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The Week in Ethics: 2018 Leadership Lessons

It isn’t just leaders’ abilities and experience that give them confidence. Authentic confidence means leaders realize that as smart as they are, their view or approach might be wrong. And what they do about that either fuels ethical leadership or spawns disaster.

A significant cause of leadership failure in 2018, as in the past, was the failure of a leader to vet adequately assumptions about a course of action and its unintended consequences.

What is hopeful and points to continued benefits in 2019 is the focus on ethics, business and leadership evident in the call to action by BlackRock founder, chairman and CEO Larry Fink in his January 2018 annual CEO letter: “A Sense of Purpose”.  In addition, the unexpected death this month of business ethics pioneer W. Michael Hoffman, who founded the center for business ethics at Bentley University 42 years ago — the first of its kind in North America — offers another call to action through the inspiration and impetus of his legacy.

In spite of our living in a time of great disruption and innovation, being wrong isn’t comfortable, especially for hard charging leaders who often rely on their own counsel. Pulitzer prize winner Kathryn Schulz’s TED Talk “On Being Wrong” explores the danger in our believing we are on the right side of anything. Being an effective leader requires the emotional intelligence to be alert to when we close down on an issue, trust our own counsel too much or don’t routinely explore with others potential unintended consequences in decisions.

Leaders can’t mitigate what their leadership styles preclude them from seeing. When leaders lose themselves in their own sense of power, the rightness of their ideas or how their ideas must be carried out, they invite unintended consequences as well as create significant vulnerabilities for themselves, their organizations and shareholders.

This problem applies to governing a country or leading, for example until just a few weeks ago, the world’s largest automotive alliance. (Carlos Ghosn’s world collapsed last month; he is indicted and in jail.) This malady of a self-serving point of view affected what was the world’s most valuable bank in 2016. In addition to fines already paid, Wells Fargo agreed in 2018 to pay settlements of more than $2 billion to federal regulators, states and shareholders for its massive customer fraud which was rooted in being irrevocably wedded to a cross-selling culture that ignored the red flags raised.

Refusal to listen to experts, hiding failures, misleading investors and doing it her way set a course for why Theranos founder Elizabeth Holmes failed in 2018 in her startup’s big, audacious vision to disrupt healthcare. This fall, Telsa CEO Elon Musk forfeited his chairman role for two years because of a tweet likely anyone on his board or team, if consulted, could have told him would be a huge mistake. Examples of companies’  actions creating unintended consequences go on and on, which is why this issue is so important to address.

In Fink’s “A Sense of Purpose” letter, he raised the bar, aligning ethics with business. He wrote to CEOs: “Society is demanding that companies, both public and private, serve a social purpose.” He continued, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”  Fink’s 2019 annual CEO letter, expected in January, will likely take farther his theme of company leadership accountability.

Hoffman, who was the Hieken Professor of Business and Professional Ethics, used to say that “Ethical theory without practical application is empty and useless and business practices not grounded in ethical principles are blind and dangerous.” He played a dominant role shaping the business ethics movement. For over 40 years he mentored, shared information or training and gave career support to thousands of faculty members (starting or expanding business ethics centers or business ethics curriculum), business ethics officers and others in the field around the world, in addition to his teaching responsibilities, books and articles.

The long-term success of business depends on the capacity of leaders to integrate ethical approaches with business strategy. Larry Fink seems poised to have tremendous influence in advancing ethical leadership. In addition, Mike Hoffman’s legacy is something those who knew him will carry in our hearts.

Gael O’Brien, December 31, 2018, The Week in Ethics

Gael O’Brien is an executive coach, consultant and presenter focused on building leadership, trust, and reputation. She publishes The Week in Ethics and is a Business Ethics Magazine columnist. Gael is a Kallman Executive Fellow, Hoffman Center for Business Ethics at Bentley University and a Senior Fellow Social Innovation, the Lewis Institute, Babson College.

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It’s Not Altruism. Just Good Leadership

Reprinted with permission from my 5/26/18 column in Business Ethics Magazine  

Leaders who believe they have a responsibility to create conditions so that employees can flourish aren’t altruists. They’re just good leaders equally committed to maximizing financial success. They know the two are connected. They also know engagement occurs when employees feel accepted and valued for their contributions. These leaders understand the role respect plays in flourishing so they pay attention to, and address, issues like bigotry, sexual harassment and exclusion before talented people leave or the culture becomes toxic.

