Absolute Honesty: Building a Corporate Culture That Values Straight Talk and Rewards Integrityby Larry Johnson, Bob Phillips
Ethics has no enemies, or so we all like to think. Yet the corporate landscape has been an ethical battleground in recent years, with the corrupt behaviors of Enron, WorldCom, Tyco, and others leading many to question whether "corporate integrity" is an oxymoron. But for most companies, fortunately, the problem is not whether to practice truthfulness and… See more details below
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Ethics has no enemies, or so we all like to think. Yet the corporate landscape has been an ethical battleground in recent years, with the corrupt behaviors of Enron, WorldCom, Tyco, and others leading many to question whether "corporate integrity" is an oxymoron. But for most companies, fortunately, the problem is not whether to practice truthfulness and accountability. It's how to integrate such practices into the culture so that they are rewarded, self-perpetuating, and virtually automatic. Absolute Honesty provides the blueprint. It gives you a template for creating and sustaining a business environment of open communication and healthy debate. It replaces what the authors call the Kumbaya Syndrome -- embrace all decisions, no matter how stupid or unethical; smile and sing the company campfire song! -- with a straight-thinking system that respects honesty instead of demeaning it. At once timely and timeless, this book shows you how to build a cultural infrastructure rooted in the Six Laws of Absolute Honesty. Through a rich selection of anecdotal case studies from such organizations as Marriott Hotels, Costco, and the U.S. Army, Absolute Honesty illustrates the quantifiable business benefits of absolute honesty. Whether your primary objective is to create a memorable brand, build market share, increase workforce productivity, or establish consistent leadership, the process outlined by these authors will help you get there. The results will speak for themselves.
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Absolute HonestyBuilding a Corporate Culture That Values Straight Talk and Rewards Integrity
By Larry Johnson Bob Phillips
AMACOMCopyright © 2003 Larry Johnson and Bob Phillips
All right reserved.
Chapter OneThe Naked Truth
"The good I stand on is my truth and honesty."
—William Shakespeare, Henry VIII
WORLDCOM. ENRON. DOZENS OF DOT-COMS. TYCO. ARTHUR Andersen. Adelphia. AOL TimeWarner. The 2002 Crisis of Ethics in Business USA sent us all reeling with shocking revelations of dishonesty, manipulation, and silent complicity. The really bad news was the cost of this dishonesty to the U.S. economy, which ran into trillions of dollars. In addition, it diminished the faith the rest of the world has in the way we do business. Clearly, dishonesty does not pay.
We will show you that honesty does pay and that creating a culture of straight talk and integrity not only keeps the media at bay but also makes an organization more competitive in the global economy and better trusted by customers, employees, and shareholders. To do this, we attack the sort of passivity at both the personal and organizational levels that allows little lies to grow into giant disasters.
THE KUMBAYA SYNDROME
The seeds of this passivity were sown, ironically, in the 1980s, when companies across the nation rushed to embrace a management model that focused on the benefits of teamwork and its ability to empower organizations. In general, this approach resulted in tremendous increases in productivity and improved employee morale—so we are firm supporters. (In fact, in our consulting practices we have worked with several companies to help maintain their team systems.) That said, many organizational cultures built on the team/empowerment model have often preached a subtle (and sometimes not-so-subtle) mantra that says, "For the company to function as one big happy team, we all must be 'nice' to each other."
Of course, there is nothing wrong with being "nice" per se, but one frustrated engineer described this misguided organizational niceness this way: "No matter how stupid or unethical a decision my team or my manager makes, we are all expected to embrace the stupidity, never argue, and start singing 'Kumbaya."'
As organizational consultants, we have talked to hundreds of executives, managers, and employees in various industries, and many have expressed this same frustration with what we call the Kumbaya Syndrome. They complain that being "nice" often translates into being cooperative rather than confrontational, going along to get along, accepting less than stellar results when accountability is called for, or simply not telling the truth when doing so would be either politically inconvenient or professional suicide.
We see this fear of confrontation and lack of truthfulness as the organizational equivalent of the fairy tale "The Emperor's New Clothes." Most people know the story. An unscrupulous tailor with a gift for salesmanship convinces a vain and somewhat stupid emperor to pay a large sum of gold for a suit of clothes made from a thread so exquisite and fine that only the most intelligent and sophisticated will be able to see it. The guileless emperor buys this fantasy and, when the tailor "presents" him with his new suit, he proudly parades through the streets stark naked. Of course, none of the townspeople dare to point out that their emperor has no clothes on, preferring to support his deluded fantasy rather than risk being punished. It takes a young boy who doesn't know any better to shout out the truth that is obvious to all and finally give the emperor the honest feedback he so desperately needs.
