Time to Kill These 3 Persistant Ethical Leader Myths?

by Andrew Leigh, Featured Contributor

THREE PERSISTENT company leadership myths haunt the ethical scene of large corporations.

Each has some claim to credibility–but no longer. It’s time to dump these popular fictions, relegating them to oblivion.

1 The Rogue Employee Excuse

Whenever a major company suffers a serious lapse in ethical behaviour a favourite form of defence is to blame one or more “rogue” employees.

MythThe “few bad apples” myth has become a preferred resource for public relations experts. They often suggest it to worried clients wondering how to deal with the fallout from some reputational disaster. [1]

Used extensively by the financial services industry, this myth has gradually been exposed as totally unpersuasive.

Nick Leeson, the original rogue trader temporarily embodied the myth. His unchecked risk-taking caused the biggest financial scandal of the 20th century and brought down Barings, the Queen’s personal bank in 1995.

It soon became clear though the rogue trader was a convenient excuse. Equally to blame were the serious failings of the bank’s supervisors, managers and a culture of looking the other way, so long as profits were flowing in.

Minouche Shafik, The Bank of England’s deputy governor for markets and banking has now called time on this myth.

In a hard hitting speech which doubtless made many in the financial services industry wince, she declared recently the many scandals could not be dismissed as one-off anomalies.

“…It is not just a few bad apples, it is actually the barrel in which they are operating…” [2]

2 The  War for Talent means pay up

When Barclays’ Chief Executive Antony Jenkins claimed, despite a fall in profits, he was compelled to pay higher bonuses to his best talent investment bankers, or risk a “death spiral” of defections. He too was embodying an outdated myth.

For over a decade company leaders have been warned about the “war for talent”.  Scary tales abound of the best talent ready to leave in droves for better paid jobs abroad. There are feverish demands within some organisations to retain a particularly bright spark from defecting to a competitor round the corner.

Defections are indeed disturbing. Yet as one former Chief Executive of Cazenove the stockbroking and investment bank explains:

“I cannot think of a single example of a well-established firm ceasing to exist because of staff defections…” [3]

Any shortage of talent in an organisation is far more likely to be due to how it’s being managed in the first place: [message type=”custom” width=”100%” start_color=”#D8D8D8″ end_color=”#D8D8D8″ border=”#BBBBBB” color=”#333333″]

Why talent might be in short supply

  1. Big Company Bureaucracy.
  2. Failing to find a project for the talent that Ignites peoples’ passion
  3. Poor annual performance reviews.
  4. No discussion around career development.
  5. Shifting whims/strategic priorities.
  6. Lack of accountability and/or telling them how to do their Jobs
  7. Top talent likes other top talent
  8. The missing vision thing.
  9. Lack of open-mindedness.
  10. The boss

Source: E. Jackson, Top Ten Reasons Why Large Companies Fail To Keep Their Best Talent, Forbes, 14th Dec 2011[/message]

No wonder talent is on the move if at all possible. What we know from the plethora of studies is talent is being wasted on an industrial scale. It has ethical implications as leaders need to take responsibility for the situation. For example, a recent survey of nearly 3000 employees in 27 countries during 2014 found only 39% satisfied with their job overall.. [4]

So who gains from these scare stories? Who wins from perpetuating the myth that it makes commercial sense to “pay up” to retain talent at almost any cost?

It certainly suits recruitment consultants and head hunters to promote the fearful imagery of a “war for talent”. And of course there are many who indirectly gain from a relentless drive to push up average pay levels.

Talent is abundant. Treating it as a strictly finite pool merely ensures there are shortages. So many companies have thrived from developing their internal talent, from deliberately setting out to unlock potential that the “pay up at any price” myth has no credibility.

3. The cost of being ethical is too high 

Since ethics covers such a wide field let’s focus on social responsibility, since that’s been a big growth area for many companies. Some have questioned whether such an investment or shift in the corporate culture is worth it commercially. That is, do ethics pay?

The Wall Street Journal conducted a fascinating exercise of showing consumers the same products — coffee and T-shirts — but told one group the items had been made using high ethical standards and another group that low standards had been used. A control group got no information.

In all of the tests, consumers were willing to pay a slight premium for the ethically made goods. But they went much further in the other direction: They would buy unethically made products only at a steep discount.

No do companies need to go all-out for social responsibility to win over consumers. If a company invests in even a small degree of ethical production, buyers will reward it just as much as a company that goes much further in its efforts. [5]

Meanwhile, the evidence that ethics pays, keeps piling up. From stronger competitive positions, reduced costs, lower risks, increased profits, better recruitment and retention of talent, to more access to capital resources, less corruption and so on.

Any leader or manager still wondering if Ethics Pays should look at our evolving factual resource here.

Myths versus Reality

There is a reason these three myths have been around so long. They originally seemed relevant with real evidence to support them.

There were individual bad apples organisations, and always will be. To retain talent you do have to pay what it’s worth and that continues to be true. And it makes sense to weigh ethical choices against commercial risks to arrive at difficult decisions.

But up close using facts, not assertions, all three myths fall apart. None stands up to an honest examination in an open, transparent culture.

Sources:

  1. A.Leigh, Bad apples, rogue employees, and lone wolves– the fine art of denial, March 24, 2014, www.ethical-leadership.co.uk
  2.  S. Fleming, and C. Giles, The City of London faces more than a few bad apples,  FT 10.11.14
  3. R. Pickering, Death Spiral is a myth to perpetuate high pay, FT 28.4.14
  4. Workforce 2020, The Looming Talent Crisis
  5. R. Trudel, and J. Cotte, Does Being Ethical Pay? Wall Street Journal, May 12, 2008

Andrew Leigh
Andrew Leighhttp://www.ethical-leadership.co.uk
ANDREW is author of Ethical Leadership, (Kogan Page 2013) and writes regularly at www.ethical-leadership.co.uk. He believes business needs to re-discover the importance of ethics and integrity. As an expert on leadership Andrew writes regularly on ways to help managers be more effective as ethical leaders. His blog stays close to the zeitgeist with a unique perspective on many aspects of leading organisations ethically, including compliance, and engagement. Andrew is a joint founder in 1989 of Maynard Leigh Associates (www.maynardleigh.co.uk) pioneers of using ideas from theatre in business. He was a hands-on practising manager for many years in the public sector, ending his time on the front line running a division with over 1000 staff. Andrew also spent several years as a business and financial journalist, including time at The Observer newspaper. He has written over 20 books on management, leadership teams and so on. Originally trained as an economist, he is a Chartered Fellow of the Chartered Institute of Personnel and Development. He is available for speaking engagements, interviews, feature articles and consultancy.

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