When big or small companies miss the mark on paying attention to respect and are in the headlines or become a cautionary tale (because we know someone who works there) it raises the obvious question of how could the CEO, senior leaders or Human Resources not see or act in time?

What we know about conduct is that when leaders model and insist that certain behaviors are a foundational priority and condition of working at a company, a culture shows different results than leaders just expecting we all understand how we should behave. The discrepancy illustrates the chasm between aspirational values and values that are actual cultural building blocks that define how an organization treats customers and each other. The defining question: how important is it to leaders that employees feel safe and have a sense of belonging?

If the “yes” is without enough anchors supporting it, the companies navigating current problems remind us that good intentions may win some diversity awards (as the three companies below have won) but won’t create sustainable change.

What follows are recent examples of what isn’t working and some suggestions of what companies can do to create conditions so that employees have the opportunity to flourish.

Visa, Nike and Microsoft

Leaders at Visa and Nike apparently failed to know female employees complained of misconduct, discrimination and a “bro culture” but now have culture change on their radar. After many female senior leader departures, Visa CEO Alfred F. Kelly, Jr.  met in May with women executives about advancement issues and inappropriate behavior they’ve experienced. Visa has also just created a Women’s Advisory Group. At Nike women, who’d said they’d been marginalized and sexually harassed with no action taken, initiated a survey. The survey results were left on Chairman, President and CEO Mark Parker’s  desk. Subsequent investigation into behaviors resulted in 11 senior executives resigning or losing their jobs.

Microsoft is among technology companies dealing with complaints of a “bro culture” and gender discrimination. An April 2018 Seattle Times article (“’I felt so alone’: what women at Microsoft face and why many leave”) captures the isolation, discouragement, bias and lack of support (from human resources as well as leaders) reported by media about women in other companies.

Creating conditions so employees can flourish

2018 isn’t our first rodeo for diversity and inclusion. The business case for diversity has been made, reiterated with new data for gender diversity and there are even CEO testimonials on business impact.  The human case for diversity has been evident for decades. However, it seems in change and uncertainty — where innovation, collaboration and conversations about new ways of seeing and doing are badly needed — there is an even greater dependence for some to surround themselves with “people like us” and act out unacceptable behavior to gain dominance and control over others. When unchecked by leaders, any sense of belonging by those harmed – and those watching who know it could also happen to them — is destroyed.

Companies of all sizes have been addressing in some way issues of bigotry, sexual harassment and exclusion because they know it’s illegal and toxic to a work environment. The bigger question is how good is their information about what is actually going on? And, are actions being taken designed to support employees in flourishing? Some suggestions for consideration:

Augmenting what CEOs know

First-hand information is the most useful.

  • Most CEOs need to get out of their offices more often to evaluate if their sense of reality is corroborated by what they hear and see. For example, what might Nike and Visa CEOs have known far sooner if they’d practiced managing by walking around (MBWA) and had a series of random skip level meetings to listen and learn?
  • As town meetings can inhibit some from asking questions, CEOs might encourage questions through an internal blog.  They may find their time well spent scanning comments and arrange with the internal communications team the best way to handle CEO responses.
  • Once a quarter, CEOs could initiate an open door policy for a few days, and encourage direct reports to do the same, to encourage two-way exchanges.
  • CEOs need to send Human Resources and their direct reports a clear message that they want unfiltered, accurate information about how complaints and problems are being handled – particularly those that address whether employees feel safe, have experienced intimidation, harassment or exclusion and how issues of fairness and respect are being addressed. Presumably someone from the CEO’s office is on the company’s diversity committee to give feedback on how issues are being addressed there.

Using information to strengthen culture

Speaking at a global business ethics symposium on diversity and inclusion this month, State Street Corporation’s  Chief Diversity Officer Paul Francisco indicated that a lot of implicit bias happens in workplaces when people are under stress. He advised slowing down to ask oneself if a decision is being made with the right context and facts or just because it feels easier.

How feedback is given, support provided and values linked with behaviors influences a workplace environment.

  • Research indicates some managers are uncomfortable giving feedback. In addition to getting tips from Human Resources, here are additional suggestions.  It’s important that employees receive constructive support and encouragement so they know what they are doing well and have specific suggestions for improvement. For employees violating policies, consequences need to be clear and consistent.
  • Managers should ask employees what support they need. Getting employees’ ideas in each team can help managers understand how to support team members and encourage them to support each other. This fuels a spirit of community and identifies values most important in that team.
  • Values need to be cultural building blocks with behaviors identified. Nike is an example of a company whose mission and 11 guiding principles are heavily brand driven.  The principle, “Do the right thing,” needs elaboration especially in light of Nike’s current crisis. Elaborating on what is meant by that principle could serve as an opportunity for teams to discuss how that should show up in how they treat each other.

