How Ethical CEOs Lead Unethical Companies

We all know or heard of someone who did something they shouldn’t have. A long time ago I worked with someone who was responsible for setting up international sales events. She would book the venue on her credit card, get reimbursed and then cancel it, pocketing the cash. There is little disagreement that this is unethical behavior. But it took a while before the company acknowledge the behavior and addressed it despite her actions being common knowledge.

What about questionable behavior that an organization seems to accept as OK? Actions like making decisions that impact your bonus without really looking at the facts, pressuring a prospect to buy more product than they really need, writing marketing copy that stretches the facts beyond truth, or positioning yourself as an objective intermediary where you have a financial interest in the outcome. If an organization’s culture implicitly condones questionable practices does that make unethical behavior ethical?

Multiply the implicit acceptance of questionable behavior to a grand scale and you get situations like Turing Pharmaceuticals, Enron, Uber, the financial meltdown, and the list goes on. These are not anomalies but routine events to which we all exclaim shock at not having foreseen the impending crisis. If leaders are generally ethical and want to do the right thing, how can so much go so wrong?

I asked Margaret Heffernan, best-selling author of Willful Blindness and her response was not what I expected. Instead of being told about the corruption of society, tyrannical bosses, and the fallacies of hyper-capitalism, Margaret responded that it’s a function of human nature to “turn a blind eye.” By only seeing the error in retrospective, we engage in willful blindness. “This is not a function of intelligence,” said Margaret during a recent interview in San Francisco. “All through history these situations happen, it’s just much more prevalent today.” Her book is full of stories about leaders ranging from ship captains to Wall Street traders who inadvertently stepped astray of ethics believing they were playing by the company’s rules.

Speed and complexity play major roles in explaining why unethical corporate behavior is on the rise. “Speed is very fashionable,” explains Margaret. “We believe that in order to be competitive you need to be the fastest which accelerates business cycles and our proclivity for working 7 x 24.” Leaders, managers and employees feel they need to run faster to keep their job or move ahead. “The problem with speed is that the faster you go, the less you see and the even less you feel,” shares Margaret. Speed is particularly dangerous for CEOs. Pattern detection becomes blurred because you pick up less data and good decisions are rooted in knowing and having the right data.

Complexity is our other love affair. In the quest for agility we have achieved the opposite. Complex markets, distribution channels, product families, and staffing models has resulted in organizations that are too complex to manage. CEOs and management teams long ago lost the line of sight from problem to solution. Sales and Marketing struggle to connect and have a meaningful relationship with their customers. We’re unable to manage these complex global organizations as we’ve seen in the retrospective analysis of troubled financial institutions, automotive manufacturers, technology companies and economies. The inability of the governments to stimulate their economies and other countries to resolve the spreading immigration crisis are proof points.

So what is a CEO to do? Margaret’s advice is to change how they manage. She points to three truths discovered while researching her book.

1. Employees almost universally believe their bosses don’t want to hear any bad news or information that challenges commonly held beliefs.

2. Business leaders understand that they don’t know what they need to know and rely on their employees to tell them what is happening in the business.

3. Every organization has fundamental orthodoxies about things that cannot be talked about.

Her advice to CEOs is to consciously slow down. Companies like Eileen Fisher, an apparel and design company which also happens to be a winner of the Great Places to Work award, slowed down their production and design cycles along with their decision making. The result was a dramatic increase in their profitability and competitive stance. In the fast paced world of fashion, this seems counter intuitive and is a good example of why we need to un-complicate our lives.

Next, CEOs need to change how they communicate. By slowing down, CEOs and their teams can have more meaningful conversations about the business, data patterns, and thoughtfully evaluate different courses of action. Conversations should:

  • Take longer,
  • Draw in a wider range of stakeholders and audiences,
  • Allow for more organizational dissent, and
  • Gain wider buy-in and consensus on key decisions.

What about social media and its promise to cut through the clutter of complexity? Transparency, trust-based, relationship-driven, and viral word of mouth, social media should turn the tide on unethical behavior. “Possibly,” shared Margaret, “but the jury is still out on that. While social media may get companies closer to the buyer, it is still in a nascent stage.” Some companies are starting to figure out that the social media’s real power is to tear down internal silos and blind spots, giving everyone a clear line of sight of business problems and their solutions. But it will take time.

In her work with CEOs around the world, Margaret’s found that leaders who slowed down and stimulated meaningful discussion and dissent around appropriate, meaningful topics did remove blind spots and the pressure to cut corners. That realization, in turn, drove a cultural movement to question the beliefs the organization held as truths. The perceived boundaries that everyone naturally constructs as a way to deal with speed and complexity were torn down along with that associated behavior patterns and opportunities to engage in questionable behavior.

She’s found that CEOs that take this bold move “see” more opportunity, clearer and more often. “Leaders that are no longer blinded become very energized as their companies feel brand new,” said Margaret. Take the time to think, unpack and slow down, it’ll make you more profitable, successful and ethical.

First published in CustomerTHINK

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