Managing Corporate Risk By Focusing On One of Four Cores of Credibility

Last year, the Harvard Business Review featured an article by Robert Kaplan and Anette Mikes on 'Managing Risks; A New Framework' in which it looked at the best approach to identifying and managing preventable risks

Companies cannot anticipate every circumstance of conflict of interest that an employee might encounter. This the first line of defence against preventable risk events is to provide guidelines clarifying the company's goals and values.

Companies should articulate the  values that guide employee behaviour towards principal stakeholders - clear value statements help employees avoid violating the company's standards and putting its reputation and assets at risk.

Of course, clearly articulated statements of mission, values and boundaries don't in themselves ensure good behaviour. To counter the day to day pressures of organisational life, top managers must serve as role models and demonstrate that they mean what they say. 

This observation of how important it is for senior managers to be role models for doing the right thing is for most people common sense, but the question is to what extent is it common practice. Where this question has arisen most in our contact with clients is in our work on building levels of corporate trust.

This starts at a personal level with the 4 cores of credibility, and with one 'core' in particular, Integrity, which we define as comprising 3 elements - Congruence (living in harmony with your values and beliefs), Humility (being more concerned with what is right, rather than being right) and Courage (Acting according to principles - especially when it is hard to do so). This element of 'Courage' would appear to be key when creating a culture that makes decisions in alignment with company values, but the issue is to what extent is this a (if not the) critical factor when recruiting, developing and rewarding senior managers and leaders. The experience we've had when asking participants we've worked with is that, when one considers all 4 Cores of Credibility - Intent, Integrity, Capabilities & Results - it is still 'Results' which features most in recruitment, development and reward conversations with companies perhaps uncertain how to test / assess for 'Integrity'.

Interestingly, within the same edition of the HBR Cynthia Carroll provided a personal account of how, when CEO of Anglo American, she took a radically different approach to mine safety, which provides a strong example of what can be looked for when trying to assess someones instincts and abilities when it comes to modelling Integrity

I had just landed (at our Johannesburg offices) when the CEO of our platinum division pulled me aside. "I have some bad news", he said quietly. "We've just had another fatality". Just hours after I'd viewed the mine, one of our workers had been killed when he slipped into a conveyor belt.

That was it. I refused to accept that fatalities were an acceptable by-product of mining. There was only one way to send that message throughout the company. We would shut down the world's largest platinum mine, which employed more than 30,000 people. And we would do so immediately. The CEO of  the platinum division probably thought that my directive was meant mostly as a public relations gesture - that after a perfunctory safety check we would resume production as swiftly as possible. That was not what I had in mind. I wanted an indefinite shutdown, during which we would fundamentally overhaul our safety procedures with a top-to-bottom audit of our processes followed by a complete retraining of the workforce.

No such shut down had ever been done before in the mining industry, and the costs would be enormous. This was not a popular decision. In fact the platinum CEO left the company a few weeks later. 

This may seem like an extreme example of a top manager serving as a role model and demonstrating that they mean what they say. However, unless an aspiring leader can describe a situation where they have made an unpopular decision with a high cost to it based on what they believed was right, there is no guaranteeing that, when faced with difficult situations in the future, they will act with high integrity and in alignment with company values, thereby mitigating corporate risk.