BlackRock’s  Managing Director and Global Head of Diversity and Inclusion Jonathan McBride  has said his goal is for the company’s 14,000 employees to have a sense of belonging. He is actively discouraging employees from surrounding themselves with people “just like them” because “it creates risk, hampers resiliency and lowers performance.” McBride is using survey questions to get more data on employees’ sense of belonging to the company, team and global function.

Information provides insight and ideas for leaders to build understanding, strengthen culture, learn from mistakes and work together with employees to create a sense of belonging and safety so employees are motivated to do their best work.

It isn’t altruism, just good leadership.

Gael O’Brien, a Business Ethics Magazine columnist, is an executive coach and presenter focused on building leadership, trust, and reputation. She publishes The Week in Ethics, is a Kallman Executive Fellow, Hoffman Center for Business Ethics, Bentley University and Senior Fellow for Social Innovation at the Lewis Institute, Babson College.

The Week in Ethics: Leaders and Culture

photo gold key in puzzle doorWe know that fostering the right culture promotes engagement, nurtures innovation and fuels both purpose and profit. The key word here is “right” culture. It is about the desire to pursue what enables people and financial results to flourish together.

According to the Fortune Magazine commentary on the Best Companies to Work For 2018 list “…it’s the companies that employees say are great workplaces that demonstrate stronger financial performance, reduced turnover, and better customer and patient satisfaction than their peers.” The commentary continues: “Caring and high-trust company cultures with a sense of purpose and clarity are consistently associated with strong revenue and stock performance.”

Great workplaces aren’t about who offers the best perks or highest salaries. The simplest thing leaders at every level can do on the road to creating a great workplace culture is sustaining an environment where employees are and feel respected, valued and supported in doing their best work.

Granted, not rocket science. Yet, it does require that a leader be self-aware, understand his or her impact on others and make it safe to share feedback about what is or isn’t working. All skills that can be developed. And when they aren’t? Well, we’ve seen in far too many recent crises, including at Google, Wells Fargo and Uber, how the absence of respect and inability to navigate conflict or hear bad news in a work environment bring repercussions.

An April 2017 Gallup report indicated there is 21 percent greater profitability from engaged business units: “Organizations have more success with engagement and improve business performance when they treat employees as stakeholders of their own and the company’s future.”

Treating employees as stakeholders means there is a level of engagement between a boss and an employee around finding synergy in what an employee needs to do his or her job well and how and why what they are doing matters (to the business and all its other stakeholders). It is a dialogue that enables work to become more meaningful, taking it from the isolated individual and team silo and connecting it to the whole.

So how do these conversations so fundamental to healthy cultures start and take hold?  They are second nature for some leaders. For those for whom it isn’t, the company’s Human Resource team should be helpful. In addition, key points in two recent leadership books, Radical Candor and Stretch, offer relevant suggestions that can  build better understanding in work relationships affecting the bottom line and engagement. (Radical Candor offers pointers on caring personally and challenging directly; Stretch provides tips on how “to untap the value in front of you.”)

Culture defines what is possible in an organization. It is human nature that with overloaded plates, leaders look for evidence that things are going well, not what isn’t. At least until a red flag is impossible to miss. However, if culture leadership isn’t a top priority and early warning signs are overlooked, untold time, energy and money may be required to fix it while other business goals are derailed.

CEOs need to ask themselves, their team, employees and Human Resources what more they can do on every level to get their culture right: to enable their people and financial results to flourish together.

Not to do so puts all other achievements at risk.

Gael O’Brien, March 5, 2018, The Week in Ethics

Gael O’Brien is an executive coach, consultant and presenter focused on building leadership, trust, and reputation. She publishes The Week in Ethics and is a Business Ethics Magazine columnist. Gael is a Kallman Executive Fellow, Hoffman Center for Business Ethics at Bentley University and a Senior Fellow Social Innovation, the Lewis Institute, Babson College.

The Week in Ethics: Wells Fargo’s Next Move? 10 Suggestions

Update: See my 12/10/16 Business Ethics column on Where Wells Fargo Goes From Here .

