ARE YOU WORKING IN A HOUSE OF CARDS?

For anyone who has read my posts, it would be obvious that I have a preoccupation with the dark side of leadership which has been fueled by my own experiences, the ongoing avalanche of corporate scandals, corruption and generally dysfunctional leaders. 

While knowing the reasons why they exist, I continue to be amazed at the number of assholes that frequent the halls of power and the harmful impact they have on so many people and society in general.

I’m also amazed at how quickly and suddenly, once seemingly powerful and influential organisations can collapse like a house of cards.   Some recent examples of note being AMP, Crown Resorts and The Star casinos, PWC, the CFMEU and many more.

These scandals have got me thinking:

1.     Have things got worse over the years?

2.     Why is that it takes so long to expose and deal with corporate dysfunction and the assholes that create it?

3.     What is it that triggers these seemingly sudden corporate collapses?

4.     How do you detect if you are working in an organisation that has the potential to be a “house of cards” and make the news for all the wrong reasons?

Have Things Got Worse Over The Years?

“The more things change, the more they stay the same”

Although I can’t refer to any research on this question, my guess is that the proportion of assholes to the rest of the population has remained constant.  While the proportion hasn’t increased, just remember that the population has increased so the absolute number has gone up as a result. 

I have however seen figures on what percentage of sociopaths/psychopaths represent and they hover between approximately 1.5 -3% of the general population.  A psychologist once advised me that when you also take into account those with behavioural issues, you are probably looking at 25% of the population being dysfunctional– a frightening thought, but a reality!

As far as the extent of corporate dysfunction and scandals go, that’s a difficult one to answer.  Once again my guess would be that we may be seeing more of these being made public due to improved media and social media coverage i.e. its harder to hide.  Whether the level of corporate and individual dysfunction has increased or not, the fact remains there are enough cases of corporate and individual dysfunction to keep the law makers busy. and the rest of us cautious and vigilant.

Why is that it takes so long to expose and deal with corporate dysfunction and the assholes that create it?

I find this question particularly intriguing due to the level of individual, corporate and political dysfunction occurring over a significant period of time – take as some examples the CFMEU, Commonwealth Bank, Casinos, PWC, AMP, James Hardie, HIH, Enron, Volkswagen, Jeffery Epstein, Harvey Weinstein, Bill Cosby, Rolf Harris and numerous other individuals and companies who have been dysfunctional and/or made life hell for so many people over so many years.  Why do they take so long to be exposed?

The answer to that question is largely answered in Jeffery Pfeffer’s book, “The 7 Rules Of Power” which is rooted in social science and intended to “help people better understand the everyday dynamics and political truths of organisations of all types, public and private." 

Of particular interest is the heart of Rule #7 – “power itself makes many problems, including what someone did to acquire power, mostly disappear” or “understand that once you have acquired power, what you did to get it will be forgiven, forgotten or both.”  Pfeffer argues that power generally insulates people from suffering too greatly for their actions based on a number of reasons:

1.     There are organisational and social processes that amplify existing advantages and perpetuate power and status rather than ensuring there is balance.  The more powerful and successful someone becomes the more others are attracted to them and the more they are perceived as successful in the future.

2.     People want to be associated with those who have money and power and are willing to forgive those who have them or look the other way

3.     People in power travel in the same circles (social/charitable circles, boards etc) and the social connections formed will act to lessen the sense of outrage in the face of wrongdoings and any interest in sanctioning the dysfunctional behaviour

4.     Once a person has achieved wealth, fame, status or power, people’s cognitive consistency tendencies will further reinforce beliefs in that person’s power, intelligence etc.

5.     Cognitive processes operate to infer positive behaviours and traits to individuals who have succeeded in attaining power and wealth which attracts others to sing their praises

6.     Moral rationalisation (one of my personal favourites) occurs when people keep associating with assholes by redefining the behaviour as either not that bad or really not their fault at all

7.     Moral decoupling occurs when people admit that the asshole they are attached and attracted to has engaged in wrongdoing but argue that the immoral beheviour is not relevant to the present context

8.     People who have power often have the resources to rewrite history that whitewashes past misdeeds or interprets them in ways that are favourable to them

9.     People who have wealth can purchase social status, legitimacy and respectability through donations and association with legitimate, high-status institutions. 

Some of my own observations as to why powerful assholes and organisations get away with wrongdoings for so long include:

1.     They create a culture of mistrust so no one speaks up because they don’t know who they can trust

2.     Dysfunctional behaviour is seen as normal in that particular company or industry and therefore represents the “cost” or “reality” of working there

3.     Consistently delivering results can cushion the asshole from the consequences of their actions

4.     Powerful assholes know how to play the media and in building their personal brand

5.     Lip service is paid to managing risk as it threatens the bottom line and dysfunctional behaviour remains under the radar

6.     Intimidation, either emotional and/or physical, can be used to keep people from speaking up

What is it that triggers these seemingly sudden corporate/asshole collapses?

“Change happens slowly, then all at once.”

