THE FOUNDATION FORUM
WEDNESDAY 12TH SEPTEMBER 2012
The following article is a summary of an event we held on 12th September 2012. The event explored questions around culture, morality and corruption which can complicate business and relationship-building, especially internationally, in both private and public spheres. The subject was discussed by David Magliano, current brand director of the Cooperative Group who played a lead role in the London 2012 Olympic bid and the England 2018 World Cup bid, anthropologist and ethnographer Dr. Robin Pharoah who has worked extensively in China, and Susan Scholefield, LSE school secretary and former senior civil servant with roles in the Balkans, Northern Ireland and the Cabinet Office. Their conversation has been summarised by Simon Caulkin, formerly Management Editor at the Observer.
Corruption is not our problem. Transparency International’s Corruption Perceptions Index could hardly make it clearer. WASPs, Western Europeans (apart from Italians) and Japanese are ‘clean’, i.e. honest. Moving from South America and Asia to Eastern Europe and Africa, on the other hand, is a journey to a moral heart of darkness ending in failing states such as Iraq, Myanmar, Uzbekistan, Somalia, Sudan and Haiti, where almost everything is crooked. Yet how sustainable is this Manichaean view of a world divided between, not to be precious about it, the first world and the rest? A minute’s reflection suggests that LIBOR, phone-hacking, MPs’ expenses and a seemingly never-ending succession of political and business scandals are less than glowing adverts for a supposedly upright Anglo-Saxon west. The financial crash, with banks imploding in a black hole of dishonesty, was of strictly western manufacture. Could it be that ‘corruption’ is in the eye of the beholder? Or even, in the words of David Magliano, one of the speakers at a fascinating Foundation Forum on the subject ‘Morality or Growth’ on 12 September, cries of foul that are the sign of a poor loser?
"Could it be that ‘corruption’ is in the eye of the beholder?"
As Exhibit 1, Magliano, an international marketer who is currently brand director for the Cooperative Group, reflected on the UK bids for the 2012 Olympics and the 2018 football World Cup. He participated in both. The UK won the former and lost the latter, he suggests, because they were judged in different ways, one suiting the UK, the other the competition. He described the three areas of consideration in such bids as ‘T’ (technical – stadia, hospitality, transport), ‘M’ (marketing and PR – ‘the story’, lobbying), and ‘D’ (deal-making). For the 2012 Olympics, Paris was technically stronger, but in the event the technical side was less important than marketing, where the UK developed a strong narrative that appealed to the International Olympic Committee (IOC)'s central purpose, built around inspiring the next generation of athletes around the world, and sold well through credible front-men. D was less critical because deal-making had been made harder by the IOC. London’s lobbying strength trumped Paris’ technical superiority: it was Seb Coe, Tony Blair and David Beckham wot won it.
By contrast, in 2018 England lost out to countries with inferior technical and marketing stories. Technical didn’t seem to be an issue because FIFA was basking in the (against-all-odds) success of South Africa 2010, while the small number of voters (around 20 versus around 100 for the Olympics, so an extra one or two made a big difference) and the bundling together of location decisions for both 2018 and 2022 competitions conspired to make deal-making and horse-trading critical. This, it turned out, was something at which England was particularly bad.
The outcome provoked dark muttering in the UK about the best side having lost. But this is where the doubts creep in. After all, London’s 2012 win wasn’t based on technical reasons either. Deal-making did take place for 2018, notes Magliano, but it didn’t break the rules. Between corruption and the simplistic, moralistic Anglo-Saxon code, he elaborates, lies something distinct from either that is entirely familiar to the rest of the world, which simply doesn’t accept, or aspire to, the superiority of Western morals. It’s perhaps best labelled ‘reciprocity’ – something outside British cultural norms that Brits, particularly, seem uncomfortable with individually and institutionally ill-equipped to handle: ‘We don’t have the mechanisms and levers.’ So while observers are quick to reach for the label “corrupt”, as for 2018 it may be more a case of the decision being made using criteria that favour others more than the UK. With emerging nations increasingly figuring in such contests, and indeed in business deals generally, this is something we had better get used to. The wider point is that pride in a supposedly unbending moral code may be self-serving and naive as well as borderline racist, both setting us up for failure and preventing us from learning from experience to boot.
