When a Corporate Value becomes an Ethical Risk
Let’s start with some examples. Someone may feel that they need to help their team deliver on something, but in doing so, they become uncomfortable about how honest the approach or goal is. This could be a situation around how a broker is placing a risk, an underwriter targeting a product, a claims person deciding a settlement, or a counter fraud person using certain types of data.
While loyalty to the firm’s own people is most common, this dilemma between loyalty and honesty can also arise with supplier relationships. ‘Supporting the relationship’ is pretty common in a sector with so many layers to it.
For sure, those two values – the ethical one of honesty and the business one of teamwork – are not always in tension. Good teams can work together without the need to emphasise loyalty, and they can have a culture that promotes honesty. I’ve experienced them – they’re great.
At the same time though, teams are put together to deliver results, and the expectations introduced by the need to perform can at times sway the team’s culture to over emphasise delivery. The ends are put first, with the means aligned around them. I’ve experienced those types of teams too, and they’re not great at all. Honesty suffers, particular with clients and the wider firm.
Starting Point
So what can a firm do about this? A key starting point is for the firm to recognise that ignoring loyalty / honesty dilemmas can be damaging. The sector has seen numerous occasions where this resulted in significant fines, practices banned and damaged reputations. And those are just the big ones. Lots of smaller ones crash careers and break up teams.
The problem is that the damage happens downstream, after the event / situation. Short term gains or pressures override longer term sense. What’s needed are ways to help people address the loyalty / honesty dilemma as it arises. Here are two steps that firms can take.
The first step is to help people recognise and weigh up the language often associated with the loyalty / honesty dilemma. A key ingredient to such language are rationalisations. These are the mental tricks that people can use to justify their handling of the dilemma for short term gain. In the training I do, I highlight four common rationalisations:
- when people deny responsibility – they say things like “I had no choice! There was no other option.”
- when people deny there’ll be any impact, saying things like “No one will really be worse off. And, who are these people anyway?”
- when people appeal to other loyalties – “the company expects this from me”
- when people claim an entitlement – “I’ve worked hard on this deal; I deserve to win it”
There’s a fifth rationalisation that a famous investor (and insurance CEO) once described as the five most dangerous words in business – “Everyone else is doing it”.
The people most likely to face loyalty / honesty dilemmas need to be trained in handling such rationalisations, in order to influence the conversations in which they start to crop up. This is something that goes into a lot of the learning resource I provide.
Address the Language
The second step that firms can take to help people handle loyalty / honesty dilemmas is to ensure that any internal documents, policies and communications avoid too simplistic a language around teamwork and loyalty. So, for example, they should emphasise that loyalty is not just about this deal, this project or this team, but exists just as much in relation to the firm and its corporate and reputational viability, to other people and teams in the firm, and to the people who built the firm up in the first place. This can also be shaped in relation to the person’s own career, and their friends and family.
Likewise with honesty. Encourage them to think in terms of who they need to be honest with. Clearly, being honest with themselves is the starting point, but it should also encompass customers as well, the profession, their wider field of colleagues, and so on.
What underlies both of these steps is the need to avoid that loyalty / honesty dilemma being weighed up in too simple terms, in too immediate a timeframe, in too narrow a context of people affected. Both steps seek to pull in longer timeframes and wider audiences. This approach is at the heart of ethical decision making.
These two values – loyalty and honesty – are invariably played out against the background of a firm’s culture and the type of leadership given to the ethical side of that culture. A key part of leadership on ethics is to look ahead and recognise where the firm may be putting up hurdles that make handling dilemmas like loyalty / honesty more difficult.
Such hurdles usually exist in performance management systems, but surprisingly, I’ve also found them in compliance and audit systems. The irony of this is that two of the 'three lines of defence’ can hugely hinder the first line of defence acting in accordance with the firm’s own ethical standards.
To Sum Up
Teamwork and honesty can seem rather simple, rather bland, everyday values that people know enough about already. For insurers, with their many internal and external layers of operation, that sort of thinking would be a miscalculation. Both are pretty complex values that can throw up tensions and challenges. Helping your people to be better at addressing them is a good investment.
Helpful Guidance
Here are two guides that can help you to think further about these issues: