As one of America’s awful perennial wounds returns to the spotlight, the two headlines I keep coming back to in my own sensemaking are culture and accountability. Why do our institutions seem to consistently fail to provide the dignity, justice and prosperity they are ostensibly responsible to deliver? While it’s a deep topic with a lot of obstacles to good sensemaking, one place to start (especially if you’re a leader yourself) is refamiliarizing yourself with the basics of culture. I want to draw attention in particular to the maxim that your culture will inevitably be shaped by the worst behaviors you allow.
Below, you can read an excerpt from our longer piece It’s Just the Culture. I believe as we move through the current pain, any real change we wish to create will depend not on shifting how we talk about our values, but in the behaviors our institutions encourage, discourage, and tacitly accept.
Values are as Values Do
The Enron Code of Ethics was devised during the company’s heyday at the behest of long time CEO Ken Lay. Banners emblazoned with its aphorisms were hung around the office, and promotional videos featuring Lay and Skilling were distributed to employees.
The code states:
We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness and arrogance don’t belong here.
We work with customers and prospects openly, honestly and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, then we won’t do it.
We have an obligation to communicate. Here we take the time to talk with one another . . . and to listen. We believe that information is meant to move and that information moves people.
We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be.
But the code of ethics is really just a list of aspirations. Enron failed to achieve most of them. Because, in reality, those aspirations were not an accurate statement of who Skilling was as a person. It wasn’t what he was like. He wasn’t an evil force attempting to bankrupt the company. He was just never going to hold others responsible for not embodying that code. That’s not who Ken Lay and Andy Fastow were. The reality of their behaviors, and the behaviors they explicitly and implicitly rewarded, didn’t match the messaging in the posters and videos.
Values and behaviors are different things. Values are a statement of what you care about. Behaviors are what you do. You can rarely predict someone’s behaviors by reading their values. And this disconnect can cause a lot of confusion. “Too many values are just words,” says Lou Gerstner, who used a tight focus on culture to turn around IBM in the ‘90s:
Kelleher (the founder of Southwest) agrees, though with a different perspective. Southwest’s value of caring is, “not a programmatic thing. It can’t be,” he says.
It has to come from the heart, not the head. If it’s programmatic, everybody will know that and say, “Hell, they’re not sincere; they don’t really care, they’re just telling us that they care.” It has to be a continuous stream of one-on-one communication, not like you sit down and say, “Boy, communication is pretty important. Let’s really communicate for the next six months and then move on to what’s really significant.” It has to be part of your fabric; it has to be something that you do really as a product of your soul.
Gerstner and Kelleher recognized that while countless companies parrot ideas such as “caring for people” or “open communication” being a critical part of their culture, such values have zero effect if they are not backed up with actions. Aspirations unaligned with behaviors create only cynicism in employees, who silently scoff at each iteration of the company’s supposed values.
Unfortunately the executive team at Enron didn’t understand this. Ken Lay could talk all day long about excellence, but he was most concerned with appearances. He hated saying no almost as much as he hated hearing bad news. Skilling, on the other hand, made his name as a risk manager. As shown by his conversations with Watkins, it wasn’t just an honorific. He spoke with his employees about risk frequently. But he cared about winning more. He valued the creative and eccentric types who would give him security and status, and he gave them free reign to be “creative.” For as much as he talked about risk, he never reigned in risky behaviors. And those who took the biggest risks got the biggest rewards in the form of bonuses and promotions. That message rang louder than any words written in a code of ethics.
Skilling was notoriously arrogant, and ignored his blind spots. He didn’t overtly tell people that it was good to engage in risky behaviors—quite the opposite. He may not have even thought that it was desirable to engage in risky behaviors. But he certainly behaved as if risk was the ultimate good. The system he set up certainty rewarded it. It was signaled in the testosterone-laced company retreats he organized for top lieutenants. It was signaled in the bonus structure that was based on closing deals rather than those deals actually being profitable for the company. It was signaled in his tacit willingness to go along with deals proposed by underlings that he himself thought were questionable. Skilling let risk become the coin of success because that is what Skilling wanted: more coins.
By focusing on the stated values at Enron, Skilling and others allowed themselves to excuse behaviors. People are powerful rationalizers; we all frequently excuse our behaviors with appeals to values, using stock phrases such as, “their hearts were in the right place.” And we see this sort of rationalization with Skilling. Though he has been branded the High Satan of corporate America, reading through the accounts it’s striking how frequently he seemed to believe his own bullshit. But it was because he believed, on an intellectual level, in the cultural values he trumpeted, and the risk management principles he set in place, that he was able to delude himself that the behaviors that came most naturally to him were in service to those values. And since he was blind to his weaknesses, his weaknesses influenced those around him. The culture simply emerged from those signals.
Think about your own company (or life).
- Where does your behavior fall short of your stated values?
- What excuses do you make for those behaviors? Why?
- How do your company policies (from hiring / firing, promotions, compensation, etc.) account for those behaviors?
- Reviewing the reflections above, consider a specific area where you’ve allowed behaviors that go against what you value.
- Launch an experiment that reinforces accountability in that area — starting with you.