Posts Tagged ‘reputational risk’
Enterprise Risk and Psychopathic Employees
Saturday, October 1st, 2011
Star employee or Psychopath?
We understand the attraction of trading to those who may show psychopathic tendencies. It is an impersonal activity – a matter of spread sheets and automatic execution into anonymous markets. It offers all the excitement of gambling and computer gaming, with the real risks of the gamble being taken by the employer and apparently mediated by risk management software. It doesn’t require EQ skills.
However, we don’t agree that every trader fits this profile[3]. People who are extremely numerate may not have good EQ. Corporate cultures may reward and encourage what could be described as selfish behaviour[4]. Similarly the effort that went into destroying internal competitors may be the consequence of a failure of performance management. The real risk management issue is not purely individuals (or trading teams). It is both how the organisation assesses and manages performance, and the impact of the prevailing organisational culture on the development and display of these traits.
Psychopathic behaviour damages organisations. Sabotaging colleagues destroys team working, creating a hostile environment with an internal rather than market focus. The consequences include increased churn, with the real talent leaving. Once the realities of working in the organisation are known, attracting good candidates for employment becomes difficult. Promoted into management the damage is worse. Productivity of other teams will plummet as internal competition ‘hots up’, more talent will leave and actions for bullying and harassment will eventually surface. The inevitable resulting internal focus compromises competitive advantage and the organisation’s future.
Fortunately, the psychopath’s ability to blag and charm does not stand scrutiny from effective performance review. A key part of this is the review and feedback process itself. Ironically those who are best qualified to deal with the technical competencies in this population are unlikely to have the interpersonal skill sets to do so, and will feel most challenged by it. Given the risks, it is important that your managers are competent in their interpersonal performance management skills. Talk to us now about how to ensure your managers have the essential interpersonal skill sets to thrive at this challenging task.
[1] University of St Gallen: authors Pascal Scherrer and Thomas Noll
[2]The brain chemistry/mechanism that could be at play has been evidenced by research published by the University of Vanderbilt http://news.vanderbilt.edu/2010/03/psychopaths-brains-wired-to-seek-rewards-no-matter-the-consequences-109865/
[3] Psychopathic tendencies do not automatically mean that an individual becomes a psychopath. The difficulty is semantic, the association with criminality. As we have noted elsewhere, psychology and neurobiology are useful sciences to inform our interaction in the real world which is where organisations operate.
[4] See our ‘Hard Wired to Fail?’ www.theperformancepractice.co.uk/ideas-blog May 2011
‘One out of every 25 business leaders could be psychopathic* ‘
Friday, September 23rd, 2011
- Is your Boss a psychopath?
What a great headline and timely – we’ve all worked with bosses from hell, and at times of turbulence when people are very stressed, these stories have a particular resonance. But the headline is a gross simplification. **1 in 25 out of small sample of 200 individuals – that’s 4% of a really small population.
Many of the skills sets required to be a good boss could easily be confused with those described as psychopathic traits. Doing business means that we are not always authentic in our emotional response to situations. Appropriate senior management behaviours include:
· Always outgoing and charming in public, (even if you’ve just lost a major contract).
· Knowing when not to engage at an emotional level, and even when to ignore individuals (and how not to give offense when you do not).
· Staying adult, (whatever the provocation), with staff, and customers.
· Maximising time to useful contacts; minimising time given to those who are not useful – and making assessments about the ‘usefulness’ of the people concerned.
· Firing people - even if they have families to support and there is no other employment for them.
· Making political accommodations and contracts with people and companies you do not ‘admire’.
Consider also entrepreneurs? Individuals who succeed against the odds – be it in commercial or not for profit sectors tend to have different psychological traits to those of the general population. Some of these traits are not very attractive.
Here is how to protect your organisation from psychopaths:
1 Know your business – it’s hard to fake when managers are knowledgeable about their business.
2 Manage performance – manage performance against objective criteria and agreed timelines. To underline the point, business plans usually come with numbers and dates.
3 Have robust hiring systems.
4 Inform everyone one of and apply relevant processes (including informal networks) to stamp out bullying.
5 Ensure the Organisational Values are alive, not just written on a piece of paper – which means including them in performance management.
Talk to us, in confidence and without obligation about helping your managers develop the competence and confidence to manage effectively. Solutions that engage, motivate and fit around, rather than disrupt the business.
*The Guardian newspaper and other media sources.
**The study was conducted by Dr. Paul Babiak, you will find more – including a (n interesting) check list of psychopathic traits at http://aftermath-surviving-psychopathy.org.
Revenge of the Organic Carbon Units?
Wednesday, September 7th, 2011
Emerging news that the US Federal Housing Finance Agency is suing various banks caught our eye. The cases allege that the banks systematically failed to follow both market regulations and their own procedures in approving mortgages in the run up to the credit crunch. The resulting ‘bad’ loans were then guaranteed by Fannie Mae and Freddie Mac, quasi-government agencies, and the FHFA is seeking to recover the billions the US tax payer lost.
The case has been rumbling for a while, with attention initially on how the banks foreclosed using the same inadequate approach, which we mentioned back in October 2010. At that time we asked what was the purpose of management in such organisations? Machines would be simpler to employ, less troublesome to manage.
Now it would seem that the malaise was deeper, perhaps revealing a cynical disregard for the customer in the chase for short term advantage? If so the cynicism would seem to have been less than smart on the part of the banks’ Boards, as one of the customers they ‘turned over’ was a powerful government agency. Such customers, backed with legal as well as market power, tend to hit back hard.