Update: In October 2016 Timothy Sloan replaced Chairman/CEO John Stumpf, becoming CEO and President. The chairman role was split and given to independent lead director Stephen Sanger.

Update: September 27, 2016: Wells Fargo Independent directors issued a statement  they will lead an investigation into “the bank’s retail sales practices and related matters” with the Board’s HR Committee and independent counsel. Chairman/CEO John Stumpf to forfeit $41 million unvested equity awards and “will forgo salary during the investigation.” The U.S. House Financial Services Committee will hold a hearing on bank’s “unauthorized customer accounts” on 12/29/16.

How will Wells Fargo resolve the ethical and culture issues it faces? And, how will it move beyond a poor showing at the Senate Banking Committee hearing and start to rebuild trust? First some background. Then 10 suggestions.

The best thing a CEO with strong convictions about the “rightness” of his/her own position can do when embroiled in a crisis is to spend time with trusted sources (inside or outside their company) who see things very differently. Being open to these viewpoints and questions iphone-pictures2-222and multiple perspectives raised make it harder for  CEOs to stay wedded to their position. However, once a CEO is under fire the temptation to stick with like-minded people can increase. What’s lost then is stimulation to think deeply about different aspects of an issue to gain new insights and awareness that enable developing alternatives legitimately aligned with values. Being stuck in “rightness” can lead to error blindness, a term popularized by Kathryn Schulz  who points out, “Trusting too much in feeling you are on the right side of anything is dangerous.”

It can lead to decisions that put a CEO on the defensive in front of a U.S. Senate hearing, as John Stumpf Chairman and CEO of Wells Fargo experienced September 20, 2016 testifying before the U.S. Senate Committee on Banking, Housing & Urban Affairs.

Stumpf was questioned about the bank’s unauthorized accounts and allegations of a pressure-cooker sales culture which became public in 2013 (Los Angeles Times story) and continued. Wells Fargo has fired 5,300 employees, paid a fine, faces an investigation into its sales practices by New York and California federal prosecutors and can anticipate an upcoming hearing by the U.S. House Financial Services Committee in addition to follow up from the Senate Banking Committee. Earlier this month The U.S. Consumer Financial Protection Bureau filed a consent order outlining findings of the bank’s “improper sales practices”from 2011 to 2016.

A few days before the Senate hearing Stumpf, in an interview, disputed Wells Fargo has a culture problem. He maintained that stance with Senate committee members, while indicating changes the Bank planned to make. However, the bipartisan committee was united in criticism that Stumpf, the Board and senior leadership hadn’t gone far enough, fast enough and weren’t showing accountability. From the Republican Committee chair to Democratic challengers, Senators didn’t buy that the bank’s culture isn’t an issue.

Where does this leave Wells Fargo? Anyone who has been through corporate crises — as I and many others have — knows that criticism from outsiders is hard to take. However, there are huge pitfalls if Mr. Stumpf stays locked in the “rightness”of his position (in spite of his 30 plus years service at Wells Fargo, presiding over several of its acquisitions and knowing his industry and company better than outsiders).

His performance at the Senate hearing this week indicates his time has been spent with legal and public relations teams and like-minded insiders. Getting out of a crisis, turning around a culture and re-earning political and public trust, doesn’t happen by working harder with the same mindset. (The much touted definition of insanity is doing the same thing over and over and expecting different results.)

I’ve limited myself to 10 suggestions for Wells Fargo to support the start of a turnaround:

