence while injustice means deficiency in both respects. Therefore, just men are superior in character and intelligence and are more effective in action. A just man is wiser because he acknowledges the principle of limit. Unlimited self-assertion is not a source of strength for any group organized for common purpose. Unlimited desire and claims lead to conflicts. The life of a just man is better and happier.”
In our research, when accountability systems were perceived to be unfair, and contributions measured unjustly, organizations were found to be 3.77 times more likely to have people withhold or distort the truth. Socrates is appropriately condemning the injustice of unlimited self-interest within an organization, a common criticism of accountability systems that excessively reward individual contributions at the expense of shared outcomes.
Over the past few years, many companies have abandoned the traditional practice of performance management systems because they required more exhausting effort than they added value. But the need to find honest and fair ways to assess contributions and keep people informed of how they are doing remains acute. Recent McKinsey research suggests that perceived fairness in performance management is a key factor in determining its impact on performance. But meritocracy demands clear ties between individual contributions and broader work, ongoing coaching and feedback, and appropriate rewards. When those weren’t in place, only 7% of people saw their performance management system as effective and fair. And that much unfairness sets the stage for dishonest behavior. Once a sense of injustice is provoked, and people declare, “It’s not fair,” conditions are ripe for a compromise of integrity. Ambrose, Seabright and Schminke’s research on Organizational Injustice clearly shows a direct correlation between employee’s sense of fairness and their conscious choice to sabotage the organization. And this study directly correlates perceived fairness and ethical behavior. When organizations allow for honest accounting of contributions – both successes and failures, and measure and acknowledge them accordingly, people no longer feel the need to embellish their contributions in “credit land grabs” or hide or deflect their mistakes in shame.
20th century American political philosopher John Rawls posited that justice as fairness was the most equitable form of understanding what was just. Systems that evaluate the conduct and contribution of its members – whether criminals, employees, students, or volunteers, just design those systems to ensure that what is perceived as fair is also perceived as just. In today’s organizations, when it comes to honoring the contributions and address the shortfalls of employees, we have dangerously separated the two.
Collaboration: Cooperating across boundaries. In Nicomachean Ethics IX.9, Aristotle exhorts the benefits of human cooperation. The Stanford Encyclopedia of Philosophy describes Aristotle’s views this way: “To realize our powers fully we need at least a group of companions who share our interests and with whom we can cooperate to achieve our mutually recognized goals. In this kind of cooperative activity, we are parts of a larger enterprise, so that when others act, it is as though we are acting, too. In this way, these activities expand our conception of who “we” are, and they make the use of our powers more continuous and more stable. Examples listed by Aristotle include sailors on a ship, soldiers on an expedition, members of families, business relationships, religious associations, citizens of a political community, and colleagues engaged in contemplative activity. As Aristotle explains in Rhetoric II.4, if we and our cooperative partners do their parts responsibly, each will develop feelings of friendship for the others involved. In this way, successful cooperative activity transforms persons’ desires and motivations.”
Sadly, organizations have come to lack such vibrant cooperation. One of an organization’s most psychologically unsafe places is at the border between two divisions or functions. Divisional loyalties naturally make those outside “your tribe” those to be feared, resented, or blamed. Establishing mutual trust and affinity to a broader mission across borders is key to ensuring integrity across an organization. Synchronizing complex work distributed across multiple functions is challenging. Rather than cooperating, too many functions end up rivaling for power, influence, and limited resources. And such rivalry is more than a nuisance. It’s costly. One study reports that 85% of workers experience some regular form of conflict, with US workers averaging 2.8 hours per week. That equates to $359 billion paid hours mired in conflict. It’s easy to blame these conflicts on personalities – think toxic bosses or big egos – but in my experience as an organizational consultant, the root cause is more often systemic. For example, this study examining the rivalry between sales and marketing showed that conflicts between managers from these historically warring functions were not driven by interpersonal issues. They were tied to the frequency of how they exchanged information, and the degree to which there were effective processes connecting their work.
All organizations have inherent tensions. Those tensions are most visible at an organization’s “seams” – the place where multiple functions, like Marketing and Supply Chain, intersect to create value. Those tensions can be healthy when managed effectively, yielding innovations and stronger performance. Managing tensions in a healthy way means knowing how to make complex tradeoffs that keep tensions in check.
Socrates described a set of cooperative principles Koinonia, which means “spirit of fellowship.” The basic principles were:
1) Establish dialogue.
2) Exchange ideas.
3) Don’t argue.
4) Don’t interrupt.
5) Listen carefully.
6) Clarify your thinking.
7) Be honest.
They sound so simple, but are often so difficult to manifest. If every cross-functional relationship established these as their ground rules, cross-border rivalries would surely dramatically decrease.
If we want organizations to be places of integrity – where we can bring our honest selves, speak our minds without fear of rejection, and contribute to inspiring outcomes greater than ourselves, returning to the roots of ethics and integrity that philosophers have explored for centuries may provide the best roadmap we have.
Ron Carucci is co-founder and managing partner at Navalent, working with CEOs and executives pursuing transformational change for their organizations, leaders, and industries. He is the best-selling author of eight books, including the recent Amazon #1 Rising to Power. Connect with him on Twitter at @RonCarucci; download his free e-book on Leading Transformation.