"It’s perhaps best labelled ‘reciprocity’ – something outside British cultural norms."
On the basis of extensive fieldwork and a period living and studying in China, Robin Pharoah, founder of research group Ethnographic Social Research Options (ESRO), came to rather similar conclusions. If the British don't do dealmaking, he notes, the Chinese don’t do anything without it: ‘They are the masters’. Exhibit 2, therefore, is ‘guanxi’, loosely translated as ‘connections’ or ‘relationships’, the Chinese version of reciprocity. Guanxi embraces everything from family relationships to business and political networks. Gifting is a central part of it, but played according to elaborate rules and conventions, and woe betide you if you, or indeed they, get it wrong. Thus, when Pharoah, in an entrepreneurial moment, sought to import a consignment of Chinese pottery, purchased with the encouragement of a prominent local official, he found them smashed to bits on arrival at the UK airport. The reason wasn’t that the official hadn’t packed the pots carefully enough: it was that he had failed to reciprocate correctly a gift from a powerful rival who systematically smashed every item to sabotage Pharoah’s transaction and embarrass his Chinese contact. The pots were collateral damage.
It one end of the scale, reciprocity or guanxi exchange can move into corruption. Robin described a colossal banquet, with gifts and drinking to match, offered to officials in what turned out to be a factory emissions inspection. But he distinguished this from gifts offered with no immediate end in view, even if there is a virtual certainty according to the cultural rules that it will be returned in some form sometime in the future. Can this be called corruption? As Pharoah notes, this is difficult morality: ‘There’s a famous saying in Chinese, “If you have a lot of friends the road is easier to walk”. Of course, it’s true, but it’s also ambiguous, and can just as well refer to bribery and more corrupt relationships.’ Complications like these are the reason that some western companies simply outsource their Chinese sales function, enabling them to avert their (and their bosses’) eyes from morally difficult areas. But since guanxi pervades everything, it’s impossible to evade its reach entirely. Chinese parents expect their children to look after them in old age to reciprocate for their earlier upbringing. The market itself may be driven by guanxi: it turns out that Pharoah’s pots were bought by people to use as prized gifts to others. Says Pharoah: ‘Things that look black-and-white to us can actually be very grey. Finding true north can be difficult and slippery when going between countries – and it can be difficult and slippery within a country too.’
Yet deals can and should be honourable, according Susan Scholefield, LSE school secretary, the forum’s final speaker. For proof, she adduces Exhibit 3, her experience as a government official during highly charged negotiations in the Balkans and Northern Ireland. For her this demonstrated there can be such a thing as a moral approach to growth in its broadest sense; and conversely that losing the moral high ground means it is gone forever.
“One important insight is that morality can’t be imposed on someone else: they have to want it.”
Her first insight is that morality cannot be imposed by one group on another: people have to want it for themselves. In the Balkans, offering the carrot of EU membership and making it conditional on standards of democracy and rule of law created a movement that over time changed the way the countries functioned. Her second insight was a chilling lesson in the value of taking a more absolute approach to morality, even when difficult to achieve. Involved in the work to bring to justice perpetrators of war crimes, Susan described debates over the legal and practical approach taken in apprehending and dealing with suspects. Central to this was a trade-off between a complicated, careful process invoking Dutch law through a UN-sanctioned police arrest or something 'more muscular'. She argued for the more legally precise approach, the value of which became clear when a pair of suspects were arrested one night. Over the course of the next 12 hours it gradually became clear that these were the wrong men, and they were set free. Had they been subjected to the more muscular version of upholding the law, they would have been dead by then.