While power and money can cushion Corporate Assholes and dysfunctional organisations from the consequences of their actions, they are at the same time not a guarantee that their house of cards will not crash.  When they do crash, it can be surprisingly sudden and out of the blue.

Over the years I’ve observed a number of factors that appear to trigger a fall from grace. Some of these can act alone and at other times a combination of factors works to bring the mighty and powerful to their knees.

·       Trigger #1 - A whistleblower – depending on the circumstances, a whistleblower can contribute to a downfall, but most likely it will be successful if one or more of the other factors are at play.  A single whistleblower, own their own, is unlikely to bring down the house of cards as they can be swept under the carpet or publicly discredited

·       Trigger #2 - A critical mass of victims – a large number of people speaking up can be very effective.  Normally it takes one to open the floodgates and an element of feeling safe to go public – the greater the number of victims speaking up will enhance a feeling of personal safety

·       Trigger #3 - A step too far – as the powerful accumulate more power and influence, their level of arrogance grows and the more willing they become to taking risks.  The CFMEU recently in taking on the AFL (in Australia) is a great example of being blinded by arrogance and taking a step to far.  Another example is that of conspicuous consumption where the asshole flaunting the proceeds of corruption can unwittingly highlight something rotten to others

·       Trigger #4 - Blinded by arrogance - similar to 3 above but slightly different.  In this case, the corporation or asshole, might be so full of their own shit, they don’t see the dysfunction in their own backyard.  When a Royal Commission slammed Crown Resorts for its practices in relation to anti-money laundering and responsible gaming, management of The Star casino were gloating and even threw out the possibility of a takeover of Crown.  At the same time, they were ignorant of the dysfunction in their own ranks and when it became public, the management was decimated, and after 2, not 1, Inquiries the company has been brought to its knees.

·       Trigger #5 - A curious journalist – it only takes one good investigative journalist to expose corporate and/or asshole dysfunction for the house to tumble.  Media exposure of corrupt and poor behaviour seems to be common in the Australian context and highlights the importance of a free press

·       Trigger #6 - Changing context – societal and regulatory circumstance and expectations change.  Past poor behaviour is no longer tolerated and, when it becomes public, is quickly dealt with

How do you detect if you are working in an organisation that has the potential to be a “house of cards” and make the news for all the wrong reasons?

“Ignore it at your peril.”

The one thing you don’t want is to be working in a house of cards when its starts tumbling down.  Not only will the house crumble around you, but you may well find yourself collapsing with it, along with your career.  The irritating aspect of this whole charade is that you have the real prospect of becoming a victim, while those who orchestrated and perpetuated the mess ie the Board and Senior Executives will, in all likelihood, walk away with bruised egos cushioned by their social connections and accumulated wealth.  Some may even be rewarded for their efforts with a termination package that could feed an impoverished, third world country.

The problem is that you might well be in that house and not realise it – time to do a “house of cards” risk assessment.  Don’t become a victim!

When assessing the likelihood that you are actually working in a house of cards, consider carefully the following 6 Risk Assessment Factors, many of which are inter-related.

Risk Assessment Factor #1 - A Fish Rots From The Head

The root causes of corporate dysfunction lie at the feet of the architects who designed the “house” together with those that were charged with the responsibility of maintaining it ie the Board and the Senior Executive team.  And it’s this level of leadership in any organisation that is ultimately accountable for its style and ethos, its culture, its management of risk and how it goes about turning a profit. 

The key aspect of leadership that needs to be considered here, is what are the primary motivators or intentions of those in charge?  Think of leadership as being on a continuum – at opposite ends are Insightful Leadership and Destructive Leadership with Pragmatic Leadership lying in the middle. 

Assume for the moment that all three leadership types are skilled at running a profitable, growing business with the only real distinction being “intent”. Let’s deal with each and their implications.

·       Insightful Leadership – this type of leadership is characterised by good intent.  It displays characteristics associated with honesty, integrity, respectfulness and empathy.  Interestingly, an arrogant leader may still be ethical if their intentions are good.  There are in fact many examples of arrogant leaders who have proved to be very effective and honest (while arrogance has its downside, it’s not terminal).  The standard of these leaders is to do the right thing and they take a wider perspective of performance, taking into account impacts on all the key stakeholders

·       Pragmatic Leadership – this leadership type is characterised by self-centred intent and does what it takes to turn a profit as long as it’s legal.  They are primarily motivated by profit and market themselves as good corporate citizens.  Whilst they do some good, their intention in doing so is primarily motivated to improve the corporate brand so that their influence puts them in a more favourable commercial position.  At times their social contribution to programs such as diversity and inclusion is superficial, bordering on cynical.  They tend to push the boundaries on what they can legally do and trumpet shareholder value as their primary motivator – QANTAS under its previous CEO is probably a good example 

·       Destructive Leadership – the intent of this type of leadership is immoral and it does what it takes to be successful/profitable, whether its legal or not.  It’s marked by behaviors based on manipulation, deception, selfishness, aggression, dishonesty and intimidation (emotional and/or physical).  This is the domain of psychopaths and sociopaths. At its worst, Destructive leadership can be summarised in one word – corrupt.