  1. The board should appoint a new chairman — an independent director — separating the role from the CEO for many reasons including signaling stronger board governance.
  2. The board should immediately decide about claw backs related to compensation of former head of community banking Carrie Tolstedt, Stumpf and any others. As part of re-earning trust, all their actions should be transparent and well communicated.
  3. The board should direct Stumpf and his team to meet with Wells Fargo’s ethics and compliance teams and risk officers to discuss/evaluate ethics, compliance and risk operations for strengths, weaknesses and safeguards to better integrate sales and all business strategies with corporate values and prepare a report for the board.
  4. The compliance and ethics leaders (and C-suite leader to whom they ultimately report) should initiate meetings with leaders of the Ethics & Compliance Initiative and the Society of Corporate Compliance and Ethics to address best practices, implementation challenges and examples where ethics and compliance leaders weigh in on business strategy discussions in sales and all areas.
  5. The board and senior management should identify outside experts to discuss how to  realign authentically culture around values. A place to start is the nearby Markkula Center for Applied Ethics.
  6. Stumpf and his management team should become acquainted with Margaret Wheatley’s concept of self seal (the rightness of one’s position), Kathryn Schulz’ TED Talk (error blindness) and Margaret Heffernan’s  Willful Blindness for starters. These are lenses that encourage conscious and unconscious unethical behavior.
  7.  A cross-functional team of senior leaders with ethics and compliance leaders should review the company’s five primary values; for each, identify five or six specific expected behaviors to be incorporated into company policy and discussed in ethics training and performance reviews. Currently, the values are too abstract.
  8. Under the value “Ethics” the company says “We strive to be recognized by our stakeholders as setting the standard among the world’s great companies for integrity and principled performance. “This should become a business objective with Board and CEO focus to keep this commitment at the center of the turnaround’s activities.
  9. At the upcoming House Financial Services Committee hearing, Stumpf and those testifying can start rebuilding trust by being fully prepared to answer questions directly and completely, having with them information relevant to committee questions. Stumpf should also make himself available to Senate Banking Committee leadership to make sure information provided since that hearing addressed open questions.
  10. Trust is a relationship where “integrity” and “principled performance” are realities, not marketing slogans. In relationships with employees, customers, customers affected by unethical actions, employees pressured by aggressive sales tactics, Wells Fargo leaders have to admit what went wrong and make systemic changes. A start is to amend the vision statement that says “We want to satisfy our customers’ financial needs and help them succeed financially” and add “in ways that build lasting relationships of trust and integrity.”

The Week in Ethics

Gael O’Brien, September 22, 2016

Gael O’Brien is The Ethics Coach columnist  for Entrepreneur Magazine. She is also a columnist for Business Ethics Magazine where her September column is “One man’s Leadership Toward a Goal: ‘The Great Mission of Business Ethics.'”

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The Week in Ethics: Why Purpose Matters to Leaders

Leaders who unite their teams around a purpose beyond creating profit redefine what is possible. They show a road map for how collectively each person can have a positive impact on customers, an industry, community, and society. The lens these leaders hold up allows individuals to see how they can make a difference, a key element in employee engagement.

We don’t hear a lot about companies that are focused on a bigger purpose because they are far less likely to derail and become headlines in scandals or crises. They are grounded by company values which creates a common language and sense of “we,” which is a ballast in the constant change of our unpredictable world. Unilever and its Sustainable Living Plan is an illustration of purpose in action that is part of a business strategy. It sets out a plan that expects the company to double in size while also decreasing its environmental footprint and increasing the company’s positive social impact.

Business can no longer afford to be a bystander,” according to Unilever’s CEO Paul Polman, “content to sit on the sidelines doing the minimum necessary to acquire its ‘license to operate.'” Polman is also one of the founding leaders of the B Team, a global initiative calling for a new kind of leadership — more inclusive and driven by a moral compass. The B Team seeks to redefine obligations to stakeholders — replacing maximizing profit with a focus on people, planet and profit.

The “business as usual” short-term profit lens has spewed out all kinds of red flags morphing into the recent financial meltdown among other problems. Last fall, a Washington Post column “How the cult of shareholder value wrecked American business” addressed the “self-reinforcing cycle in which corporate horizons have become shorter and shorter” with reduced CEO tenures and patience for the long-term, as well as the decreased average time stocks are held (now less than six months).

The irony, columnist Steven Pearlstein wrote, is that the focus on maximizing shareholder value hasn’t actually done that much for shareholders.  “My guess,” he said, “is that it will be a new generation of employees that finally frees the American corporation from the ­shareholder-value straightjacket. Young people — particularly those with skills that are in high demand — today are drawn to work that not only pays well but also has meaning and social value.”

The push for purpose has many advocates in addition to Gen Y employees. The impact social entrepreneurs are having on creating positive social change as well as global giants like Unilever demonstrate that innovation, financial gain and societal benefit can fuel each other. Research also supports that purpose is as great a motivator as profit as Daniel Pink pointed out in Drive.

Purpose matters.

Inspired leaders know, says Simon Sinek, that “people don’t buy what you do, they buy why you do it.”

The Week in Ethics

Gael O’Brien, January 23, 2014

Gael O’Brien is The Ethics Coach columnist for Entrepreneur Magazine. She is also a columnist for Business Ethics Magazine; her December 2013 column is “Why Do Good People Do Bad Things? The Role of Spiritual Intelligence.”