The power of integrity in leadership

Host:

G’day, and welcome to NousCast, the podcast of Nous Group, an international management consultancy. From business to government, defence forces to sporting organizations, integrity and leadership is in the spotlight. The power of integrity and ethics in leaders is the topic of our discussion today. In conversation, we’ll hear from Tim Orton, the founder and CEO of Nous Group, and Dr. Peter Collins, a Nous principal, who has more than 25 years of experience working with an array of organizations as a senior leadership advisor. Let’s get into it.

Tim Orton:

Peter, welcome to Nous. It’s great to have you on board.

Dr Peter Collins:

Thanks very much, Tim. It’s great to be on board.

Tim:

Peter, how can thinking about ethics and integrity help deal with the issues before and as they arise, rather than has been, it seems at the moment, after the event, where we have royal commissions or other inquiries?

Peter:

Well, a lot of what royal commissions throw up is the entrails, and as you go through it, you can recognize that if we had intervened earlier or been aware of pathologies in our decision-making or tendencies in the ways that organizations were running and behaving, we could have taken remedial actions. We, being senior leaders or boards or regulators. It could have been a concerted effort to do that. So, modern ethics, particularly behavioral ethics, gives us the tools and the ability to now do that in a way that wasn’t even available to us 20 years ago.

Tim:

I’ve heard of behavioral economics. Just tell me a little bit about behavioral ethics, if you could.

Peter:

Sure. It’s a counterpoint to normative ethics. We, in ethics, say, “We ought to do the following.” And what behavioral ethics said, “Actually, when we make those kinds of decisions, we actually do things that are quite contrary to it.” So we fall into patterns around… Bias is very well known, or we have what’s called ethical failure, that under pressure, people’s ability to manage ethics and factor ethics into their organization goes out the window. And it can be as dramatic as that, as royal commissions show. Bystanderism is another form of behavioral ethics. You see large scale wrongdoing and lots of people know it, but people don’t do anything.

Tim:

So, in a sense, you’re arguing prevention’s much better than cure, but why haven’t organizations gone down that track?

Peter:

Well, that’s a very good question actually. I think we’ve overestimated our ability to manage organizations through other domains like risk or reputation management or compliance, and said that’s sufficient in order to be able to run them. And I second, we’ve overestimated our ability as leaders personally to deal with this. I still hear the phrase, “I’ve got integrity, therefore I’ll be able to manage these issues,” which is good if one has it. It’s more a question of, can you then apply modern thinking about organizations and decision-making that ensure integrity flows right through our systems and our organizations?

Tim:

Tell me, those people who’ve said they’ve had integrity, I’m assuming they’ve had integrity, but somehow they’ve ended up in a situation where it would appear otherwise. Just tell us a bit more, and you might want to draw on example without naming it. How do you end up there?

Peter:

I’m an investigator for the Independent Broad-based Anti-corruption Commission. So usually when people say under pressure and they’re under investigation, “I’ve got integrity,” it’s a mechanism for self-defense. Let’s leave that off the table, but note it. After the event, people have engaged without any intent, and with all the best will in the world, they ended up in an outcome which is just unethical. And they say, “I’ve got integrity, and yet my leadership of my organization and my organization itself has ended up an unethical outcome.”

There’s some calamitous examples, Juukan Gorge and what happened there. Or you get Banking Royal Commissions and practices like commissions from the debt. Those are gross, extreme examples, but far too common, and the leaders involved find it a huge challenge to their own sense of their leadership because they’re responsible for these outcomes, whether they’re intentional or not.

Tim:

Let’s move on to what Nous brings to building integrity in organizations and examples of practical changes that we’ve recommended for clients.

Peter:

Well, we’ve recommended some very practical things. One of the core things we know with wrongdoing around sexual harassment or bullying, misconduct of that kind, you can put all the systems in the world, but you need to have a culture that enables people to speak up. And we’ve done a lot of work in that over the years.

