THE FOUNDATION FORUM
MONDAY 24TH JUNE, WRITTEN UP WITH THE HELP OF SIMON CAULKIN
The following article is a summary of an event we held in 2013. Held at One Alfred Place on the 24th of June, the evening's subject was ‘Truth – easy to talk about, a hard way to manage, and critical in the long run?' The three speakers were Brian Heyworth, co-Head of HSBC’s global Financial Institutions business, Matthew Gwyther, award winning editor of Management Today, and Andrew Mitchell, who needs little introduction after “Bike-gate” but served as Secretary of State for International Development and Government Chief Whip before his “30 days of media hell”. The discussion has been summarised by Simon Caulkin, former Management Editor for the Observer.
Telling the truth is a lesson that is drummed into us from the earliest age. It seems simple, categorical and non-arguable. Yet it is only in hindsight that the practice of truth is straightforward. As the experience of the three speakers at the Foundation Forum of the 24th June shows, on the contrary truth is nuanced, complicated, and sometimes ambiguous. As a living thing, changing according to the light and vantage point, it is also high-maintenance – FRAGILE, DO NOT BEND, HANDLE WITH CARE.
‘Exposing your own organisation to scandal is rarely a ticket to another CEO job’
Above all, truth plays out in unexpected ways. So honesty may be the best policy – but nobody said for whom. Take the trajectory of Michael Woodford, briefly but explosively president of the Japanese electronics firm Olympus, as recounted by Management Today editor Matthew Gwyther, who has written his story. A few months after his appointment as Olympus’ new broom, Woodford, one of a tiny handful of Westerners to make it to the top of a Japanese company, and a non-native speaker to boot, got wind of a $1.9bn black hole in the accounts resulting, as it eventually transpired, from derivative trades gone wrong in the 1990s. Determined to expose the truth, Woodford was met with a closing of boardroom ranks, frozen out and finally sacked, whereupon he took the nuclear option of revealing all to the FT. After a long-distance legal war waged from London, he won his case for unfair dismissal and £10m in compensation. A just end to an unhappy affair, you might think – except that, however justified the revelations, the whistle-blower’s lot is rarely a happy one. Sure, said Gwyther, Woodford got his pay-off and some of the Japanese directors will probably go to jail, so justice is technically done – but exposing your own organisation to scandal is rarely a ticket to another CEO job, leaving Woodford with a brooding sense of ostracism, while after the ripples have died away the still waters of Japanese governance will lie as unruffled as before.
‘So far the UK banks have coughed up more than £3bn in fines...but notoriously no bankers have gone to prison, bonuses are still being paid, and many believe that the sector is composed of institutions that are both too big to fail and too complex to manage’
The effects of shining a light on the murky affairs of the financial sector are similarly uncertain. It’s hard even now to estimate the full extent of banking misdeeds, but the picture that has emerged is one of an industry ‘out of control’, admitted Brian Heyworth, co-head of Financial Institutions business at HSBC, although even within institutions extraordinarily disreputable behaviour towards employees and customers co-existed with its impeccable opposite. How did the industry get that way? In part because it had convinced itself of the importance of a series of partial (and self-serving) economic ‘truths’ (globalisation, light-touch regulation, leverage, individual self-interest) that in combination led it to betray its historic mission of serving the productive economy in favour of making money. It allowed smaller truths to obscure the larger one. (In other cases, as Gwyther pointed out, especially for business in the post-shareholder-value era, it was not immediately clear what the truth was, or it changed over time, or according to the point it was viewed from). For the banks, the costs of being untrue to themselves are piling up. In financial terms they are beyond colossal – so far the UK banks alone have coughed up more than £3bn in fines, with much more to come as the Libor investigations unfold, while total liabilities for the PPI and related insurance swaps mis-selling are being put as high as £25bn. But notoriously no bankers have gone to prison, bonuses are still being paid, and many believe that the sector is still composed of institutions that are both too big to fail and too complex to manage. ‘It’s to do with people and it’s to do with leadership, and most bankers are useless at it,’ said Heyworth emphatically.
