Here is an interesting twist: “First mover advantage” can be applied to responses to scandalous situations. Barclays Bank, being the first that was caught in the Libor scandal, was fined only $450 million. I said “only” because that sum is but a small dent in the bank’s assets, chump change, an operational cost. And chances are likely that any additional costs from damage control, lawsuits, or temporary revenue loss will be subtly imposed on customers.
Irony of ironies, the “first mover” advantage also applies here. WHEN others in this massive scandal are caught and fined/punished, the late-comers are likely to bear heavier burdens.
So here is the lesson to be considered: When a mistake, big or small, happens, own up quickly. However reluctant the owner of the mistake might feel, taking ownership will paradoxically allow the entity to move on/forward more quickly, assuming owning up doesn’t lead to criminal prosecution. Personally, I would like to see criminal prosecutions in the dozens of individuals responsible for this scandal. For a large organization like Barclays, a quick house-cleaning would allow really hard-working employees to pick up the pieces and regroup.
But this lesson assumes that the people involved have some standards by which to detect the signs when something has gone awry. What happens more often is “escalation of commitment” in which management digs in and keeps covering up with layers of white lies, manipulations, and downright unethical and illegal activities, while all the time thinking that they are doing the right things! (see previous entry for the logic)
To continue peeling this onion, how then does management ensure integrity and humility, particularly during crises? Spend less time in closed-door meetings with colleagues of the same rank. Invite a few people “outside” the top rank to some of these meetings. Talk to people handling the frontline duties regularly. Most importantly, when you think you are absolutely sure of your decision – it can’t possibly go wrong – discuss this decision with at least three people whose thinking styles and worldviews are different from yours. Try it on, you may be pleasantly surprised and learn something new.
In one of the interviews on Moyers & Company, a former CEO said something about the need for regulations for business (paraphrasing): If our car has no brakes, we’d drive very slowly and carefully. When the brakes function reliably, we can drive much faster. Author’s note: Obviously, you still need to drive carefully, but now you have confidence in the car.
So, do you have good brakes in your organization/system? What do they look like?
Till next time,
Staying Sane and Charging Ahead.
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- The LIBOR Scandal Might Destroy the Banking Industry (motherjones.com)