The second is, a lot of wrongdoing people don’t want to be engaged in. I’ve been working with the Medical Research Institute, for instance, and why people might falsify data is because they’re underpaid, have insecure work that the organization’s putting pressure on them to publish, and so they reach out and do the wrong thing. So you have to think of a whole system at work here and intervene at various stages.

One of the answers in that case was the organization started to pay its people more, 15 to 20% more than they were. Let’s take the pressure off that. Let’s take the pressure off publication by assembling a more reasonable target, et cetera, that may apply in those cases. So there’s two examples, but there are many more.

Tim:

So you are arguing that example, the last example, that the incentives we put in place to encourage high performance are also the same factors that distort the system. How do we square that circle? How do we reconcile those two dilemmas, because we want high performance and we want integrity?

Peter:

I think the practical answer here and the answer that ethics reaches for, is to test our REM and incentive schemes in our targets on their unintended consequences as we put them in and review them as they start to take hold. Because then we can know about what unintended consequence… what’s the offshoots of these? Because people don’t set up REM schemes to do that. They want them to attain high performance, but incentives and targets are very powerful forms of motivators for human behavior, and you can make it rational to do the wrong thing.

Tim:

You said earlier on that perhaps organizations believe too much in governance and risk and compliance, but you wouldn’t be arguing that you don’t need those things.

Peter:

No.

Tim:

How do you bring those and the cultural dimensions together successfully?

Peter:

Well, I think you need to integrate them, and I think what’s been a missing piece up until now is people haven’t factored ethics and integrity into that case. I’ll just take one example of practices. So it became mandatory, or at least there was a practice in organizations, the financial sector, to set up a system of commissions, but no one tested it. It was fine legally, it was fine for the regulator, but no one tested and really asked enough of the questions as to why, even after people died, their beneficiaries were still obliged to pay the commissions. Now, when you and I hear that, and the people listening to us, they go, “How could they have missed it?” And the answer is, all too easily, under pressure to get targets, under pressure performance to increase shareholder value. We put schemes in, but never really think through the consequences of them.

The banking sector was horrified when this came out. They’ve stopped the practice, which is great, but it should never have taken hold if it had the wisdom and foresight and the skill to think of these things before they happen.

Tim:

We’ve talked about the systems and the way incentives and other things shape a culture of integrity or otherwise. What about the effect that ethics has around decision-making? How do you use ethics in a way to make both decisions that achieve the outcomes for the organization, make it high performing, but sustain its integrity?

Peter:

Well, I think we have to factor in the traditional forms of ethics, which is fairness, justice, purpose, these kind of resonant words, patient care, and incorporate in our decision-making behavioral ethics and how it works. Leaders face terrible dilemmas, Tim, we’re in the state of Victoria now, it’s supposed to be a dreadful bushfire season. I’ve been working, as Nous has been working with our emergency management people. They have to make massive decisions about moving populations, countering fires, and what they know they’re subject to is the risk of bias, the risk of making shortcuts, called heuristics. So they’re starting to build then their decision-making so they can make the decision-making as free as possible from those forces which might undermine them.

Tim:

Can you give us other examples about the way you’ve instilled the ethics? I think you did some work with the ADF on this.

Peter:

I did, actually. In fact, I think, of all the professional work I’ve ever done, Tim, this is the one I’m proudest of. I was approached by the chief of defence that our soldiers in our frontline, they called it, “In harm’s way.” Listen to that language, “They’re in harm’s way.” Were at risk through the rules of engagement that operated in joint missions of engaging in wrongdoing. And the soldiers themselves, the ADF members felt this, so worked on a system where they could, at the frontline, call off missions. We called it a yellow and red card. Those who like football or rugby will get the analogy, but anyone in those groups can raise a concern. They pull out a yellow card and let the sergeant, whoever it is, the head of the patrol, know that they’ve got an unease about it. Not about, it’s a difficult mission, but actually, there’s an ethics issue here. There are women and children in nearby facilities and if we go ahead, there’s a significant risk. And the red card is when the group votes, actually. The group votes to call off the mission.

