Culture Breathes from Human Resources


Corruption Expands and Whistle-Blowing Collapses through Fear-based Management

To cut short the question of the law of retaliation, we must note that even in its primitive form it can operate only between two individuals of whom one is absolutely innocent, and the other absolutely guilty. The victim, to be sure, is innocent. But can the society that is supposed to represent the victim lay claim to innocence? ~ Albert Camus

If you are building a culture where honest expectations are communicated and peer accountability is the norm, then the group will address poor performance and attitudes. ~ Henry Cloud

Within most enterprises, decision making authority is hierarchical based and not process based. This is the western management paradigm that management consultant W. Edward Deming often admonished in his writings and presentations. Such a paradigm is a management by fear, whereby the abuse of position and power corrupts and undermines a productive workplace, discourages whistle-blowing and process improvement. The paradigm facilitates hazardous workplace behaviors, such as, harassment, bullying and mobbing. Deming’s contributions and methodologies have been mostly relegated to the quality management arena. However, the broader scope of Deming’s quality management philosophy, the System of Profound Knowledge, encompasses the expansive mechanization’s of organization productivity and efficiency. In general, quality – what is delivered to customers – is the central objective of any business enterprise. The principal areas that management needs to be attentive of in Deming’s System of Profound Knowledge are the understanding of systems (systems thinking), human psychology, variation, and acquiring knowledge about processes used for the products or services offered. Essentially, Deming saw organizations as systems whose output is quality. It is through the management of the system that delivery of quality products and services can be optimized. The axiom that every decision is a risk translates to the greatest risks to any enterprise are how decisions are made. How decisions are made is the foundation or any organization culture. The organization culture is really what differentiates any one business enterprise from another. Even with unique products or services, there are many different ways to manage the throughput from order to delivery which has direct consequences – positive or negative – to stakeholders. An organization culture is the sum of its values, interactions, behaviors, beliefs, and attitudes. When people work closely together on a project, individuals tend to take on group values that without oversight and control group values can be substantially different than proclaimed core values of the enterprise. Individuals within an enterprise, or a subset group, often compromise their own values in favor of those held by the social group that they work within. Therefore, an organization’s real composite values are a primary determinant of culture, employee satisfaction and business performance.

Ruth Mayhew articulates that the Six Main Functions of Human Resources Management are: recruitment, safety, employee relations, compensation and benefits, compliance, training and development. All of these elements of course shape the workplace culture. Likely, the majority of people work for compensation and benefits. Training and development is also very important to most professionals because is determines future opportunities for future growth and the increase compensation and benefits. All of these things are supposed to be aligned to improved business performance. The problem is that hierarchical authoritative decision making does not yield the best performance. In fact, Deming identified the practice of the annual performance rating, which is carried out by so many organizations, as a deadly disease. But, it is more than that. Hierarchical authoritative decision making facilitates corruption – self-interested decisions made by those with entrusted power. Such structures allow decisions to be made to help individual’s above the interests of organization stakeholders. Isn’t this the definition of corruption? The annual performance appraisal (PA) is the base model of a misused instrument of power which permeates throughout the western management paradigm and has deep impact on the socioeconomic systems which have seen growing income and opportunity inequality. Firstly, PA’s are the simplest and most common weapon of corrupt management to hide wrong-doing. Most people likely (hopefully) do not work within corrupt enterprises, or at least are unaware that they do. Many good managers conduct their ritualistic performance appraisal’s assuming that while they may not find meaning in the mandated instrument, certainly someone in HR must. Most often, both managers and HR work desperately to make good out of something fundamentally dysfunctional and flawed to begin with.

The principal flaw of line managers assessing employee performance is that it is the system that determines performance to the tune of 90-99% (Deming’s Red Bead Experiment). In fact, performance, as per the annual performance appraisal, can be very closely correlated to the relationship of the rater and the subject being rated. This bias is always present within enterprises practicing hierarchical management authoritative decision making. Hence, culture becomes the first line supervisor regardless of what the posters and employee handbook says. And that cultural experience is why so many employees working within dysfunctional enterprise systems are disengaged. Within a dysfunctional system most workers possess very little control over the outcome and yet are held accountable to assume a disproportionate amount of the blame for the poor performance. They are a bi-product of a poorly managed system. Assessing resource performance incorrectly (maliciously or negligently) has a number of unintended consequences and provides a plethora of opportunities for abuse, waste, and fraud within the enterprise. HR articulates and shares policy to employees and stakeholders, promotes or implements career progressions (positive or negative), as well as determines and distributes remuneration.  HR is an adjunct to management that within corrupt enterprises looks to justify rather than rigorously evaluate management decisions. The same can be said of compliance and internal governance functions. Corruption – the abuse of entrusted position – becomes a forgone conclusion within hierarchical managed enterprises that allow unchecked, with regard to compliance and policy, authoritative decision making. When the basis of decision-making is not held to any externally monitored standard or policy, but rather internally by hierarchical position within the organization, the result is that corruption, fraud, and other non-compliant behavior, is very often facilitated through HR. The foundation of the PA system is based on a falsehood which removes accountability for poor performance from those who should own it, to those with no power over it. HR, whose actual stated component function is to monitor and police violations, becomes an instrument for cover-up which facilitates executive malfeasance and corrupt (even criminal) behavior through eliminating those who speak-out against non-compliant behavior – whistle-blowers.

