Tag Archives: culture

Governance and ethics

Lost valueBack in June I posted on Governance and Stakeholders focusing on the damage institutions were doing to their stakeholders through on-going governance failures.  Two of the organisations discussed (not for the first time) were the CBA Bank’s ongoing financial advice crisis and FIFA’s corruption, both on-going scandals.

Press articles over the last few days show neither of these problems is being well managed from either the institutions’ perspective or their customers’/stakeholders’ perspectives. The on-going sagas suggest the root cause of the problems is very much a governance failure, but in areas not previously discussed.

The Six Functions of Governance are:

  1. Determining the objectives of the organisation;
  2. Determining the ethics of the organisation;
  3. Creating the culture of the organisation;
  4. Designing and implementing the governance framework for the organisation;
  5. Ensuring accountability by management;
  6. Ensuring compliance by the organisation.

This post will demonstrate the importance of functions 2 and 3.

Starting with FIFA: the stated objective of FIFA is to further the development of soccer (football) world-wide. A noble objective!  However, to a large extent the culture and ethics within FIFA have become focused on individuals obtaining and retaining personal power for the benefit of the ‘powerful person’ – they may believe they are the best possible person for the job, but the evidence suggests otherwise! The use of FIFA’s resources by people in power to achieve this end has already been well documented and whilst of themselves these actions are not necessarily wrong, they have certainly led to a number of high profile prosecutions for corruption. I would suggest the ethical breakdown was driven by the toxic culture focused on achieving and retaining power.

This type of problem is well understood in many similar organisations that I’m familiar with, where there has been a focused effort by the governing body to create a culture of service to the membership / stakeholders.  This has been achieved by placing strict limits on the amount of time any one person can occupy a position of power. Generally there’s a ‘leadership chain’ of one or two ‘vice presidents’ and then the president.  People on this chain have one year terms in each position and move up the ladder progressively (elections are for the lowest ‘rung’ on the ladder).  Similarly, members of the governing body can serve a maximum of two terms of two years and a minimum of 25% of the ‘board’ positions are up for election each year.

This type of governance framework provides both continuity and renewal, and discourages people seeking power for themselves.  Anyone interested in seizing ‘power’ for 10 to 20 years will go elsewhere and find another organisation to participate in. This continual renewal process ensures there are always new ideas and new sets of eyes to ‘see’ any problems that are emerging, balanced by experience to maintain the longer term objective of the organisation. Ethical standards, competency and other matters remain important within a governance framework focused on facilitating the organisation’s objectives.

It will be interesting to see if the inevitable changes in FIFA will move in this direction and then if they use their funding power to drive similar changes through the regional and national organisations. If there’s no structural change, there will be no lasting change in the governance culture and consequently in the culture of the whole organisation.

CBAThe second focus is the CBA bank. Culture is also an issue in the way the CBA bank is treating the people damaged by the toxic culture it encourages in its wealth management division.  The basic rule for dealing with a failure (particularly of this magnitude) is ‘own-up then fix-up’. You need to acknowledge the error and take appropriate actions to rectify the mistake.

The causes of the problems were structural, and are discussed in The normalisation of deviant behaviours, but it took a Senate enquiry to drag a reluctant acknowledgement of the error.  To avoid sanctions, the CBA also agreed to set up a ‘high profile’ unit to compensate the victims of its wealth management advice.  After many months virtually no-one has been compensated and the bank’s approach would appear to be parsimonious at best.

The ‘fix-up’ part of dealing with a problem requires quick and generous restitution as far as is possible. This is relatively easy where then primary loss is financial but runs counter to the bank’s demonstrated culture of not really admitting error accompanied by short-term monetarism.

A quick and generous solution would be to frame a simple calculation and make an offer. The CBA knows how much money was ‘brought to the table’ by their victims, they can easily calculate what that would be worth now if the bank had advised the people to invest in bank term deposits and  they know the value of the money actually returned to the people. A couple of weeks with a decent spreadsheet and everyone could have received a reasonable offer.  There may be a need to add in some costs incurred in fighting for the victims rights and for other losses and damage but the whole problem could be largely resolved by now.