Now, this is reported to parliament. So it’s a very significant form of decision-making, and the bit that I’m most proud of, and of our Defence Force I’m most proud about, we’re the only country in the world that allows it. And yet, all defence forces on their missions live come across circumstances that it may be unethical to proceed. So I think that’s a very practical example of how special forces, et cetera, and it shows to me the innovation and the good decision-making that ethics can give rise to.

Tim:

It’s interesting, I started this discussion saying integrity and ethics, almost using as interchangeable words, but as you’ve talked about the yellow and red cards, it’s reminded me that ethics and integrity are different, but complimentary. Perhaps for the listeners, define each of them and give an example of each of them, so we’ve got them clearly in our head.

Peter:

The classic definition of ethics is working out the right thing to do in a given situation. It’s usually accompanied by terms like a dilemma. I’ve got options. How do I choose what’s the right thing to do in these circumstances? And given no two circumstances the same, that’s quite tricky. Integrity, you can think about, is a very admirable human quality. We all want it. If you and I were described by others as having the highest amount of integrity, we’d feel incredibly pleased, as would anyone who’s joining us. So integrity is a human quality that we hold to and aspire to.

Where they come together, is that you do need to be a person who has human qualities in order to make ethics-based decisions. It’s not just an algorithm or you’re a clever calculator of consequences. You do need to be able to engage at a human level and work out what the right thing to do is. The decision-maker is a key part of that, and what they bring to such decisions, or acts of integrity, as the case may arise.

Tim:

Now, the thing I wanted to explore a bit more in that, Peter, was again, as I was thinking about your examples about ethical decision-making, is there’s a value set that underpins them. So the way you think about the lives of people in the village that the Defence Force were considering, most organizations have a set of values. How are those values linked to ethical decision-making? I’ve never heard someone talk about the organizational values and how they play through in ethical decision-making, so I’m somewhat intrigued. Are the values an important part of the behavioral construct or have they tended to be something on the side?

Peter:

Well, they ought to be at the center, but I think there’s a limit to values at an organizational level, is you’d usually find five dot points, in that they’re fine for most issues that most workers or employees find or grapple with in their organization, but they don’t necessarily give you the skill to be able to answer or respond to more complicated dilemmas. It’s because most dilemmas we’ve worked out. Most of us come to work and know we’re not going to steal. We want to act with integrity, and these are prompts to that. But these other, more complicated ones, they’re, if you like, necessary but not sufficient. And that’s why I think we need to add a more skilled level of decision-making to what we have now.

Tim:

So that means that if you’re thinking about the developing the leadership of people, you’d be arguing, we need to engage them in complex, in a sense, simulation, to some of the challenges they might face in order to really get into the questions of-

Peter:

Absolutely.

Tim:

… ethical decision-making?

Peter:

Yeah. And I do that. Victoria Police, they have a framework for integrity called Cultivate, Compromise, Corrupt. Most police forces have an equivalent. But you run it through modern threats to their integrity. You tell them who’s coming after them, who’s cultivating them, and you open up a whole richness about what they ought to be aware of and practices that we see in our work with the public sector, like, they never allow us to pay a cup of coffee. That sounds ridiculous at one level. No, because there’s no indebtedness. Can they accept free tickets to the grand final? Of course not, because of the indebtedness and it gives a preference. It goes down that path.

So there’s some very good wisdom built into these. These are not things of only the last 20 years, but the modern threats to integrity are very considerable. And I might add, people come to work in the public sector and the private sector and they’re now looking to do the right thing, and they will be equipped to look at a dilemma and a circumstance, and go, “I’m not going there. I’m going here,” and be able to work it out for themselves.

Tim:

We better wrap it up. In our last 30 seconds, if you had 30 seconds with the CEO or a senior leader of a significant organization, what message would you like to impart about integrity and ethics in leadership in this modern day?

Peter:

I’d say whatever your bigger idea of success is, whatever that looks like in your context, integrity and ethics will and can assist you, and how to realize that bigger idea. It’s the how that’s really critical.

Tim:

Peter Collins, thank you very much for your time, and delighted to have you as part of our team at Nous.

Peter:

Thanks, Tim.