Our premise still stands - management matters, and it is the Board that ultimately sets the standard. Was this a sin of commission rather than omission? It will be interesting to see the resolution of these cases, and the resulting impact on the regulation of financial markets and the banks.
Talk to us, in confidence and without obligation about helping your managers develop the competence and confidence to manage effectively. Solutions that engage, motivate and fit around, rather than disrupt the business.
(from October 2010) So, why use people?
The news that Wells Fargo management used ‘robo’ signers to approve mortgage foreclosures caught our eye*. Also in the frame for similar practices are JP Morgan Chase and GMAC Mortgage (Ally Bank). The Wells Fargo VP of Loan Documentation giving evidence in a Florida lawsuit said she only checked if her name and title were correct on the documents. She also signed affadavits stating she had “personal knowledge of the facts regarding the sums of money which are due and owing to Wells Fargo”. These were used in foreclosure proceeding. This is gold for the lawyers who are challenging the bank foreclosures.
This information raises intriguing questions, not least what is the purpose of managers in such institutions? Does the process manage the manager or does the manager add some value by managing? And even if the (automated?) process worked as designed (aka those affavdavits), then the fact that the lawyers are able to make hay with it, shows a management failure. Was the organisational effort to deal with the historically challenging volume of foreclosures such that sight was lost of treating customers (and thus the market) with proper respect? Where were the supervisory and audit functions in the organisations?
What we find most confusing of all is that if all that was required from management was a signature, why didn’t they use an automatic signature machine? After all why pay people, and put up with all that unpredictability and emotion?
Talk to us, in confidence and without obligation about helping your managers develop the competence and confidence to manage effectively. Solutions that engage, motivate and fit around, rather than disrupt the business.
* See www.ft.com 14/10/10
Supernova – when your Star explodes
Friday, March 4th, 2011
The Pain of Performance
After much professional struggle and personal pain, you are a Star in your industry. But life is not going so well, using alcohol and maybe some other substances to dull the pain, you lose control in public and are arrested for racist and anti-Semitic defamation. The instantly recognisable face of a global retail brand, the outburst filmed by a bystander goes viral on youtube.com. Then you are fired as your employer attempts to avoid brand contamination. Sober, and publicly shamed, you apologise profusely. But the damage is done.
John Galliano’s very public meltdown caught our attention as managing staff performance – however senior or much of a Star they are – is a key indicator of organisational success. UK organisations have a duty of care towards employees that includes the stress from their employment. Failure will, as Dior are finding out, damage your market and employer reputation, may further damage (and thus increase the risk of your being sued) your failing employee and will certainly waste the monies that you have spent developing and hiring him or her. For Dior to un-mesh their corporate identity with that of the Galliano ‘brand’ is a further cost.
High value services and products require teams to deliver into globalised market places. Leading teams of different generational, functional and cultural backgrounds is a daily reality for most managers. You are part of the team you lead and work alongside them every day, and you may even like them. With current market turmoil, the possibility of reducing stress by average scoring and giving the standard pay rise has gone. No wonder it is difficult to persuade managers to engage with this personal and interpersonal challenge.
No surprise then that the banks and IT developers are talking about developing software that will de-risk the 1:1 of leadership – Cyber or Android Manager to take the pain away?
We beg to differ. The solution starts with the senior team acknowledging the significant risks and costs involved with poor execution of these skills. Performance management belongs to line management rather than HR, as it is in those thousands of ‘moments of truth’ as teams interact that performance is managed. Giving managers the competence that leads to expert and confident delivery requires an accessible, engaging, individually low risk programme that fits around demands of running a business.
Talk to us today, in confidence and without obligation, to ensure your managers produce stellar performance from the whole team
NB: Dig a little deeper into the Galliano story and it transpires that the individual who managed the interface between Galliano and his employer, (Steven Robinson), died four years ago. Perhaps this exposed the designer to the stresses of managing his own relations with a corporate culture, and removed an important reality check. Whilst Galliano will no doubt recover from the shock, it is a shame for both the organisation and the individual concerned that the realisation that there was a problem came only after such public and shaming exposure.
Competence and Risk….. Pigeons coming home to roost!
Tuesday, September 28th, 2010
The news that the Irish government is to wind up Allied Irish Bank, and in doing must consider the markets reaction and the impact on the Irish economy and government (and of course people), is perhaps an extreme example of the proverbial pigeon coming home to roost.
This one is very tatty indeed having been battered by forays, into the debt boom. If Anglo Irish Bank’s exposure to Quinn Insurance is indicative of a lack of effective risk management and associated management competence, it will be interesting to see what is in the balance sheet at Allied Irish.
The bubble made making money appear easy as the market surged upwards, everyone was a Super Hero – and the risk was managed by wonderful IT systems. But there is no substitute for competence – not just technical risk, but management (governance) competence. The ability to understand what staff are doing, (however arcane or black box it may appear), and when it is appropriate to challenge it, and to do so effectively are key competencies that are developed not innate. Business is still about people.
From the outside we cannot know the motivations, and positive actions that led AIB to build up such a toxic balance sheet. We may however seek to ensure that our own Super Heroes do not fall into the same trap and become homing pigeons.
Talk to us, in confidence and without obligation about helping your managers develop the competence and confidence to manage effectively. Solutions that engage, motivate and fit around, rather than disrupt the business.