Our global community of business leaders, politicians, regulators and commentators have not yet, I sense, fully digested intellectually the implications of the 2008 meltdown in global credit markets. But, after that in stunning succession, we have seen more failures in the delivery of responsible outcomes as we experienced the failure of General Motors as a going concern, the failure of Toyota to foresee, remedy, and explain failures in acceleration systems and brakes, and, perhaps most sadly, the failure of certain priests in the Roman Catholic Church in Ireland and elsewhere to maintain the standards incumbent upon those who would be God’s vicars on earth and of their administrative superiors to quickly and efficiently deal with their wrongs and to comfort and heal their victims.
I could also suggest that the credit crisis failures of Bear Stearns, Lehman Brothers, and AIG, and the near failure of CitiGroup were similar failures of organizations to behave with due responsibility. And the recent scrutiny of Goldman Sachs for being “net short” against the American housing market leaves more than a hint of corporate irresponsibility in the minds of some. When it comes out that employees of Moody’s and Standards and Poors were apparently open to linking the quality of their ratings to the quantity of their fees - (low quality for higher fees), the pricing mechanism at the heart of financial capitalism was irresponsibly debased.
Why is it then that so many such organizations, so blessed with talent, resources, and experienced leaders, fail so seriously?
I suggest that there is an unwholesome chemistry that brews such irresponsibility, a chemistry that works its mischief at the intersection of organizational realities and the individuals who work for these hierarchies.
The problem, I think, is inherent in every bureaucracy because every bureaucracy works through individuals. Put ordinary individuals into an ordinary bureaucracy and you increase the risk of something going rogue.
With the Wall Street firms that failed, with General Motors, with Toyota, even with the Catholic Church, there was at the wrong times a supine attitude towards confronting future risks and an unfortunate negligence in guarding against future negative externalities.
Some code of loyalty, some priority given to conforming to the immediate demands of the organization, froze decision-making within the ranks. Thoughtful, ethical leadership was prevented from happening when it was most needed. Some kind of ethical entropy
was slowing things down from the assumption of responsibility to fear and avoidance.
One part of the dysfunction was in constrained reporting. Bad news did not flow up these organizations with sufficient credibility to trigger responsible responses to potential trouble. Conventional wisdom was accepted as sufficient unto the day.
Second, there was inadequate tolerance of contrarians: of those who gave rise to cognitive dissonance within the ranks, who pointed to potential troubles, who tried to blow whistles or seek a change in organizational direction.
Third, organizational imperatives reward loyalty and team-players, those who get along and go along, because the organization does not to admit in public that it has short-comings. In protecting its reputation today it undermines that very reputation on the morrow.
While organizational failures, like fish, rot from the head; the deeper cause of the rot in organizations lies lower down the pecking order of power and authority..
Organizations are first and foremost formal structures of positions, each with duties and responsibilities, with reporting obligations and most with supervisory powers over other positions. Organizations are a system of coordination among roles mandated by the division of labor to promote the specialization of function.
From this perspective, organizations are best understood as flow charts of reporting relationships where superiors set tasks and goals for those who report to them. Organization and hierarchy seem to be one and the same under most circumstances.
But in each role or position is a person, an individual who brings individual skills and needs to the execution of his or her tasks. Much of the art of management is finding suitable matches between persons and job descriptions.
So, now if we look at the interaction of the self with the role, we can observe a powerful cause of ethical dysfunction in organizations.
The self of the person in the role has needs and those needs exercise great influence over how that person performs his or her duties and tasks as called for in the job description for that particular role. Most of us use our roles to advance our personal agendas. We are not necessarily loyal and studious agents of those who trust us with responsibility.
One set of personal needs can easily be associated with the kind of failure we have recently seen in major international companies and the Catholic Church.
Harry Stack Sullivan, MD, published his Interpersonal Theory of Psychiatry in 1953. Here Sullivan directed our attention to the presence in each of us of anxiety as a driver of our sense of self.
He suggested that, after birth, as each person develops his or her moral sense and becomes a citizen in society, we all experience - to a greater or a lesser degree - anxiety about who we are, what powers we have, and who cares for us. Such anxiety starts to arise in the interpersonal exchange of the baby with its mother and then with others who are bringing the new personality into full sociality. Anxiety is experienced as a falling away from security and acceptance.