The cost of this type of option will be insignificant compared to the less obvious but real costs associated with the wages and costs associated with the bureaucratic monster the bank has created, the massive on-going damage to the bank’s reputation and ‘brand capital’ and the contingent liabilities for further legal actions and/or government action driven by the bank’s approach to this problem.

I’m not sure how the logic of the bank’s assessment processes are structured but a report in the press this week that some people had only been offered a fee refund highlights an approach focused on minimising payouts rather then solving the problem.  If advice was so bad a refund of the fees paid for the advice is warranted, the advice was bad and liability for the damage it caused would appear to sit with the bank??

How you change the culture in an institution as big as the CBA from a parsimonious focus on paying out money to maximise short-term profits is a challenge of the CBA Board, but if they fail, sooner or later the CBA will fail because its stakeholder community will decide to do business elsewhere.  Just because you are big does not mean you are invulnerable.

Conclusion.

The first three elements in the six functions of governance are there for a reason.  Obviously the objectives of the organisation are its reason for existing and have to come first. Then the governing body has to do the hard work of developing the right set of ethics and the right culture within the organisation’s (making sure its governance framework supports the desired culture) before anything else can really occur. As FIFA in particular demonstrates, failure in these critical aspects of an organisation tarnish everything else is touches.

It is impossible to achieve a ‘customer centric’, stakeholder aware organisation if the culture is focused on power or short-term profits!

Ethics and Governance

head-in-sandOne of the long running themes of this blog has been the importance of ethics and governance to the success of organisations and the importance of ethical behaviour at all levels of an organisation from the project level up to the very top.  No one can afford to allow unethical behaviour to continue – the expediency of turning a ‘blind-eye’ is simply not an option.

Within this theme, a couple of years ago we highlighted changes in laws in Australia, the UK, and the USA focused on eliminating bribery of foreign officials (read the post) and the wide reaching effect of these laws.

Since then, a range of high profile companies have been successfully prosecuted and there are numerous on-going investigations. One of the latest to be finalised involves the French engineering group Alstom, which has been fined a record $772 million by the US Department of Justice (DoJ) for corruption in foreign countries. The fine was for an ‘astounding’ history of international bribery. Alstom pleaded guilty to paying more than $75m in bribes to government officials in countries such as Indonesia, Saudi Arabia and Egypt, which resulted in Alstom winning projects worth more than $4bn and gaining profits estimated at $300m (see the full report).

Developing a culture of effective governance is not easy – we will continue this theme in 2015, in the meantime select ‘Governance’ from the category list in the side bar to review our earlier posts.

Culture eats strategy for breakfast 2!

In my first post on this topic I suggested that:

  • Even where a smart business has aligned the project with a sensible/necessary strategic intent, and then properly leads and resources the effort, failure is still likely if the power of culture is ignored.
     
  • And culture can be loosely defined as ‘the way we do business here’ and incorporates attitudes, expectations and the way both internal and external relationships work. The people in the organisation are there because they can operate in the culture as it currently is and embody the culture; they are predisposed to resist change.

This post looks at the entrenched nature of culture and its affect on change.

Surveys by the Australian Institute of Management and others consistently show that around 30% of people in an organisation are looking to leave; which means 70% are content. This majority are comfortable within the current status quo and know how to ‘work the system’ to their advantage. The 30% who aren’t happy may be open to change but are also already disaffected and therefore probably disinterested.

Introducing a new ‘best practice’ will inevitably change the status quo and change the relative power balances within the organisation. A couple of examples:

  • The organisation decides to introduce an effective scheduling system (possibly supported through a PMO). The people involved in doing the schedule gain ‘power’ they develop the schedule and report progress against the plan. The project teams lose power, they need to conform to the plan (losing the flexibility to do what they feel like on a day-to-day basis) and failures to achieve the schedule are highlighted to management much sooner than if the schedule was not being used. We can prove having an effective schedule improves the probability of project success (see: Proof of the blindingly obvious), but what’s good for the organisation as a whole is not necessarily going to be seen as good by the individuals affected by the ‘improvement’.
     