If managers can't get honest feedback from their employees, they, like the naked emperor, will make foolish decisions. Instead of telling an "emperor" how wonderful he looks in his new suit, employees should be encouraged, if not required, to speak their minds and go to the mat for what they believe in, even if it means disapproval from their managers or colleagues. Without such honesty, an organization exposes itself to fallout from bad decisions based on bad information, much like an emperor without clothes.
This book speaks to an urgent need to reestablish a standard of communication that encourages open discussions and healthy debate; tells the truth; doesn't mince words; and, most of all, is guided by a moral and ethical sense of right and wrong. We call this communication style absolute honesty.
When we think of absolute honesty, we think of Mrs. Edna Lever, Larry's eighth-grade teacher. Mrs. Lever was known throughout the school as a taskmaster, a strict disciplinarian, and a bit of a grouch. With a glare and a stern word, Mrs. Lever would never hesitate to tell you when you did something wrong and how to correct it. On the other hand, with a smile and a brief comment, she would always let you know when you did something right and that it pleased her. No matter what, you knew that she would always tell you the truth, and you sensed that her intentions were always in your best interests.
Consequently, Mrs. Lever's students always scored highest on the annual achievement tests. Parents competed to get their children into her class. By midyear, Mrs. Lever's students universally loved her. (It took time for some of them to warm up to her gruffness.) Mrs. Lever was a superb practitioner of absolute honesty. She told the truth when the truth needed to be told, she was clear in how she told it, and her focus was always on doing the right thing for the right reason (her students' welfare).
We believe there need to be more Mrs. Levers practicing absolute honesty in organizational life today.
Don't get us wrong. We don't think you have to be a grouch to practice absolute honesty. In fact, we believe that common courtesy and a sincere concern for other people are highly desirable traits. Absolute honesty is not about attacking others nor is it about winning just to prove you're better than someone else. It's about using the truth to achieve higher, nobler goals. What made Mrs. Lever effective was not her grouchiness. We all know grouches who are just that—grouches. What made her great was her willingness to be straight with you and to do it in a way that showed you how to be a better person.
Absolute honesty is also about doing the right thing for the right reasons. It is recognizing when decisions and actions either are unwise or are not within the bounds of ethical and moral standards—and it's about having the courage to voice your opinions about those decisions so they can be corrected.
This doesn't mean that we advocate insubordination or arguing endlessly against decisions made by your manager or your company—quite the opposite! At the core of absolute honesty is the practice of "disagree and commit," which means that if you don't agree with a decision or action, you should be free to express your feelings openly and without fear of being punished for doing so. Once that's done, however, you are expected to support whatever decision your management decides to follow, unless it is ethically wrong to do so. We discuss the "disagree and commit" concept further in Chapter 5 and the topic of ethics in Chapter 8.
Not surprisingly, some corporate giants have long known the value of straight talk and no-nonsense communication. Intel integrates expectations of straight talk and truthfulness into employee performance reviews and trains its people in the effective use of confrontation to solve difficult issues. Based on the practices we've observed and helped implement in such companies as American Express, Harley-Davidson, Sequent Computers, Tektronix, and Intel, we show you how to practice absolute honesty and to communicate more courageously with your colleagues, customers, friends, and family. We also show you how to build a culture that encourages and nurtures the practice of absolute honesty.
IT AIN'T EASY
We are not so naive as to think candor and truth telling don't include risk. Our guess is that if any subordinate of Tyco CEO Dennis Kozlowski had objected to Kozlowski's alleged misappropriation of millions from the company's coffers, that employee would soon have been an ex-employee. As an old Turkish proverb says, "If you tell the truth, have one foot in the stirrup." Yet there are times when telling the truth is the right thing to do, even if the odds are stacked against you.
Consider Sherron Watkins, Enron's vice president of corporate development. In August 2001, she wrote an e-mail to Chairman Ken Lay outlining her concerns about the company's financial dealings that said in part:
Dear Mr. Lay,
Has Enron become a risky place to work? For those of us who didn't get rich over the last few years, can we afford to stay?
The memo went on to describe her concerns about two questionable deals, Condor and Raptor) that Enron had engaged in to hide its losses. She concluded with:
I am incredibly nervous that we will implode in a wave of accounting scandals. My eight years of Enron work history will be worth nothing on my resume, the business world will consider the past successes as nothing but an elaborate accounting hoax. Skilling [Enron's then CEO] is resigning now for 'personal reasons' but I would think he wasn't having fun, looked down the road and knew this stuff was unfixable and would rather abandon ship now than resign in shame in two years.
