Monday, 1 August 2016

The single most important foundation of positive culture is an organisation’s appetite for truth.

However, even in successful organisations with respected leaders, negative information is gradually filtered out as it rises through levels of the hierarchy. This happens without artifice or deceit. It is the result of human bias.

In spite of recent criticism, it is our experience that the great majority of senior people running large organisations genuinely intend to conduct a responsible and ethical business. We have observed they seek advice on how to achieve this and they put processes and policies in place to guide and monitor conduct.

However, even with the best of intentions, the information which they are given by their staff and which they use to evaluate the culture and conduct of their business is often incomplete or flawed.

The factors which cause this result more from natural human bias than any attempt to mislead.

1  Bias to please

People have a bias to provide positive information to leaders they want to please. Where there is an articulated goal to conduct business responsibly, staff provide evidence of the measures which are being taken to do this. Ironically, the more integrity a leader has the more staff will selectively seek validation of the good work which is being achieved to pass on. It goes against the grain to be the person who says “we are not doing as well as you think we are in this important area.”

This has sometimes been termed the JFK effect after the famous American President. History tells us that many bad decisions (such as the Bay of Pigs) were made by well-intentioned, charismatic leaders who were not called out by their senior advisors in spite of their private doubts about the strategy. As a situation progresses it becomes increasingly difficult to be the first person to question something which is viewed as successful by a wonderful boss.

2  Bias to self-interest

Organisations, particularly large organisations and financial institutions, have teams of people whose job it is to monitor risk and manage people. These teams are motivated to do a good job and to demonstrate that they are doing a good job. They pass on the data to support their success and in large organisations there is plenty of supportive data to be found.

It takes a courageous and different mindset to deliberately seek evidence of your team’s short comings.

The existence of a threat such as critical external scrutiny can escalate this from individual self-interest to a perceived need for self-protection. This in turn creates a defensive attitude within the team. They become suspicious and controlling in sharing information rather than providing full ‘warts and all’ disclosure. In an uncertain or hostile environment, self-protection overrides higher level thinking. It is likely that the current negative targeting of financial institutions will increase this defensive behaviour rather than increase honest self-examination. We were informed earlier this year of a senior banking official who suggested his team ‘vote 5 to stay alive’ in response to an internal survey on staff engagement.

3  Confirmation bias

Humans selectively pay more attention to information which confirms the views and attitudes we hold about our world. If we have a positive view of our organisation and our controls and a negative view of external regulators we view events and information in accordance with those constructs. Without consciously manipulating the information available to us, we see confirmatory data as more significant and often fail to give contradictory information sufficient weight or attention.

So what does this mean for organisations who have an appetite for the truth?

  • An examination of culture and conduct will produce better quality information if it is framed internally with the goal of increasing awareness than if it is mandated by an external agent.

  • Organisations should use independently validated criteria and tools in assessments of culture and conduct and test their internal control processes independently.