Every week its seems there is another ‘corporate scandal’ in the media. Outrage is expressed, and the twitterati react. This week alone there have been three stories already.
Volkswagen:
Issue: Misleading the emissions testing program
Impact: Potential fine upto $18bn, share price reduction
General Motors:
Issue: Installing faulty ignition switch
Impact: $1.5b in fines and compensation
Turing Pharmaceutical:
Issue: Raising price for patented drug 55x from $13.50 to $750 per pill
Impact: Bad publicity
Certainly the consequences for Volkswagen have been swift and severe, both in terms of brand impact and share price, but plenty of opinion has been written about all three.
Our confidence in household names, ones we thought we trusted, is being shaken. We ask ouselves, “surely people knew”, “how could such a thing be allowed to happen?”
There is no doubt, this type of corporate behaviour is not acceptable, and I am sure most people would agree. However leaving the specifics of the issues aside, we ask ourselves how is it that such issues or disagreements are allowed to be hidden for so long? Maybe widely known across a company, why are they not reported or addressed early when they can be fixed?
For answers we need to reflect on our own human psychology. What are the options for employees?
- Report and resign – Walk away with your integrity intact, you’re on high ground if it becomes an issue, but you have no job.
- Report and stay – Difficult conversations, investigations will take place. It’s more work and may risk that future promotion.
- Do nothing – Not really your accountability anyway, it’s for someone else to worry about. Keep your job and let it be.
Most people cannot afford to take route #1 or #2. After all, it is a difficult, scary choice to be a lone voice or leave. So option #3 is easy; an immediate path of least resistance.
To counteract this and ‘help’ people make the right choice, our immediate reaction is to bring out the stick: Fear. Fear of regulation, fear of censure in the media and fear of the associated consequences… “We need more regulation and tougher punishments, this is outrageous!”.
Regulation and regulators of course play a very important role in situations such as the ones in the news this week. They are the counterweight to prevent this type behaviour.
This message of course is heard loud and clear inside organisations and there is commonly much talk of accountability, transparency, whistle blowing hotlines and leadership ethics.
However as the pressure mounts, so does the fear if something is found to be wrong. That fear can quickly permeate an organisation, quickly creating a blame culture and actually re-enforcing choice #3: Do nothing (“why should I say/do/own something, I will be blamed”). It can be counter productive.
So, before loading more fear into the system, let’s take a step back. Is there a different approach? One that is more constructive? For example:
- How can companies and individuals be celebrated for finding mistakes or raising issues, rather than being blamed?
- How can we set up common goals between regulators, consumers and employees so that issues are raised and resolved before damage is caused?
- If someone does take advantage, how quickly can this be identified, isolated and addressed?
- If you are a leader or employee in an organisation, how can you promote a constructive solution-driven environment?
For many this may be a change of perspective. However as leaders, if we do nothing we will continue on this escalating spiral, increasing stress on companies, employees and having negative impacts on customers. In a small way it can start with each of us.
So as we hear these stories develop, think about your employees. Think about your organisation, and which path would you take? Would you be able to look back and say you have done the right thing? Is the culture you work in transparent? If not what can you do today to help make a positive change to that culture?
