Meet Alexander Wagner. He studies human ethical behaviour. In his tedtalk he wonders why people behave in a trustworthy way, even when they cannot get caught cheating. So there are values that resist trade-offs with other values, particularly economic values. These are protected values (Baron & Spranca, 1997).
But these protected values are not always strong. Despite the many initiatives to avoid or prevent derailed behaviour, fraudulent behaviour never fully disappears. There is always a risk that even good people behave badly.
Wagner argues there are two ways to avoid fraud. You can hire people who have protected values. Or you can build incentives or policies to inspire honest behaviour. Guess which of both is more sustainable.
Trustworthiness has to do with loyalty and integrity and with competence. If the lack of trustworthiness is a result of low competence, it’s easy to handle. If it is a result of lack of loyalty or integrity, it’s difficult.
Control is not the Answer
We cannot build full-proof control systems. We cannot check every moment on every person. This would paralyse an organization (where’s the agility?). It’s also humiliating to those who do have protected values and are honest.
The issue of trust and trustworthiness within an organization is extremely important. Smug bastards might say that it is important not to get caught. And so we have a tendency to put elaborate control systems in place. Because we want to eliminate risks.
There is a long list of corporate scandals. There is a long list of people who have acted in ways that were illegal, dishonest, unethical. Companies have gone bankrupt because of this. Environment has suffered because of this. People suffer because of this. And we see this happening in both regulated and less regulated environments.
And the question is why that happens. It happens because people face temptations that make them behave in a way they might not want to.
What happens when we install exuberant bonus systems to motivate people to meet the targets? We inspire them to take risks and commit fraud.
What happens when we exert disproportionate pressure on people to perform? They might take shortcuts.
What happens when the culture is such that integrity is defines as “doing the right thing for the company”. We weaken moral awareness.
What happens when all that counts is money and shareholder value, instead of including other outcomes and stakeholders in the equation. We reduce ethical behaviour.
So not only do we need to hire people with high moral standards, we have to create a context in which the erosion of morality has little or no chance to occur. That means we have to design that context according to morals too.
Hiring people with character is one thing, designing a moral context is another. The context helps to protect values. And the basic principle of context design is easiness. Don’t make it difficult to commit fraud, make it easy to display trustful behaviour.
It all starts with leadership. In my Book on Sustainable Leadership I talk a lot about Trust and Trustworthiness. To me it’s the fuel of leadership. But we know that leadership both builds contexts and is a product of the context. That’s why we should base leadership on character and not on power, position or popularity. These are not sustainable sources and lead to erosive behaviour. Character is the only aspect of leadership that provides stability and trustworthiness.
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