Ethics Newsline®

It’s the Culture, Stupid!

Oct 20th, 2008 • Posted in: Commentary

by Rushworth M. Kidder

Okay, enough hand-wringing. It’s time for a solution-oriented approach to the current economic crisis. To get there, we need to ask three questions.

First, what caused it? We may never fully know. Some probable causes are easy to understand, like Wall Street excesses, regulatory inattention, and unscrupulous mortgage lending. Others are nearly incomprehensible, like derivatives, collateralized debt obligations, and credit default swaps. Still others are too amorphous for words — ghostly fears, leaping like pale sparks from market to market, spooking investors, and scorching trust.

But running like an obbligato beneath them all is the persistent murmur of a single word: unethical. There’s a feeling in the air that what’s happened has been not simply illegal but profoundly immoral. There’s a sense that core decencies have been demolished, integrity dissolved, and common values trampled upon to an unprecedented degree.

Second, who’s to blame? Not just the leaders. There’s a growing recognition that entire organizations, not just their top executives, can go off the rails. Like individuals, corporations can develop wholesale cultures of greed, fraud, and deceit. Regulatory agencies and congressional committees, too, can slide into irresponsibility, blame shifting, and turf wars. Sure, we take grim satisfaction in seeing top executives nailed for turpitude, but our intuitions tell us that the problem is bigger than that. In some organizations, the culture itself is so toxic that few employees dare call attention to misconduct — and is so deaf that whenever anyone does speak up, nobody listens.

Third, what can be done? In the coming months, the media will gorge on scandalous tales of malfeasance, as CNN already is doing in a listing titled, “Ten Most Wanted: Culprits of the Collapse.” Useful? Sure, if the fault lies in individuals. But if we’re going to shift from suspicions to solutions, we need to look at organizational cultures. We need to know not just what makes bad ones worse, but what makes good ones better. We need, in other words, the “Ten Most Wanted” characteristics of cultures of integrity — what they are, what they do, and how to build them.

So here’s a start. Based on years of research at our Institute, we think cultures of integrity arise when organizations do the following:

Embed ethics in every action, strategy, and policy. Walking the talk, such organizations bring their stated cultures into alignment with their practiced cultures — and spread that alignment from the custodian right up to the board chair.
Define ethics not simply as right versus wrong but as right versus right. Moving past obvious wrongdoing, I’m-right-you’re-wrong oversimplifications, and black-and-white rigidities, they learn how to make nuanced ethical choices when both sides have powerful moral arguments.
Engage moral reasoning to shape future decisions. Not content simply to use core values to explain past actions or current circumstances, they develop early warning systems to address over-the-horizon ethical dilemmas before they arise.
Focus on intrinsic rather than instrumental values. They know that the latter (diligence, say, or competitiveness) are as important to themselves as to the mafia. So they ground themselves in really big values, like truth, respect, and fairness.
Emphasize moral principle over legal compliance. Recognizing that lawfulness is vital, they also know the dangers of the mantra, “If it ain’t illegal, it must be ethical.” Legal principle is playing by enforceable rules; moral principle is obedience to the unenforceable.
Expand their moral perimeter. Some people have great honesty or responsibility, but practice these values only within their own firm, family, or tribe. Cultures of integrity constantly expand the inclusiveness of their ethical concern toward the global.
Focus on relationship building, not just deal making. Knowing that truly important relations are not transactional but values based, cultures of integrity have multiple bottom lines that measure not just financial but social, environmental, and ethical success.
Cherish and repeat fireside stories. Cultures of integrity point with pride to their own moral traditions, educating new employees through narratives about taking courageous stands, making character-building decisions, and putting principles above personalities.
Maintain deep reserves of moral courage. Though prepared to take stands for conscience, cultures of integrity don’t need to expend those reserves internally — while in unethical organizations, good people need huge courage just to get through a workday.
Keep the ethics flame alive collectively. Since culture means “how we — not I — do things around here,” cultures of integrity make ethics the responsibility not of an exceptional individual’s probity but of an entire community’s sense of honor.

If every organization in the world approximated these characteristics enough to warrant the “culture of integrity” label, we’d be left with only one question: How could a financial crisis like the one we’re in ever happen again? If we want the answer to be, It couldn’t, we need to solve today’s problems in ways that ensure such crises never recur. How? By deliberately building cultures of integrity across business and government. Nobody said that’s easy, but nothing less will do.