For anyone who works in banking this must be a difficult time. Just as things seemed to be getting better, with fewer newspaper columns about ‘horrid bankers’, it all blows up again and it appears there are more distressing revelations to come. The Libor scandal threatens to engulf more banks and is pointing to a view that fundamentally the culture in our financial sector is at fault, and the leaders of the sector are responsible. There is some scientific evidence that may back this up.
The work of Dan Areily on Predictable Irrationality shows that morality is circumstantial, rather than absolute. What we see others do, how others are treated, defines our own moral standards. There are norms for cheating. Clearly the norms at some banks were well known at least to a group of traders and support staff responsible for reporting Libor rates. There is an excellent talk on Predictable Irrationality here.
The City of London and Canary Wharf, the centres of our financial services sector, are known for their rigorous standards of recruitment. Rigorous that is in hiring the brightest most creative people each year from the top universities and business schools. But is this the root of the issue? Not that people are too bright but that creativity and dishonesty are related. That is the claim of a new book published just last week: coincidently the same week as the scandal hit the press.
The book, The (Honest) Truth About Dishonesty: How We Lie to Everyone – Especially Ourselves is also by Dan Ariely and explores a simple question – “is dishonesty restricted to a few people with low morals, the bad apples, or is it a more widespread problem?”
Dishonesty, he shows, is remarkably prevalent and better explained by circumstances and cognitive processes than by concepts like character. Ariely says one of the reasons for exploring topics like dishonesty is the knowledge we derive means we are no longer helpless; we have the means to overcome our human weaknesses. I guess this is the role of HR to take what we know is a human weakness and put the right culture, training and rules in place to mitigate it. Depending on what culture the company desires the balance may be more rule-focused versus skills-focused.
Of particular interest in this context is a chapter on the relationship between creativity and dishonesty. Ariely contends the same habits that allow us to create new ideas, to be creative are also responsible for enabling dishonesty and rationalizations justifying poor behaviour.
Ariely says “We may not always know exactly why we do what we do, choose what we choose, or feel what we feel. But the obscurity of our real motivations doesn’t stop us from creating perfectly logical-sounding reasons for our actions, decisions, and feelings.”
In other words we make up stories to ourselves and others to justify our behaviour. The better we are, the more creative the story of justification. He goes on to say justification is a driver of how human’s make decisions about what we want and then reverse engineer them towards what we believe is the right thing to do. Here is where his research is explicitly linked to Banking scandals, and many other kinds of ethical business issues and where it gets interesting when you think about culture:
“The difference between creative and less creative individuals comes into play mostly when there is ambiguity in the situation at hand and, with it, more room for justification… Put simply, the link between creativity and dishonesty seems related to the ability to tell ourselves stories about how we are doing the right thing, even when we are not. The more creative we are, the more we are able to come up with good stories that help us justify our selfish interests.”
Ariely tested how closely intellegence is related to dishonesty by looking at liars. One of his experiments measured the brain structure of pathological liars, and compared it to a normal control group. He measured the ratio of gray matter (the neural tissue that makes up the bulk of our brains) to white matter (the wiring that connects those brain cells). Liars had 14 per cent less grey matter than the people in the control group but had 22-26 per cent more white matter in the prefrontal cortex. This suggests they were more likely to make connections. Increased connectivity means greater access to the associations and memories stored in grey matter. “Intelligence,” wasn’t correlated with dishonesty – but creativity, which is all about connecting things, was.
In another experiment, Ariely tested how “moral flexibility” was related to the level of creativity required in different jobs at an ad agency. He studied the capacity for dishonesty in representatives of its various departments and found a correlation between the creativity in the job role and dishonesty.
Ariely explains the balance between creativity and dishonestly through our capacity for storytelling:
“Just as creativity enables us to envision novel solutions to tough problems, it can also enable us to develop original paths around rules, all the while allowing us to reinterpret information in a self-serving way… Creativity can help us tell better stories – stories that allow us to be even more dishonest but still think of ourselves as wonderfully honest people.”
Which brings us back to leadership and culture, as in the end the stories leaders tell their followers and which they allow to prevail will it seems determine the degree of honesty we get in the organisation. How many organisations have that in their leadership model and appoint leaders with any degree of attention to storytelling?