That was week ending 10th August 2012

Lessons from the Olympics 2 – the ethical dimension.

The second week of the Olympics saw more British success. We had a slight moment of panic midweek when we went almost 24 hours without a medal, but the winning conveyor belt restarted and more gold, silver and bronze went to British athletes.

The other success that continued was the almost universal praise for staff at the Olympics venues, especially for the volunteers, armed forces and police. “So friendly, helpful, smiling, brilliant” were just a few of the almost embarrassingly un-British like adjectives that visitors and spectators used to describe their experience of the welcome and service they received. This got me thinking about “employee engagement”.

Personally I don’t like the term but it won’t be long before the HR/training/consultancy world spots the potential for promoting the connection between the Olympics and employee motivation and engagement. However the volunteers were not “employees”, at least they were not getting paid and the armed services and police were only there because they had been sent there. So there had to be something more than just “engagement” to generate such brilliant attitudes and commitment. The Olympics is an inspiring undertaking and therefore a significant motivator for anyone involved to do their best to deliver. But there is a further factor that makes all the difference.

In 2002 Tomas Gonzalez and Manuel Guillen published a research paper on the “Leadership Ethical Dimension” in relation to the implementation of Total Quality Management (TQM). From their research they argued that whilst TQM can be presented and perceived as a “good thing” this is insufficient to maintain the engagement of people without this “ethical dimension” being demonstrated by the leaders of the enterprise.

Gonzalez and Guillen described this as “the right decisions and actions combined with good intentions accompanied by moral correctness of behaviours”. They went on to state that “when doubts arise referring to the honesty or the goodness of the leader’s behaviour, the moral trust, based on the ethical dimension, is shattered”.

Overall in my view the leadership of LOCOG got this pretty much right. In particular I think Lord Coe has played a blinder in this respect. He has been consistent in his approach that this is about delivering a great Olympic Games for London, Britain and for all the people involved. He has been visible in all the venues not just watching the events but walking about talking to staff and volunteers, thanking them for their efforts and reinforcing the message they were all engaged in something that was really worth doing. This achievement and maintenance of “moral trust” is all the more remarkable given the less than” moral correctness of behaviours” that pervades in the IOC itself and some of its associated organisations.

“Ethics” is a big issue for business right now which the business world is slowly waking up to and realising is going to be major factor in their ability to successfully sustain their businesses into the future. Gonzalez’ and Guillen’s research shows that it starts and ends with the leaders. It also shows why the bonus culture, whereby a few received rewards out of all proportion to results achieved is now unsustainable. It just cannot be perceived and justified as “good intentions accompanied by moral correctness of behaviours”.

So the next time you want to “engage” your employees think hard about what they think about what you want them to engage in and why.

Now you see it, now you don’t.

On Friday evening my wife and I went for a curry with my brother and sister-in-law. We had a very good meal and an enjoyable evening which was made even better by a magician called Magic Amit. He performed some very clever conjuring tricks at our table and in spite of four pairs of eyes watching his every move we could not spot how he did them. The quickness of the hand really did deceive the eye.

It reminded me of the story about Knight Capital a US market maker which lost $400m in a few days caused by a computer error. This loss was three times Knight’s profit for the whole of last year. Although the firm has been rescued by several other Wall Street firms it will, for all intent and purposes cease to exist. This has raised concerns that America’s financial markets have become too dependant on computers for trading with too much emphasis on the speed at which trades are executed.

So why do these market makers want their trades to be executed faster and faster? Could it be that the faster they go the more the rest of us, including regulators find it impossible to see what is really going on? We think it is time this was all slowed down, giving time for good judgement and honest dealing to be applied rather than leaving it all to computers. A couple of years ago Tony Ericson, one of my business partners wrote an article on this. Tony is an engineer and he pointed out that as an engineering “system” goes faster, unless some damping is introduced it will ultimately shake itself to pieces. This is what happened to the financial markets in the credit crunch and on a smaller scale what happened to Knight Capital. Tony’s simple solution was to ban anyone selling any asset they do not own. Because this would be difficult to define and police he came up with the even simpler solution that there should be a 24 hour delay from time of purchase of any asset before you could resell it.

Probably too simple for all the clever people in the financial sector but this simple “damping” would very likely have saved Knight Capital. I am sure that Magic Amit’s secret to his conjuring tricks is also “simple” so maybe we should try simple for a change.

Prudential KISS

Talking of simple last week saw some impressive figures from Prudential. Since 2007 when the credit crunch hit the Pru’s was worth £17bn and it is now £20,5bn. In contrast Aviva’s worth has halved over the same period.

But it could have been very different. A few years ago the Pru’s Chief Exec Tidjane Thiam proposed a $35bn bid for AIA along with a rights issue of $21bn to pay for it. Whilst the bid was a bold, game changing and audacious idea Thiam failed to take his shareholders with him and the deal collapsed with costs of £450m. It cost the Pru’s Chairman his job and very nearly did the same for Thiam. However he was given another chance and appears to have learned from it. Under his leadership the Pru has stuck to what it does well and now does it even better, including rapidly growing its business in Asia, which was what the AIA deal was all about. So “keep it simple stupid” or KISS has once again proved its worth.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.