  • The organisation decides to introduce a Portfolio Management process to select the best projects to undertake to achieve its strategy, within its capacity to properly support the work. This is a great strategic initiative that maximises the value to the organisation but will mean rejecting more the 60% of the potential projects it could do if it had unlimited resources. This means 60% of the pet projects supported by various members of the executive will be canned! Which means these people will lose power and status firstly to the team making the portfolio decisions and secondly to the executives whose projects were selected. Another group disadvantaged by the selection process (or more accurately the rejections) are the teams who develop the idea and build the business case for the non-selected projects.

In both cases what’s good for the organisation is potentially bad for a large group of individuals who are currently happy and effective working within the current culture and structures of the business – if they weren’t happy they would not be there!

In Culture eats strategy for breakfast! #1, I raised the concept of creating ‘space’ in the existing culture for the change initiative to move into and fill. This ‘space’ is created by crafting a general acceptance within the culture that the current status quo is not working well for the majority and some sacrifice of existing power and ‘comfort’ is generally warranted for the good of each individual as well as the organisation. This objective can be achieved in a number of ways:

  • by identifying a ‘clear and present danger’ that is threatening the group and the organisation as a whole – the need to change to survive;
  • alternatively a competitive challenge to beat an opposing organisation may work or;
  • best but most difficult to achieve a engendering general striving for excellence simply to be part of something great.

Engendering the move towards accepting or desiring the change requires powerful leadership embodying credibility and a clear message that identifies the reason for the change and generates buy-in to the concept of changing and improving before the specifics are even discussed. This leadership has to come from the top! (see more on leadership)

The more established the ‘culture’ is the harder creating the desire for change becomes. Small and medium sized businesses can link the well being of the business to the benefits of the individuals far easier than large businesses. Commercial organisations can link their success to the well being of individuals far easier than stable government organisations with permanent employment as part of the public servant’s culture. The more resistant the culture, the more important effective leadership linked to powerful communication becomes in creating the space for change.

Once the ‘space’ has been created and the desire to improve is generally present, a careful two-way dialogue is needed to define the best options for change and build engagement, to recognise those who will inevitably lose power or be inconvenienced by the change and to help these ‘losers’ re-gain their losses (or perceive a better future despite the losses). Altruism is wonderful but it is unwise to rely on it as the primary mechanism for change.

There will always be resisters to change, the challenge is to shift the majority to a point where they want the improvements (or at least recognise the changes are essential). In addition to leadership, this also requires effective stakeholder management (see more on stakeholder management ). Once this shift is achieved, traditional change management processes cut in to deal with the implementation of the change, supported by project management processes to create the necessary deliverables to implement the change.

However, if the organisation fails to create the ‘space’ in its existing culture for the new processes to work within, the existing culture will definitely eat the intended strategy for breakfast!

The Cultural Dimension of Stakeholder Management

The importance of understanding culture in designing successful communications to influence and inform stakeholders cannot be understated. But as discussed in previous posts, culture is multi-dimensional. Some of the facets include:

  • corporate culture – how the organisation works
  • industry/professional culture – the way people in a profession work and relate
  • age – baby boomers, Gen X, Y and Z (at least in the western world)
  • national/ethnic cultures

The last of these facets tends to be over simplified in many texts. There is not just an east/west divide! Robert J House in Culture, Leadership and Organizations (2004 – Sage Publishing) reported on the Global Leadership and Organizational Behaviour Effectiveness (GLOBE) program that is undertaking a long term study of 62 societies.