What do we do? I know this question cannot be addressed in the all-employee meeting, but can you give some assurances that you and Causey will sit down and take a good hard objective look at what is going to happen to Condor and Raptor in 2002 and 2003?
Six months later, Enron was in bankruptcy, its employees out of work and without retirement funds, its accounting partner, Arthur Andersen, headed toward ruin. The only bright spot was Sherron Watkins. Her courage made her a recognized celebrity hero on the streets of Houston.
Perhaps it was a case of too little, too late, but nevertheless, Ms. Watkins's forthrightness and candor are to be applauded. We believe there need to be more Sherron Watkinses walking the halls of corporations.
This book shows you how to build an organizational culture that supports and encourages people of candor and courage. The benefits of such a culture are enormous. Organizations that value doing the right thing, telling the truth, promoting no-nonsense communication, and confronting difficult issues move ahead in their industries and markets by creating:
* Cultures of integrity
* Compelling brands
* Competitive advantages
* Productive workforces
* Consistent leadership
* Positive morale
In addition, the organizations that do the right thing can expect to avoid negative press and keep their officers out of jail more often than those that don't.
CULTURES OF INTEGRITY
Arthur Andersen once had a reputation for honesty. That reputation was decimated when Andersen's role in the Enron debacle was exposed. To many in the accounting world, however, this came as no surprise. Two months before the Enron story broke, Andersen agreed to pay $217 million to settle a suit against it for its role in the Baptist Foundation of Arizona (BFA), duping 13,000 elderly investors out of their life savings. According to an article published in Salon.com, an online news agency, Andersen was accused of practices at BFA that have a hauntingly familiar, Enron-like ring:
* Ignoring or failing to thoroughly investigate shell companies created by insiders who grotesquely enriched themselves while hiding BFA's mounting debt in "off-balance sheet companies"
* Ignoring knowledgeable whistle-blowers
* Altering documents
* Ignoring well-known accounting industry "red flags" that indicated white-collar fraud was taking place
Andersen's name has also cropped up in the investigations of Qwest, WorldCom, and Peregrine Systems—all subjects of investigations for wrongdoing. Gee, is there a pattern here? Perhaps it's just a coincidence, but it appears likely that the "unusual" accounting practices Andersen applied at Enron were more than just isolated incidents.
We believe that when lying, dishonesty, and unethical behavior are accepted in one part of a company's culture, those standards of behavior will migrate throughout the entire organization. Nothing occurs in a vacuum. When the culture authorizes aberrant behavior, aberrant behavior becomes the norm, and a culture of integrity ceases to exist.
In 1982, seven people in the Chicago area died after ingesting Tylenol® Extra Strength capsules that had been laced with deadly cyanide. A subsequent investigation found that someone had intentionally contaminated the capsules after the shipment had left the factory.
Most experts in marketing and advertising at the time agreed that Johnson & Johnson, the parent company of Tylenol's manufacturer, McNeil Consumer Products, would never recover from the public relations disaster. Advertising guru Jerry Della Femina said shortly after the crisis broke: "I don't think they can ever sell another product under that name.... There may be an advertising person who thinks he can solve this and if they find him, I want to hire him, because then I want him to turn our water cooler into a wine cooler."
Johnson & Johnson proved Della Femina wrong. Almost immediately, the company truthfully admitted to the public that there was a potential health risk to anyone taking Tylenol. It stopped the production of Tylenol capsules across the country and pulled all remaining Tylenol capsules from the shelves throughout Illinois.
The result: Johnson & Johnson was praised in the media for its forthright and responsible reaction to the crisis. An article in the Washington Post, titled "Tylenol's Maker Shows How to Respond to Crisis," said, "Through the hysteria and frustration generated by random murder, Johnson & Johnson has effectively demonstrated how a major business ought to handle a disaster.... There has been no Nixonian 'modified limited hangout' at the J&J headquarters in New Brunswick, New Jersey." The article went on to compare Johnson & Johnson's response with that of Firestone Tire and Rubber Company, whose officials tried to pretend that nothing was wrong when Firestone 500 tires were disintegrating. It pointed out that, unlike Firestone, Johnson & Johnson was willing to do the right thing, regardless of the fact that pulling more than 22 million bottles of Tylenol from the shelves cost the company more than $80 million and that it would very likely lose most of its 40 percent market and the $400 million in revenue Tylenol produced for the company. The article wrapped up by saying:
From the day the deaths were linked to the poisoned Tylenol until the recall on Thursday, Johnson & Johnson has succeeded in portraying itself to the public as the company willing to do what's right, regardless of cost.
