Sometimes performance-driven organizations, with their intense focus on accountability, can be breeding grounds for fear and other problems. JP Morgan Chase is about to pay an 800 million dollar fine to settle a variety of violations with the big one being the London Whale fiasco where employees at the company were found to have deliberately hidden losses from senior management, regulators and the markets. The trust violation here is that JP Morgan Chase engaged in high-risk trading to increase profits, called it hedging and, when the bets went bad, they failed to report this material information in a timely manner to regulators and investors.
Reading some of the email trails among some of the actors in this drama shows that one of the root causes of this trust violation was a desire to delay communicating problems until solutions could be designed and presented along with the bad news. There was too much “management of reality” going on, rather than actually dealing with reality. Many of us have heard the maxim: Always bring solutions along with problems. In many firms, this gets burned into the culture by punishing people who are good at identifying problems but who fail to present solutions. They are “coached” (criticized) and told that continuing this behavior is a CLM (career limiting move). That is code for: “you will be fired.” And so they naturally learn to avoid punishment by taking the time to find solutions before they communicate problems.
Normally this is good. There is a sense of accountability for performing well that is essential for competence-based trust that customers desire. Such a culture leads people to take ownership of issues and seek to solve them at the point of pain. But what if there are no solutions at your level? What if finding a solution or mitigating negative impact requires broad communication, more resources and diverse thinking applied to the problem? What if delaying communicating the problem serves your need to avoid punishment but actually makes the problem grow and hurts the organization? You can see how a culture of “you’re paid to solve problems, not identify them” can become an organizational learning disability that causes problems to grow and delays resolution.
Changing this requires developing in employees some judgment about when to escalate problems but it also requires that employees trust that their managers will do the right and fair thing with information they are given. Even if I have enough good judgment to know that the solution to a problem may be above my pay grade, if I think that asking for help will lead to a negative reaction, I will be reluctant. This is why all high-trust organizations combine a performance and accountability culture with an even stronger emphasis on integrity and candor. These high-trust organizations know that truly high performing and trustworthy leaders are the ones who can see, admit and correct mistakes out in the open. GE is an organization that has worked over the years to create an intense accountability and performance culture that tends to reduce the lying and deception of “reality management” by also conditioning people to understand that integrity violations CANNOT be compensated for by superior financial performance.
The JP Morgan Chase case further reinforces our research that shows that major trust violations always have deep organizational root causes. Once we understand the root cause, we can correct it, repair trust and work towards building an organization that consistently sends signals of trustworthiness. From what Jamie Dimon has said, this is the path that he wants for Chase. The good news is that there is a roadmap for building the trustworthy organization.
The Consortium for Trustworthy Organizations at Fordham University pools together academic and industry expertise in building this roadmap. For more information:
- Visit our website at: www.trustinorganizations.com
- Sign up to receive our weekly Trust Digest, compiling current headlines related to trust and trustworthiness from all of the top news outlets through the “contact us” portion of the website
- Read Prof. Hurley’s blog posts, check out our resources page, and follow us on Facebook and Twitter (@Cfto_Fordham)
- Friday October 25th the Consortium for Trustworthy Organizations is holding our second annual summit: Building the Trustworthy Organization at Fordham University, Lincoln Center. The summit’s wide array of panelists includes executives from IBM, Allstate, Ernst and Young and academics from Duke, Harvard, Durham (UK), and Fordham Universities. For more information, please visit our website.
Dr. Robert Hurley is a professor at Fordham University and the Executive Director of the Consortium for Trustworthy Organizations.
Originally posted on the Consortium for Trustworthy Organizations Blog. All posts and comments on the Ethics and Society blog are solely the opinions of their respective authors, and do not represent the position of Fordham University or the Center for Ethics Education.
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