It’s been suggested by accountants PwC and the London Business School that we shouldn’t scold ‘bad boy bankers’ but treat them like babies and give them the equivalent of a cuddle (Sunday Times today).
The study says threats of punishment for bad behaviour are counter-productive when trying to improve ethical standards. Instead praising good performance and good behaviour is much more effective.
The research also says that competition is damaging and bankers are twice as likely to behave unethically when they feel anxious about competing with colleagues. Then they are more likely to cut corners and make mistakes. Or just cheat perhaps?
The research among 2,500 bankers, insurance companies and wealth management firms which suggests that the key to changing behaviour and improving ethical standards is praise rather than retribution is just wrong-headed in my view.
Some of these ‘bad boy bankers’ at the top of companies are sociopaths and narcissists and praising them will only feed their belief that they are always right.
But you might expect people from financial services to say that (even if one of the PwC team is said to be a behavioural science specialist). Given that banks are reported to have paid out over $200 billion dollars in fines since 2008 but no banker has been convicted of fraud or theft I wonder what cloud these researchers are sitting on.
The report says regulators and financial services leaders should focus on the positive outcomes of good performance – and I’d like to see a definition of that – instead of the negative behaviours they want to stamp out. But where is the evidence that it will work? Is it just the bankers etc being surveyed saying “be nice to us and we’ll behave better‘? Given the outlandish financial rewards financial services seems to offer do you think they are motivated by anything other than money?
After the fiascos of recent years most people would be happy to see bankers and similar financial sector workers taken down a peg or two, not least in respect of their ridiculous bonus levels. The bottom line is that we don’t trust them to behave honourably.
Research shows that accuracy in our ability to decide if someone can be trusted is little better than chance.
According to David DeSteno, a psychology professor at Northeastern University writing in the Harvard Business Review (“Who can you trust“), it’s because we place too much emphasis on reputation and perceived confidence.
We also ignore that fact that people can change in different contexts and we don’t trust our intuition enough.
DeSteno proposes 4 things to bear in mind:
1 Integrity can vary. People use reputation as a proxy for integrity but it isn’t a stable trait. Because someone has been fair and honest in the past doesn’t mean they will continue to be so in different circumstances.
His research into cheating shows that 90% of people will cheat if they believe they won’t get caught. And they then rationalise those actions rather than accept that they are untrustworthy.
2 Power does corrupt. Appearances can be deceptive but the author cites research by Paul Pliff, a social psychologist at Berkeley, which suggests that indicators of socio-economic status can predict trustworthiness.
Increasing status and power correlate with decreasing honesty and reliability. It’s not that rich people are inherently less trustworthy than poor people but that a person’s honesty depends on his or her relative feelings of power or vulnerability.
Assigning people to be a boss or a follower in office simulations Joris Lammers, a psychologist at the University of Cologne, found that those elevated to more senior roles displayed a high degree of hypocritical behaviour and were quick to condemn others for unethical, self-interested behaviour whilst judging their own actions to be acceptable.
When someone has a higher status than you, or even just thinks so, his mind tells him that you need him more than he needs you. Consequently he focuses on short-term outcomes and worries less about the long-term effect of being untrustworthy.
This explains why big companies often treat smaller clients less well than their larger ones.
3 Confidence often masks incompetence. Honourable intentions mean nothing if a person is incompetent. We know this instinctively from an early age (4-year olds will pick people as instructors whom they perceive as more competent).
But confidence is so alluring that we tend to trust information provided by people who exude it, especially when money is at stake. Hence the success of confidence tricksters.
In newly formed groups those members who expressed pride in the group quickly rose to positions of leadership even though the abilities that their pride stemmed from weren’t relevant to the group’s objectives.
So while reputation isn’t a good predictor of integrity it is of competence because capabilities are more stable.
4 It’s OK to trust your instinct.
Despite decades of research into researching ways of detecting untrustworthiness most people do little better than chance. Even trained experts.
That’s because most of us look for a single “tell” to indicate whether or not someone can be trusted whereas we need to look for a set of gestures. This is something we can do instinctively.
So is it better to trust or not? If you have no information to go on then a bias towards trusting is better for long-term gains. Otherwise remember these 4 rules!
The 5 dysfunctions of a team
Patrick Lencioni is a strong advocate of trust in teams. In his best-selling book, “The 5 Dysfunctions of Teams” he sets down a hierarchy (see diagram below).
But basically it’s all about Trust.