Why non-banking CEOs and boards should bother reading The Banking Standards Board second annual review

Last week The Banking Standards Board published its second annual review which received page two coverage in The Financial Times with the strange headline: “Bankers battle with ethics versus career quandary”.

The headline was strange not only because it implied that there are circumstances in which career considerations could trump ethics but also because, given that the 2008 crash resulted from unethical behaviour, these shocking results should have been the headline, not the quandary they seemed to present.

As reported by the FT, some of the results of the Review based on a survey of 28,000 employees at banks and building societies are jaw-dropping: “more than a third fear negative consequences of voicing concerns…one in eight had seen instances where unethical behaviour had been rewarded…[a large number saw] a conflict between their organisation’s values and how it did business”.

The impact of this environment on ethical decision-making must be grave, making another crash a certainty, if not highly possible. Certain because the results were not front page news; certain because we have become immune to such behaviour and, above all, certain because permission to behave well in banking is still not ubiquitous.

If the banks are heading towards another crash – so be it. But you and your board can avoid risks just as grim by giving your directors and their team’s permission to behave ethically. How can this be achieved?

You could start simply, by announcing that there will be zero tolerance on your board for the three behaviour examples below:

– the rewarding of unethical behaviour

– experiencing negative consequences for voicing concerns

– failing to confront conflict between our values and how we do business

The first of these might seem obvious, but if as much as one in eight has seen instances of such behaviour in the banking sector, the chances are that some of that behaviour is happening in your business and without challenge.

And this will persist if you do not support the second rule by encouraging people to speak the truth to the powerful. Of course, the best way to ensure an ethical culture is to create an environment in which people feel that they can speak up on normal issues i.e. those which have nothing to do with ethics or the law.

If your people feel comfortable challenging you on normal business issues, then they are more likely to feel comfortable calling you out on bad behaviour.

My guess is that those banks where people are afraid to voice concerns are also afraid to voice just about anything else which might not meet with approval from on high. Where this becomes seriously mad is when people start assuming what will and won’t be approved and are wrong. Then you have a truly sick organisation of your own making.

Emotionally intelligent boards can create emotionally intelligent businesses that are more likely to make ethical decisions which are right in themselves and also reduce risks and increase opportunities.

One way of creating emotionally intelligent businesses is to have zero tolerance for shaming language. Shame is a great mental killer in business, especially amongst men. Guilt means I’ve done something bad. Shame means I’m bad.

Over the years I’ve observed shaming language at its worst in many contexts. Once I worked in an organisation where the “D word” was the shaming weapon of choice at meetings, as in: “Joe Blogg’s quarterly results were very disappointing, indeed.”

This would be said as if Joe was not in the room. He was of course and would die a thousand deaths in that boardroom and had nowhere to go because of kids, mortgage and all of that.

Another example of shaming language is when a powerful person is reasonably challenged on a strategy or routine issue by a less powerful person as in: “Joe Bloggs, I think we need a bit more light than heat on this issue”. Withering.

Have you ever been that Joe Bloggs? I have. And I can tell you that there’s nothing more certain to discourage someone from voicing concerns about ethical or legal matters if they are shamed for voicing concerns about issues that are perfectly legal and ethical and, please, remember where you first heard about the next banking crash and its causes, if you read it here first.

CEOs and boards: how tension between directors can be put to good use to improve performance

Frustration in the boardroom

I constantly hear stories of tension between board members causing exhaustion, frustration and even depression. The bullied feel humiliated, the eager unheard and the anxious unsupported. Slights, real and imagined, are harboured; baseless assumptions inform action, or worse, inaction. Unconscious behaviour abounds.

My clients tell me that the most significant barrier to working productively together are “personality issues”. They feel hopeless that the conflicts, which frequently simmer under the surface, can’t be fixed.

Unacknowledged personality issues hurt the bottom line

Some directors I meet are blissfully unaware of these issues; others are not but shy away from these problems because they don’t know how to deal with them.

But the costs and opportunity costs to the business of not confronting behavioural issues are incalculable. I would be a very rich man if I had a pound every time a director said to me “If only we would do x, we could save y cost or avoid y risk or generate z revenue”. Why don’t you?, I ask. “He/she/they won’t wear it,” they assume. Delete as appropriate.

Behavioural issues are notoriously difficult to address. So, we avoid them. But what if there was a way to address them, incrementally, safely and with a high chance of success?

Least Likely To Say

Your business could outperform its targets, get more done and with happier employees if every director, without exception, improved their worst behaviour. Let’s call it their DWB – Director’s Worst Behaviour. No one I’ve worked with fails to understand what this means and what impact it has.

By worst, I mean that outstanding behavioural weakness that we all have and that drives everyone else on the board mad because it adversely affects them but which we struggle to acknowledge, let alone change.

I find that a good way to get an accurate list of the individual DWBs on a board is to facilitate an exercise, at a plenary session of the board, called “Least Likely To Say” preceded by a series of 1-1 sessions with each director to build trust.

In this exercise, each director tells each colleague what they are least likely to say. For example, the micro-manager is least like to say “Just get on with it, no need to check in with me”; the person who talks over people: “What do you think?”; and the solo player “How can I help?” And so on.

This exercise rarely fails to generate the embarrassed laughter of recognition which we are more familiar with in the company of true friends, who rarely let us get away with anything. In my experience, the degree of consensus on the DWB list surprises no one. If done with a light touch and kindly, the impact can be pleasantly cathartic.

Moreover, by avoiding the shaming language often used in board rooms directors can encourage colleagues to confront tricky behavioural issues which they otherwise would bury.

People don’t change, do they?

“This is all pie in the sky”, I hear you say. “Leopards don’t change spots. It’s dog eat dog in the boardroom. People just don’t change. This stuff won’t work on our board.”

Agreed, if you use traditional change processes. That’s because either they don’t work or if they do, they don’t last because, under pressure, everyone tends to revert to type.

But people can and do change behaviour if incentivised to do so. And what better incentive than knowing that if you change your behaviour, every other board member will do so too? It’s simple. It works. I’ve witnessed it.

Small Change

In my Small Change Programme, I focus on helping each director to acknowledge to their board colleagues their worst behaviour – i.e., their DWB. Then I support each to agree and implement, over a period of six to nine months, an unwritten behaviour contract undertaking to change just ten interactions in every hundred about that behaviour. That’s just 10% change, hence small change. But even small change is hard to do, and so my programme is designed to help CEOs and boards do it.

For example, one micro-manager I worked with undertook to micro-manage ten times less out of every hundred interactions.

The micro-manager, who proceeded to change his behaviour as agreed, courageously acknowledged that never being allowed to fail in his early years was probably the cause of his behaviour, and was pleasantly surprised at how more motivated his team was, how much more time he had and what new things he could do with the time released from his micro-managing. No wonder he did, given how much time he had wasted micro-managing.

Free Offer

I’m offering a free one-hour telephone or video workshop on my Small Change Toolkit to help you start the process yourself. The toolkit is a set of concepts and models which you can take away from the one hour workshop and use with your colleagues. I offer this as an incentive for you to engage in a conversation with me with a view to persuading your board to sign up for my Small Change Programme, but if you don’t, that‘s fine too, you still get your free workshop.

If you would like to arrange a free one-hour telephone or video Skype workshop with me, please email me on cfenton@ciaranfenton.com or call me on 07966168874. You can read more about me and my model on http://www.ciaranfenton.com