As he quietly went on to note, the damage wasn’t just financial. There were also heavy personal costs – much harder to compute – as individuals found themselves forced into roles and activities that clashed with intimate values and convictions. As that suggests, some people were uncomfortable with what was going on, but for whatever reason felt unable to resist it. One of the lessons from both these stories – and indeed from the third – was the vulnerability of the truth, the need in Heyworth’s words for ‘frameworks’ within which industries, companies, units and individuals could balance the tensions between the basic capitalist urge to profit and the need to do it in the right way. The focus then was on judgement as a more modest but realistic alternative to expectation of obvious black-and-white right or wrong. The third speaker, the MP and former minister Andrew Mitchell, put it even more explicitly: ‘In my experience... it is very much the case that the truth needs to be bolstered by structures that help people to go straight.
“I was caught up in a media storm of such ferocity that it was absolutely impossible to stand up for truth” (Andrew Mitchell)
Almost everyone ‘knows’ a version of Mitchell’s ‘plebgate’ experience (‘finally a political scandal that really does involve a gate’, as the Foundation’s Charlie Dawson put it). ‘What happened to me,’ said Mitchell, ‘was that I was caught up in a media storm of such ferocity that it was absolutely impossible to stand up for truth. I stood there and I said this isn’t true, and a spokesman for me said this isn’t true and it was completely buried in [the subsequent] avalanche’ – a classic case of a minor incident that is taken up by the press and then becomes a political cause célèbre.
There’s a kind of regression to this, because if, as Mitchell categorically asserts, the press is ‘absolutely critical’ in keeping people straight, that makes its own nonchalant attitudes to the truth almost as unforgivable as the misbehaviour of the banks. In fact, although the press played a subsidiary role in the three Foundation episodes, its own truth-related morality tale is one of the most instructive of all – an object lesson in how declining standards were reflected in falling trust, leading to tumbling circulation and, in the case of the News of the World, the most dramatic corporate vanishing act since Arthur Andersen in the wake of Enron. ‘And certainly in the case of phone hacking, to what end?’ asked Gwyther. ‘What on earth? What was so sad about it is the trivial nature of the tittle-tattle that they were actually after. It just wasn’t worth it – just look what’s happened as a result’.
‘Mitchell...promises a detailed response when his lips are unsealed – and if that sounds an air of menace, he does nothing to dispel it’
In the wake of the hacking scandal, whether it likes it or not the press will certainly get its own structures to keep it on the rails. The police and even doctors and nurses, two other professions in positions of trust whose ratings have slipped recently, are in a similar situation. And they should perhaps be grudgingly grateful. Mitchell is currently unable to say as much as he would like about plebgate, but he promises a detailed response when his lips are unsealed – and if that sounds an air of menace, he does nothing to dispel it.
And that’s the final lesson about truth: as each Foundation story confirms in its own way, you may be able to keep down some of the truth all of the time and even all of the truth some of the time, but all of the truth all of the time? I wouldn’t count on it.
The Foundation's view
Truth sounds like a dry subject. Until it gets illuminated by people and stories, showing why it matters. At which point it comes to life, a source of anger, reflection, realisation and insight. We took three lessons from the evening:
That being true to yourself is fundamental to your own performance and well-being. Understanding what that means and actively moving to find it was a lesson from Brian in particular, who was successful but uncomfortable for many years, at considerable personal cost. He’s now successful in an environment that works with his values, and a whole lot more fulfilled as a result.
That being true to yourself in the wrong environment, even if you take bold steps to make it better, can be damaging and pointless for all. The story of Michael Woodford was, I assumed, about a whistle-blower’s whistle-blower, the most amazing tale of one man taking on the establishment and getting a result. But the ending added by Matthew described an unemployable and frustrated individual, albeit wealthy, and a Japanese business stuck in a deep-seated national culture – a few people moved and the wound closed over, for things to continue much as before.
That some places are truer than others. They make money honestly by doing something of value and worth, something that people feel pride in providing, guided by principles not governed by rules. It is difficult to maintain such direction even if attained for a while, and bringing sources of truth into the boardroom is one way of staying on track. We like exposing senior people directly to customers as a route to paint-stripping honesty and realisation, but professional advisers at their best are another way of speaking truth to power. However painful and however achieved, developing this kind of organisation is, in our view, the only route to success that lasts.
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.
We answer three sizes of question:
Small – a new proposition or an improved customer experience
Medium-size – growing value per customer or improving retention (a sub-set of the former)
Large – creating customer-led business success, often by uncovering a true outward-looking purpose and the genuine belief needed for it to be acted on
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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