Bob MacDonald on Business

Sage Advice on Insurance and Financial Services from the Perennial Maverick

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Real Leadership Depends on Understanding the Difference Between Ethics and Ethical

June 29th, 2009 · Blog, Business Ethics, Business Management

Ethics is the glue that keeps a family, organization or a society together and functioning. In a survey asking people to identify the most important trait in any personal or commercial relationship, ethics was far and away judged to be the most important.

Ethics is the judgment of the conduct of individuals, leaders and organizations in light of standards of conduct, obligations and duties established by society. Passing society’s test of high ethics does not assure success, but a clear lack of ethics is viewed as a death sentence for any relationship. Ethics even invades the world of criminality by calling for “honesty among thieves.”

Ethics is considered so essential to the effective functioning of society that every attempt is made to drum it into the psyche of every member of society from a very young age. Indeed, it should be, because any society that fails to impose and enforce clear standards of conduct, obligations and duties will soon disintegrate into chaos. (Just look at what happened in Russia after the fall of Communism.) One only has to look at the damage that can be done to a society when even a few individuals, leaders or organizations violate the rules of ethics.

However, for leaders and organizations to really stand out in society and to attain uncommon levels of achievement and success they must rise above society’s minimum levels of ethics and become ethical leaders. That’s because merely having ethics and being an ethical leader are two distinct and different concepts.

Let me explain what I mean.

Simply put, having strong ethics means doing the right things that are required to be done. Being an ethical leader means doing the right things that are not required to be done.

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Is Hartford in a Freefall to Nowhere?

June 22nd, 2009 · Blog, Business Management, Financial Services

Believe it or not, it is easier for a company to achieve remarkable levels of success than it is to stop the slide down once a company reaches the pinnacle of its success. There is no in-between. Once a company stops growing, it begins to decline. It may take months, years or even decades, but in the vast majority of cases, once the decline of a successful company begins it is virtually impossible to stop before the company loses its independence or actually fails and disappears. The lesson is simple: If a company is not making history, you are history. If you don’t grow, you go!

There are almost too many examples to prove the point, but Xerox, Kodak, Polaroid, Trans World Airlines, General Motors and Chrysler are but a few that can be mentioned. Even if the companies have survived, they are clearly in a form different from their heyday of success. Consistent patterns - some obvious and some subtle - plague all companies that begin the downward slide to failure. For a successful company to avoid the slippery slide to oblivion the leaders of the company must understand, resist and overcome these signs of slide.

These identifiable patterns include:

  • The company begins to lose its competitive edge. Market and technology changes become the enemy rather than the opportunity.
  • The culture of the organization evolves from entrepreneurial to bureaucratic.
  • Company management begins to exhibit an attitude of entitlement to future success for the company.
  • The company seeks to maintain rather than attain.
  • As the future becomes uncertain, management wraps itself in the certainty of the past.

Once these patterns have taken hold and a company begins to decline, it is virtually impossible for the management that allowed the decline to begin to reverse the slide into oblivion. It becomes, as they say, inexorable.

A company in decline can easily be identified by the actions of a flailing management in an attempt to save the company. Actions such as:

  • Reorganization after restructuring after reorganization. It is as if simply moving the pieces around will change the game.
  • Cost-cutting and downsizing ad nausea. Cost-cutting and downsizing were not what caused the company to grow in the past, but a desperate management acts as if such actions are the Yellow Brick Road to future growth.
  • Switching from taking known risks to making gambles on unknowns. Gamblers always lose in the end, but managed risks are opportunities for growth.
  • Seeking to change the rules of the game to make it easier for the company to compete, i.e. changes in accounting or regulatory rules.
  • Attempting to sell off parts of the company to save the whole. When a company is in growth mode it adds to the whole. When a company is in decline it subtracts from the whole.
  • An attempt to find a “strategic partner” to prop up the company as it teeters on the brink of failure.

There are three telltale signs of a company in decline:

  • Constant, pleating protestations from management that, “everything is okay and under control.”
  • When there is wave after wave of changes in the executive suite, especially the CFO and CEO.
  • When second level management and key employees begin to desert the company.

Any number of companies could be the poster child for the ersewhile successful company that barreled down the road to potential oblivion, but none more contemporary or pertinent than Hartford Financial Group. (Even though AIG and Lehman Brothers are obvious examples of successful companies that failed, their demise was more the result of greed and search for artificial growth.)

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What Do Allianz, Jimmy Swaggart, Eliot Spitzer and Larry Craig Share in Common?

June 15th, 2009 · Blog, Business Ethics, Business Management, Financial Services

Psychologists have long recognized that individuals with deep character flaws that they’d just as soon hide from others often adopt a defensive mechanism of publicly railing against the very flaw from which they suffer. Psychologists refer to this as the “PBK” syndrome. (Phony But Know it!) Here’s what I’m talking about.

• Elliott Spitzer as a prosecutor in New York, took a highly public self-righteous stand against prostitution. He even spearheaded new legislation to fight the evil, only to be exposed later as a frequent user of the service.

• Congressman Mark Foley (R-Fla.) aggressively proposed and supported legislation to identify and prosecute pedophiles, only to be forced to resign from Congress when it was revealed that he had sent sexually explicit Internet messages to at least one underage male Congressional page.

• Former Senator Larry Craig (R-Idaho) was recognized as a staunch and proud homophobic who constantly fought gay rights. That is, until he was cited at the Minneapolis airport for soliciting sex from a male.

• Ted Haggard, nationally known and highly respected preacher, constantly sermonized against the sin and evils of homosexuality, only to be exposed as having, on several occasions, paid a male prostitute for his services.

• And who can forget when televangelist Jimmy Swaggart, the self-appointed moral judge of America, tearfully tried to explain away his prolific use of prostitutes. (His defense was that he only looked but did not touch!)

I could go on and on, but the case for the PBK syndrome is made.

Now, psychologists have discovered that PBK syndrome can apply not only to individuals involved in hypocritical immoral personal activities, but also to companies involved in bad business practices.


One example of corporate PBK syndrome came to light this past week when it was widely announced that Allianz has joined with CNBC to launch competition to find new, “Green” entrepreneurs. This search for entrepreneurs will be spearheaded by a new TV series to be screened on CNBC later this year.

Tagged for its TV debut as “The Good Entrepreneur,” the show is backed by CNBC and financial services provider Allianz. The announced aim of the show is to find the entrepreneur with the best eco-business concept which is sustainable, responsible and innovative.

Wow! Allianz involved in identifying, rewarding and supporting entrepreneurs. What a concept! Allianz joining up with CNBC to identify entrepreneurs is a little like Eliot Spitzer joining with the Playboy Channel to do a reality TV show aimed at identifying the best new call-girl services in America.

If any company lacks even one scintilla of entrepreneurial philosophy or culture it would be Allianz. If there were a “Bureaucracy Hall of Fame,” Allianz would surely be the standard against which all other bureaucracies would be measured. Allianz is so bureaucratic that even bureaucrats within the organization complain about the bureaucracy.

This is pure PBK syndrome in the business world. Allianz knows that its organizational structure and culture is anything but entrepreneurial. Yet, rather than concentrate and correct their own bad business practices, they go public with a widely-publicized stance aimed at identifying and supporting entrepreneurs.

It’s easy to see what Allianz shares in common with these other PRK’ers. Can all of us say - HYPOCRISY?

And the moral of the story is …

Whether it be personal or business practices, it is always better to take care of business at home, before we lecture others to be what we are not.  Know thyself and conquer the world.

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