The baby’s response, naturally enough, is to minimize the level of felt anxiety and so return to security and acceptance.
As the baby learns to so minimize felt anxiety by manipulating the mother and other adults, a self-system arises in the young person that confirms its unique character and personality vis-à-vis others.
In his book Sullivan points out but does not dwell on the point that each adult person carries along such a self-system and uses it to reduce felt anxiety and seek security and acceptance. This dynamic of the presentation of self spreads throughout our interpersonal relations to any area where there is a chance that anxiety may be encountered.
If one had no protection against very severe anxiety, one would do practically nothing - says Sullivan - or if one still had to so something, it would take an intolerably long time to get it done. We must rise above anxiety if we are to live well and go far above it if we are to thrive. This resistance to anxiety is not just a shadow that follows us, but lives deep down inside our core sense of self. It doesn’t just go away on sunny days.
Therefore, when I, for example, assume a position with an organization, I bring to that position my self-system, in particular, my ways of reducing anxiety. Not just my anxiety, but my need to reduce feelings of anxiety, come with me every day to the job.
A similar analysis of what happens when individuals engage in organized cooperation was offered by Erving Goffman in his noted 1959 book The Presentation of Self in Everyday Life. Goffman looks at people in social settings as performers, attempting to engender in othesr a perception of reality that is most advantageous to the self that is on the stage. We know each other by our respective “performances” and estimate others by the substance and quality of their “performances.”
Combining the insights of Sullivan and Goffman, we can posit that my self “performance” is often scripted to reduce felt anxiety, anxiety that is engendered by being with others.
Now, I can reduce felt anxiety most directly by gaining a sense of security. My “performances” can be planned to gain access to security. This warming and reassuring perception of having power and control can come from the socially expressed approval of others, from having authority and positional power, from having discretionary wealth and money, from identification with the power and prestige of the organization, from avoiding risk, and from justifying my actions with non-contestable reasons prevalent in the organizational culture - like doing as I am told, following conventions, using math, science, professional expertise, or objective data.
In fact an organizational position would put me in a pretty good position to access all these forms of power to feed my need for security.
In my formal position in the organization - be it a company, a government, or a even church - I can command others; gain material reward by meeting the goals of my superiors; gain prestige in the minds of others from their perception of the power and prestige of my organization, avoid risk, go along with the conventional wisdom, and generally not rock the boat. With acts of demonstrable and unquestioned loyalty I can hope to move up the hierarchy and obtain more power over others and more of the worldly goods that work psychologically as a young child’s security blanket.
Sullivan says that later in life many of us seek other persons and situations that replicate, or personify, our experienced learning of the good mother that once had reduced our anxiety as a young infant and child. Much organizational life has that very maternal quality of taking care of us and we respond with submission and reciprocal care. Our needs drive us to protect the organization in the here and now. Our vision of what is right narrows and our sense of self actually shrinks as we cling to our audience in giving a rewardable “performance”.
In short, my self system primes me to act in all the wrong ways when my organization confronts poor risk management, failure, or potential embarrassment.
I cringe from genuine responsibility, which is determined by standards and needs outside the organization. I lower my standards and seek to reduce the anxiety through enhanced solidarity within the group. I shrink from being the bearer of bad news to my superiors or vigorously speak out to change group norms or ways of thinking.
My self-system is well trained to want to do best by myself, which quickly translates into doing what is best for me within the organization, which can easily become a course of conduct that gets me along by my going along, deferring responsibility to others or to the future.
In a conflict between two masters - my need to reduce anxiety and the best interests of the organization - I choose the path leading back to my psychological home. My master lies deep within myself.
We are easily pressured by our self-systems to obfuscate and delay, to minimize the bad news, to paper over what is uncomfortable or threatening. All this is merely human. We are mostly not bad people of bad intention seeking to cause harm, just vulnerable persons
The art of applied ethics and the introduction of social responsibility into organizations needs, I think, to take better account of anxiety in order to improve organizational outcomes.