Tone at the Top – Leadership is Everywhere

One of the most enjoyable aspects of being on “sabbatical” or between Chief Executive roles is the occasional consulting opportunity I selectively take.  On two occasions in my professional career, I resigned my post without a clear path to the next opportunity.   In order to fill the coffers (i.e. buy lunch), I scouted and accepted consulting opportunities within medium-to-large corporations.  My previous two resignations were driven by the ethical “tone at the top” problem that existed within the enterprise so I was curious how other corporations managed when ethical employees began to choose to do unethical things.   Essentially, what started out as a means to stay active in the market as a consultant, turned into one of the best learning exercises a leader can have.

One thing I have observed first hand is that many different things drive ethical climate and often the idea of tone at the top as the main driving factor has mythical components.

For example, one of my executive positions allowed me ready access to the owner of the corporation.  There was little question he was an ethical person.  He had a sense of fair play, right and wrong, and regularly communicated the right message to his direct reports.  However, he had a marked aversion to confrontation and some misguided beliefs about qualifications required for strong managers.  He was hard-driving and focused outward and left the day-to-day benchmarking of performance to his managers without ever validating approach or metrics.  He had a tendency to hire in executive managers who were highly respected technologists or specialists in their field without validating their people skills or management experience.  He also disliked engaging with the employees on a one-on-one level and did not practice a true open-door policy.

During the four years I was with the company, I regularly observed the ethical tone of the culture being set at lower levels than the owner.  The effects became obvious in the financial statements within the first year.  The owner, desperate for an answer to what was failing, hired a big six (at that time, 6 existed) firm to analyze what was going wrong in his company of approximately 2500 people.  It was a fascinating, but disastrous, exercise.  The firm quickly discovered pockets of retaliation and entitlement behavior, malicious obedience, and creative incompetence.  Unfortunately, the firm identified the symptoms as the cause and the “fire the bad apples” reduction in force project devastated the company.  Sadly, they folded within 3 years of this exercise, never being aware of the true causes.  Active involvement, direct employee communication, open door policies, and avoiding abdicating management responsibility would have addressed the corporations problems over time.

Let’s talk about retaliation and ultimately the entitlement behavior.  This occurs when employees feel they are being mistreated and find ways to get even.  The potential for retaliatory behavior exists in every organization.  When employees feel they are unappreciated, treated unfairly or abused, their sense of “entitlement” is sufficient rational to motivate or justify behavior (often unethical) that would be unthinkable otherwise.

For example, in the previously mentioned corporation, several of the executive managers decided in order to boost EBITDA, a reduction in benefit costs was in order.  Included in those benefit cuts were training and certifications.  Now, this was a technology firm and as many technologists know, you are as desirable in the workforce as your last certification.  Unfortunately, much of the top-talent at this firm had been attracted via the owner’s promise of continued training and certification.  Many employees saw the revision of the benefits as a loss.  The corporation was investing heavily in sales, conferences, seminars, and client-engagement.  The employees began to selectively choose conferences, seminars, and clients that were in distant but desirable geographic areas.  They also began to book first-class tickets, expend higher dollars on client entertainment, and select higher-end hotels tied to conferences.  Employees found a way to “compensate themselves” and retaliate against the corporations new policy.

During one of my early-career consulting engagements, I was placed rather distant from executive management so I got to experience first-hand the tone being driven by the mid-level directors and managers.  Many divisions within this large company were healthy and the overarching corporate culture came through loud and clear.  Happy employees doing the right things for the right reasons abounded.  However, one division seemed to struggle dramatically.  It was the division I had been assigned to and I made it my mission to understand bottom-up what was creating the discordant tone.  It didn’t take long to identify symptoms of the problem.

My observations about unethical behavior at the employee level were easy and obvious.  The mid-managers regularly showed up at the office at 9 and left at 3:30.  They stood behind employees and consultants around 3:20 and started asking the question, “are you ready to go yet?”  The teams spent inordinately large amounts of their time preparing presentation decks (PowerPoint Slideshows) that were then passed up the chain to the “big boss” for presentation at some unknown conference or event.  There were no cross-team meetings, no collaborative initiatives, and no strategy or direction setting from the VP.  I regularly saw malicious obedience practiced.  On one occasion, the VP jumped three levels below him to an information security engineer and directed activity without knowledge of other conflicting events.  Rather than escalate the request to his boss, the employee responded as directed and created a 7-hour outage to a portion of the enterprise.  He knew he would create it.  He also knew if he responded with anything other than an affirmative “yes sir” he would be chewed out by the VP, or worse.

Another regular occurence of destructive behavior was around creative incompetence.  Employees were regularly told not to communicate above their own managers, regardless of the situation or event.  They were also tightly reigned in on communication outside of their own division by the VP.  Corporate myth existed surrounding what happened to employees within this division if they every communicated above their “chain of command” even if the communication was positive, informative, or in one case, a warning of direct impending information security breaches and compliance.  I was not surprised when I popped open my laptop one morning and saw this corporation splashed across the front page internet news regarding an egregious breach of data confidentiality that ultimately created a $2 billion dollar breach and recovery.  I knew that many of the team had been escalating concerns about their lax identity and access management policies to the VP but he regularly shooed their concerns away citing “budget issues that could get him fired.”  Although I wasn’t with the corporation when the large, and very public, breach occured I can easily guess what drove these engineers with ethics to commit an unethical act of creative incompentence.  Ironically, the VP was fired.  The day after the public breach.

Most people, when thinking of “tone at the top” think in terms of corporate officers or very senior (CEO, COO, CFO) managers.  In fact, the top is relative.  It is most accurately characterized as the immediate supervisor of whoever is asking the question.

Knowing this, many of you may have a different appreciation of how you create the ethical climate.  Where you set the bar,  and what you intentionally or inadvertently communicate, speaks volumes about your ethical expectations of your staff and managers.

Whether you are at the top, middle or bottom, you have ethical responsibilities and obligations that are not to be found in any law, regulation or policy.  To be an effective ethical leader, you MUST attend to the tone being set by informal systems — with a focus on messages from the board, executive management, and you — about what it means to do the right thing