The power of trust, ethics and integrity in business

tigeraudiencePromoting trust, ethics and integrity in the workplace was a major theme of a TIGERoadshow in Edinburgh, on Trust and Integrity in the Global Economy. It was hosted by Tods Murray LLP’s Women in Business network and The3rdiMagazine. The roadshow was invited to Edinburgh by the magazine’s editor, Karen Birch. This was the third event in a series of one-day conferences organised by Initiatives of Change UK’s Trust and Integrity in the Global Economy (TIGE) programme.

Lady Susan Rice.previewLady Susan Rice, Managing Director of Lloyds Banking Group in Scotland, said that trust should be at the core of the banking and financial sector. Following scandals of the mis-selling of Payment Protection Insurance, bailouts and bonus rows, the sector has lost the public’s trust.

Rice said: ‘When things go well in a business, we tend to describe its success in numbers. But when they go badly, we blame behaviours. It’s curious that, because at the end of the day, it’s the people in a business and their behaviours, their values, their conscience which deliver the value. So, even in the best of times, should we not describe success in terms of both the numbers and the culture?’ She added that we can measure professionalism, trust and confidence—values not just outputs. ‘The way we do things is as important as what we do,’ she said.

Following the financial crisis of 2007-8, regulators had become more robust with rules and regulations. However, Rice urged regulators not to be overly complex as this limits bankers’ ability to make their own judgements, which is crucial in ensuring that they take responsibility for their actions.

The Chartered Banker Professional Standards Board, which she chairs, has said that 200,000 bankers will meet the Chartered Banker Code of Professional Conduct by the end of 2014. This sets out the ethical and professional attitudes and behaviours expected of bankers. Rice said: ‘By achieving this standard we want bankers to feel pride in the service they give and, one by one, restoring confidence in the work that they do, because confidence leads to trust.’

Lloyds has set aside $10 billion to compensate customers for the miss-selling of PPI, yet she also pointed out that up to a third of customers’ claims against the bank were invalid and this was also costing the bank millions.

Margaret Heffernan.previewWhile Rice believes in competition in banking, the renowned Texan business writer and entrepreneur Margaret Heffernan, author of A Bigger Prize, said that competition did not create variety or diversify risk. She stated: ‘In the last 50 years we have doubled up on competition as the single motivator in schools, sports teams, science labs, companies and countries and I would argue it lies in the heart of our moral, ethical and economic segregation and inequality.’

In the banking crisis all banks used the same model and sold the same poor products. This did not create variety or reduce the risk. Competition, instead, causes an ‘explosion of cheating’. We needed less competition and more cooperation to mitigate risk.

Competition was having detrimental effects across all sectors, she continued. Science, for example, relies on the increase of knowledge. This only works if scientists share ideas and thinking. In 1998 only 14 per cent of scientists said they felt safe sharing their work.

In a competitive market, companies are forced to cut costs by using cheap materials and labour, which eventually destroys social capital and promotes environmental risk. ‘Cheap comes at a high cost to all of us.’ BP’s strategy of dominating the market with mergers and acquisitions had loaded the company with debt. This led to cost cutting of 25 per cent per year over four years. The result was the death of 11 people in Texas in 2005 and the 2010 Deepwater Horizon oil spill. ‘That was the price of the pursuit of big,’ Heffernan said.

She concluded on a more positive note: ‘We are deeply collaboratively people; our collaborative instincts are as strong as our competitive instincts.’ Her advocated cooperatives where there’s collaboration and creativity. An example of this is Ocean Spray, which is owned by 750 cranberry farmers. The company started with three cranberry farmers who, instead of competing against each other, came to work together. ‘No one wins unless everyone wins,’ Heffernan concluded.

David Erdal.previewDavid Erdal, author of the book Beyond the Corporation: Humanity Working and one of the UK’s leading advocates of employee-owned companies, spoke passionately about the beneficial effect that employee ownership has on society.

Erdal shared his experience of transforming his family-owned paper mill into a successful co-operative. He started by ensuring all information was shared with employees once a month. He introduced a consultation process and quality improvement circles. He allowed initiatives to start from lower down the organisation, encouraging innovation and creativity. He introduced profit sharing and began to distribute shares to people. ‘The response was an absolute paranoid suspicion,’ he said. ‘It was only after three years that the people who were elected to consult with the board every quarter began to realise that this was for real.’

Giving people the reason to care, and treating them as cooperative, autonomous people, improves productivity, innovation and commitment. ‘The idea of ownership is a fictional use of language. It is a set of relationships between people,’ Erdal said. Co-operatives are proven to have a better effect on society. In areas of concentrated cooperatives, the gap between rich and poor is radically different. The local authority is more helpful, crime is under control, there is less domestic violence, less truancy, more lifelong learning, and there are wider supportive social networks, he claimed.

Dr Deborah Benson.preview

Photos by Mike Smith

Dr Deborah Benson, former Managing Director of Miller Homes, emphasised the link between strong leadership and ethics. Under her leadership Miller Homes became the fastest growing and most profitable residential development operation in Scotland. She said: ‘If you want to get ethics into your country, community, business and organisation you have to have strong leadership.’ Organisations that have a typical hierarchy structure cause friction. Many leaders underestimate the power of the people around and below them. They can block what comes up or down if they don’t like what you are doing; you become very vulnerable.

A strong leader has respect and trust. But an aggressive leader is a very weak person as they use aggression to command respect. ‘In the global economy you must take leadership, you have to empower people to be ethical, you must lead with authority, be authentic, act with integrity, achieve trust. Leadership is about building strong dyadic relationships,’ she said.

Tony Bradley, Director of the SEED Centre (Social and Ethical Enterprise Development) at Liverpool Hope University, believed that ‘we have come to an end of the line within global capital development.’ While there was growth in the UK, Britain was returning to bad practices of previous decades. ‘We may be the fastest growing economy in Europe but our levels of inequality are surging.’ Small businesses were responding to what consumers are asking for. Green spending in 1999 was worth £13.5bn; now it’s worth £54.4bn. There has been a significant shift towards ethical consumption. Green spending is also varied geographically with Edinburgh, Bristol, Bath, Brighton and East London as hot spots. Bradley stated that the future of business lies with social enterprises, ethical businesses, new ‘pro-sumers’, and identity-based businesses.

Audrey Birt, former Director for Breakthrough Breast Cancer and Diabetes UK charities, spoke about the paradoxes of power: ‘People believe that the more you move up the hierarchy the more powerful you become. The third sector has started to adopt leadership business practices that are killing the very intrinsic motivations that brought people into their work. As businesses start to realise that maybe they are doing it wrong, the third sector is in the middle of doing this,’ said Birt. Leadership, she insisted, is about empathy, listening, knowing the questions and not the answers. The more we measure and the less we trust, the more we squash innovation and risk taking. Good leaders work with passion and work to inspire people.

Ian Monteague, Chair of the voluntary organisation Family Action in Rogerfield and Easterhouse (FARE) in Glasgow, shared his experience of supporting young people in Glasgow through the community project. FARE has gained support from TV’s Dragons Den entrepreneur Duncan Bannatyne. The reason why the project works is because it is based on values, ethos, integrity, decency and honesty, Monteague said, adding, ‘We all need to be in this together.’

Videos of the day are courtesy of Tods Murray
http://thinkandtalkwithtods.com/2014/05/22/tods-wibn-business-and-society-ethics-and-integrity-video-report/
http://thinkandtalkwithtods.com/2014/05/22/tods-wibn-business-and-society-ethics-and-integrity/

 

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