The GLOBE study identifies ten national culture clusters that have distinctive leadership and management behaviours:

  1. Asian:
    a.  South Asia – Philippines to Iran, including ASEAN countries and India
    b.  Confucian Asia – China, Japan and Korea plus Singapore, Hong Kong and Tiwan
  2. European:
    a.  Anglo – North America, UK, Australia /NZ and ‘white’ South Africa.
    b.  Germanic – Germany, Austria and Netherlands
    c.  Latin – Portugal, Spain, France, Italy, Israel.
    d.  Eastern – Poland and Greece to Russia.
    e.  Nordic – Denmark to Finland, Iceland.
  3. Arab – Qatar and Iraq to Morocco
  4. Sub-Sahara Africa including ‘black’ South Africa.
  5. Latin America – Mexico to Argentina.

The GLOBE study focused on the interrelationship between societal culture, organisational culture and organisational leadership. Attributes such as uncertainty avoidance, power distance and performance -v- human orientation were considered.

Yoshitaka Yamazaki in Learning Styles and Typologies of Cultural Differences (2005 – Science Direct) identifies six dimensions:
  Cultural typologies in anthropology
    1. High-context vs. low-context cultures
    2. Shame vs. guilt cultures
  Cross-cultural management literature
    3. Strong vs. weak uncertainty avoidance
    4. M-type organizations vs. O-type organizations
  Cross-cultural psychology
    5. Interdependent-self vs. independent-self
    6. Field-dependent and field-independent

High context societies place great importance on ambience, decorum, the relative status of the participants in a communication and the manner of the message’s delivery. Effective communication depend on developing a relationship first, because most of the information is either in the physical context or in the context of the relationship, therefore relatively little needs to be in the coded, explicit, transmitted part of the message. Communication in low context societies tends to have the majority of the information vested in the explicit code transferred by the message. People from high context societies (eg, France or China) may think people from a low context society (eg, Germany or USA) think they are stupid because the low context people include all of the information in a message. Similarly, people from high context societies are unlikely to express their disagreement or reservations in an open meeting, circumstances and relationships are as important as work so they would comment in a more private or appropriate occasion but only if the opportunity is provided.

Shame or guilt considers whether a person has an outwards orientation based on the judgement of others or an inward orientation focused on their core ethical values to encourage high performance and moderate poor performance.

O-Type organisations are where the employees see themselves as a permanent part of the group; they are part of a social collective. M-Type organisations are more focused on individual achievement.

Field-dependent societies adhere to structures and perceive or experience communication in a global fashion. Field-independent societies and people are analytical; they can self-structure situations and have self-defined goals and reinforcements.

These differences in approach were one of the reasons I posed the question ‘do we need cultural extensions to the PMBOK?’ (see: PMI’s Voices on Project Management). But while understanding cultural stereotypes may be a helpful starting point, no grouping or stereotyping will provide the necessary subtleties needed for important communication.

Firstly, everyone’s experience is unique and the person you wish to communicate with will have been moulded by a range of influences including the corporate and professional cultures they have worked within. Second, no study I am aware of has focused on the effect of the global communication network on national cultural behaviours. The concept of baby boomers, X, Y and Z Gen, is very much a western phenomena, there are certainly likely to be age groupings in other cultures but where the divides lie and how technology interacts with the national characteristics is largely unknown (at least to me). Thirdly, people travel widely for both education and work, even after returning home they will have absorbed some of the influences of the other cultures they have lived in.

So how should you approach the planning of an important communication? As a start, try to define the normal communication mode of the person you are seeking to influence or inform. Understanding national characteristics helps, but is not enough; you need to seek information from a wide range of sources. Err on the side of caution if there is any doubt about the optimum mode for communication. Then carefully observe the effect of your initial communication on the receiver and adjust the mode until you achieve a satisfactory result.

My paper for the PMI Asia Pacific Congress, Beyond Reporting – The Communication Strategy,  is also focused on the topic of effective communication, as is my next book, Advising upwards: A Framework for Understanding and Engaging Senior Management Stakeholders due for publication in 2011. So expect more on this subject in the New Year.