Now its time for you to assess what leadership type runs your company?  It shouldn’t be too difficult to identify between the two extremes i.e. Insightful or Destructive – working in either should be fairly obvious.

Pragmatic Leadership is a bit more difficult to assess.  On the surface it may appear to be Insightful due to its excellent marketing and corporate image.  So you really need to dig beneath the surface to establish what’s really going on. 

If you aren’t sure what leadership type runs your organisation, the risk assessment factors that follow may assist you in coming to a conclusion.

Risk Assessment Factor #2 - Greed Is Rewarded

An organisation that rewards profitability without factoring in the impacts on consumers, suppliers, employees, the community and the environment will see decisions that are based on self interest at the expense of everything else.  That is how the system is designed and that’s exactly how it works.  Remuneration structures are notorious in rewarding the wrong behaviours, focusing on the short term and undermining a company’s long-term profitability.

What does your company’s remuneration structure reward and how balanced is it when it comes to outcomes other than just short-term profitability?  Who are the heroes in your company that are recognised for their contribution?

Risk Assessment Factor #3 - Profit Rules

This risk factor is heavily influenced by Risk Assessment factor #2.  It’s characterised by an obsessive focus from those at the top who might be following profitability even on a daily basis. Guess what type of behaviours that generates?

Once profit rules, so do costs and an equal obsession with cutting costs exists without any regard to the impacts on employees, maintenance of assets and managing risks.

I’m in no way suggesting that profit isn’t important or that controlling costs shouldn’t be a priority.  Both need to be managed with a view to maintaining long term performance executed in a socially responsible manner – is that too big an ask or beyond the ability of a Board and its Executive to achieve?  If it is, the wrong people are running the show!

How obsessed is your company with profits, no matter what, and cutting costs to the point where it threatens the ongoing survival of the company itself? 

Risk Assessment Factor #4 - Lip Service Is Paid To Managing Risk

Most companies say they manage risks, but how many do so effectively?  As with most things, the answer to this question is mostly determined by a company’s leadership.  If the attitude of its leaders’ views risk management as a drag on profits you can be safe in assuming its approach to risk will be superficial in terms of formal processes and the resources allocated to it and the decisions its employees make when balancing risk and profitability. 

Look carefully at the business decisions made when profits are challenged by risk factors and see how the cards fall – because one day the whole house might come down!

Does your company take a balanced approach to managing risks and profits and are sufficient resources devoted to ensure it does?

Risk Assessment Factor #5 - Honest People Are Crucified

Do people speak up in your company?.  Is challenging the status quo encouraged?  Are mistakes analysed to identify root causes and learnings applied to prevent them occurring again?  Or does the messenger get shot?  Are meetings dominated by a select powerful few?  Do people go silent despite knowing that the boss is wrong?  Do people feel their career or job is threatened if they raise sensitive issues?  Does the loudest, most powerful voice dominate discussions and decision making?

Does your company value honesty or merely people towing the company line? Does it view honesty as disloyalty or something to be rewarded?

Risk Assessment Factor #6 - Messaging & The Media Is Carefully Manipulated

How much effort does your company and its leaders make in showcasing its contribution to the community and economy?  While this in itself is not dysfunctional, it is when its dishonest or exaggerated.  Is the image of a good corporate citizen designed to divert attention away from the harm your company is actually causing?

Does your company honestly communicate its contribution or does it do its best to whitewash reality?

What’s Your Verdict?

The Risk Assessment Factors are by no means exhaustive, but they can potentially assist you in identifying the extent to which the company you work for is in fact a house of cards.

If you have identified your company’s leadership as Destructive, get out now! 

If your company’s leadership is pragmatic, watch out!  You may be living on borrowed time.  Luck may be on your side and you’ll survive – the house of cards may collapse after you have left.  On the other hand, you might be caught in the crossfire if the cards fall and everyone, particularly those at the top, duck for cover, scream they didn’t know what was going on and throw you under the bus.

There are two aspects of Pragmatic Leadership that are potentially disturbing:

1.     They can unwittingly protect leaders who are destructive

2.     Over time, an organistion led by Pragmatic Leaders can drift towards being dominated by Destructive Leaders as pushing the boundaries of what can be done becomes riskier and more profitable

If you are lucky and your organisation’s leaders are Insightful, don’t take it for granted.  While your leaders may be Insightful now, it only takes a small change at the top for the landscape to change dramatically.  Take for example Boeing, once a highly respected American company responsible for the safety of millions of passengers.  Now that very same company has been charged with fraud.  Boeing has agreed to plead guilty to a fraud charge for misleading regulators who approved the 737 Max jetliner before two planes crashed resulting in the loss of 346 lives.

The key message? Irrespective of the leadership type running your company, avoid complacency, remain vigilant, undertake your own due diligence and you might just avoid becoming a victim of a house of cards.

(Disclosure: I worked for Crown Resorts between 2007 and 2021)

 DAMIR KUCAN

July 2024 

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