Her final thoughts related to Northern Ireland. Part of the complicated extended peace process was amnesty and closure, one aspect of which was the macabre business of locating ‘disappeared’ victims of the Troubles whose bodies had never been found. Steering the necessary Location of Victims’ Remains Acts through Parliament and the Dail in parallel, to a tight deadline, required major political concessions in pursuit of an honourable deal that was an important step towards peace. ‘So are we really no good at doing deals? I think we can be,’ says Scholefield. But there are no short cuts, and no one said it would be easy.
Not all deals are played out for such high stakes. But in a tightly connected and rapidly changing world, it is an illusion to think that moral questions are about become to easier or less common. Moral imperialism by the west is as inappropriate as any other kind and if anything, in future the boot will be on the other foot. With the rise of nations in Asia and Latin America, issues around reciprocity are likely to become more central. As Pharoah points out, the liberalism of modern China and other emerging economies is not rooted in the values of the Enlightenment, as in Europe; ‘guanxi capitalism’ is evolving as a new set of rules. Transparency International’s maps may have to be redrawn, in a range of shades of grey.
So can you have both growth and morality, the question implicitly posed by the forum’s title? The answer is surely that that must be the aim. But whether in foreign parts or at home (wherever home may be), getting there will involve wrestling with difficult decisions because only part of the morality landscape is clear. Understanding the underlying assumptions behind the way different people and cultures do business and operate as a society means seeing the world in shades of grey, between the black and white of other, absolute standards of right and wrong that also need to be recognised. Being able to turn this understanding into clear agreement between people from different cultures is the challenge at the heart of achieving sustainable growth in such a complex world.
The Foundation's view
We always learn a lot from these Forums, and this one provoked deeper reflection than most.
This is an area that sounds from a distance like it should be easy – right versus wrong, above board versus bribery and corruption.
But in fact the area between ‘OK’ and ‘Corrupt’ needs to be recognised. It might be called ‘Reciprocity,' To ears raised in the UK it can feel uncomfortable, but that doesn’t mean it is fundamentally wrong. It does mean it may be difficult for us, or for anyone crossing cultures, to get right.
In an interconnected and evolving world, these kinds of moral dilemmas will multiply in number and importance.
Getting it right and finding a way through matters. In some situations it can make the difference between life and death, and in such situations it pays to take time to find a clear and sensitive way through.
When it isn’t life or death, then our chances of taking confident steps are improved by being aware of ‘Reciprocity’ as a different, legitimate way of viewing the world, and by understanding the ’50 words for snow’ subtlety inherent in getting it right.
About The Foundation
We are a management consultancy working with all kinds of organisations to achieve customer-led success. This means tackling big organic growth challenges; growing faster, growing into new markets or fending off threats to growth by starting with what matters to customers and then making it work for the business as well.
The aim is to influence customer behaviour, but this is inherently tough. Why? Because people in any organisation naturally see the world from the inside-out, with colleagues close and customers distant, and lots of assumptions about how things work that aren't challenged.
We help clients look from the outside-in, re-connecting them with what customers really value (the problem they want to solve, not usually what the client sells), then finding new and better ways to create this value.
This means working both as expert advisors and facilitators. The issue with simply gathering outside-in information is that it lacks impact to get senior teams to tackle inconvenient truths in what customers want, and to believe their own organisation can be different.
By using ‘Immersion’, personal conversations with customers and leaders of organisations in other sectors who have tackled parts of their challenge, we help teams get around the natural and limiting inside-out beliefs that stand in their way. This helps them develop better answers for customers and new ways of achieving lasting success.
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Our clients include HSBC, JLR, O2, M&S and Ebay, with achievements including helping create Plan A at M&S, adding £100m of value to a Travelex travel money proposition, and giving Morrisons a competitive direction contributing to their return to growth.
Behind our work our most distinctive characteristic is our team and their outlook. Each individual is motivated to and experienced in crossing the border between the worlds of customers and business which often resist mixing well.
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