Serving the public interest has simultaneously saved the company's reputation. That lesson in public responsibility—and public relations—will survive at Johnson & Johnson regardless of what happens to Tylenol.
Of course, Tylenol did survive, and today it is once again one of the top-selling pain relievers in the world.
Compare Johnson & Johnson's reaction to the Tylenol scare with Jack in the Box's reaction when faced with a similar crisis. From December 1992 through January 1993, lethal food poisoning became a national issue when contaminated beef served at various Jack in the Box restaurants in California, Nevada, Idaho, and Washington poisoned more than 700 people. Four children died and thirty-five developed hemolytic uremic syndrome, which often causes kidney failure later in adulthood.
Government scientists at the Centers for Disease Control in Atlanta studied, traced, and identified the pathogen E. coli 0157 as the source of contamination originating from tainted meat—meat that had not been sufficiently cooked by Jack in the Box restaurants.
On January 15, 1993, the Washington State Health Department alerted Jack in the Box that the outbreak was linked to its hamburgers. Jack in the Box immediately denied responsibility for the crisis, pointing to the fact that many of the victims had eaten at other restaurants before becoming ill.
Six days passed before president Robert Nugent admitted that Jack in the Box had been the source of the tainted hamburgers. Simultaneously, however, he attacked the Washington State Health Department for not distributing current meat-handling regulations in a timely manner. This resulted in a massively negative public response. Newspapers were full of editorials criticizing Jack in the Box for shirking its responsibilities. By the end of March 1993, the E. coli crisis had cost Jack in the Box more than $30 million in lost revenues. Liability damages eventually exceeded $100 million.
In the midseventies, Xerox set up a team of highly talented scientists in a state-of-the-art facility in Palo Alto, California; allocated a huge budget for their use; and gave them the mandate to invent better copiers. These folks went well beyond Xerox's expectations, eventually coming up with the idea that if you could make a desktop computer user-friendly, you could eliminate the need for paper—and for better copiers in the office. The dominant operating system for desktop computers at that time was MS DOS, which was anything but user-friendly. To overcome this problem, the researchers developed an operating system that mimicked a real desktop by using something they called graphical user interface (GUI). This enabled users to point at icons, click, and open files. BINGO! They had a user-friendly system.
With great excitement, they presented their idea to Xerox's top management. The leaders of a copier company were not thrilled with the concept of a "paperless office" and sent the researchers packing back to Palo Alto.
A few years later, one of the researchers conducted a tour of the Xerox Palo Alto facility for the CEO of a company located just down the street. That CEO was Steve Jobs of Apple Computer. He saw the potential and immediately adapted the idea to the Macintosh operating system. Years later, Microsoft also "adapted" the concept (Apple called it stealing), and now 99 percent of the computing world uses some form of GUI, in either Windows or Macintosh format—and Microsoft has grown to be one of the largest and most successful companies on earth. Meanwhile, Xerox has struggled to survive—a plight it might have avoided if ninety-nine percent of all computers on earth were using a Xerox operating system.
Excerpted from Absolute Honesty by Larry Johnson Bob Phillips Copyright © 2003 by Larry Johnson and Bob Phillips. Excerpted by permission of AMACOM. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
What People are saying about this
Pharmaceutical Representative: "Give the current climate of our fiercely competitive industry, and the scrutiny from government agencies in the pharmaceutical and healthcare industries, this is one you can’t be without. Use it as a template to create this kind of change in your company and any organization you belong to. Being honest and forthright with people while also being respectful is not always easy. It’s tough to fight the feeling of defensiveness or the urge to take things personally, but it’s worth it in the end. This book can show you how to do it and do it effectively."
Jack Covert, president and founder of 800-CEO-READ and syndicated columnist: "Absolute Honesty is the book we all need to read to create a culture that could and should help us avoid nightmares like Enron, WorldCom, Tyco, Martha Stewart, and Adelphia."
Meet the Author
Larry Johnson (Scottsdale, AZ) is an internationally renowned speaker and consultant whose clients include Lloyd’s of London, Harley-Davidson, and Nordstrom. Bob Phillips (Bend, OR) has more than 30 years’ experience as a human resources professional, including vice president positions at Tektronix and Thomson Multimedia.
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