It is not wisdom but Authority that makes a law. ~ Thomas Hobbes

In the last analysis, of course, an oath will encourage fidelity in office only to the degree that officeholders continue to believe that they cannot escape ultimate accountability for a breach of faith. ~ James L. Buckley

Recently, corruption at Wells Fargo Bank has been in the US news. A review of millions of accounts showed that many unauthorized accounts had been opened since 2011. This included as many as 1.5 million deposit accounts and 565,000 credit card accounts. From these, 115,000 accounts had incurred a fee. (Wells Fargo has since refunded to customers). During this time, thousands of workers had been fired from Wells Fargo after opening unauthorized customer accounts. On 13 September 2016, Wells Fargo CFO John Shrewsberry, stated in defense of management, “these bad practices were not a revenue-generating activity. It was really more at the lower end of the performance scale where people apparently were making bad choices to hang on to their job.” The article, Former Wells Fargo Employees Say They Were Fired for Whistle-blowingtells a far too familiar tale. In front of the US Senate Banking Committee, Wells Fargo CEO John Stumpf, stated that Wells Fargo employees are “encouraged to raise their hands” if they see illegal activity taking place. However, according to a former Wells Fargo HR employee, the bank’s strategy for dealing with those who spoke out – whistle-blowers – was to find ways to fire them “in retaliation for shining light.” Former employee Bill Bado stated about Wells Fargo, “They ruined my life.” Bado had called the hotline and wrote an email to HR in September 2013 and was fired for tardiness eight days later. Another former employee, Heather Brock, said, “I endured harsh bullying … defamation of character, and eventually being pinned for something I didn’t do.” Ex-employees say their firings all followed that pattern, with trumped-up charges of being late or other misdeeds.  The Wells Fargo saga is ongoing, but shows a common scenario of corrupt organizations and the scapegoating of employee’s performance to shield wrong-doers of culpability, such as the massive fraud which had incurred under the current management.

Wells Fargo has mentioned that there had been no wide-spread outcry from customers over this debacle. And this points to another salient issue about enterprise corruption and fraud. Official agencies, such as the police, or even employment lawyers rely on corporate governance and compliance processes to be applied within enterprises and seem to care less about white-collar crimes. Only after the massive frauds accrued dollar amount reaches some untenable threshold which can no longer be ignored will there even be a chance of investigation. Begging the question, what is the point of whistle-blowing? Before there were 115,000 unauthorized fee-generating accounts opened, there were whistle-blowers who had discovered the fraud and alerted internal stakeholders. The first question which I would have asked Shrewsberry is how Wells Fargo measured performance? Performance is how processes and resources are used to achieve the desired outcomes. Performance is contextual to the workplace culture and processes. It is management that creates complicated error-prone processes. Not every bank requires the same song and dance. Each enterprise, through their executive management, decides what is performed and why, not staff. Managers should be trying to improve and reduce errors. Why did management not notice any problems which apparently were wide-spread since 2011? And finally, how does Wells Fargo measure management performance? Performance is determined by the system which is controlled by management. For too long hierarchical regimes have been able to blame hapless workers for mismanaged systems while promoting the top tier who seem to not really know what is going on(?). The authoritative management decision-making paradigm contributes to less than optimal enterprise performance as well as income inequality.

When organizations eliminate whistle-blowers they promote corruption. Those who look the other way for a corrupt management are promoted. The honest workers become unemployed with a reference that says they were poor performers. Payroll becomes a money-laundering function and form or hush-money or embezzlement to protect corrupt executives. If an employee walked out of the bank with $12.50 from the cash register they could be legitimately terminated. If regular staff did so multiple times, each month perhaps, they would likely be prosecuted. But, when executives create and oversee a system that charges fees to multiple unauthorized account holders for several years undetected they apparently can blame employee poor performance as if they even know what that is! Most enterprise malfeasance, whether it is fraud or safety issues on offshore platforms, is not a single transaction or event. It is the culmination of several events which become apparent only because of the scale and size of the aggregate of multiple compliance and risk failures. If stable processes are in place along with a reasonable threshold for compliance, there would be no aggregate of magnitude. As with a manufacturing quality management system, threshold variations (i.e., six-sigma) from expected outcomes would have been detected and improved.

Well managed and compliant enterprises do not get caught by public whistle-blowers and then have to recall thousands of vehicles with hard-wired emissions performance devices (VW) or provide thousands of refunds for unauthorized accounts. When there are well managed and functional compliance and quality programs in place, real issues should be detected and solved (improved) at the micro-stage, long before the non-compliance cascade with such economic impact to bring down companies or economies. Such disasters cannot arise from an individual or even group employee performance issue. It is always a management issue. In fact, wide-spread and long-term issues call only be systemic and built into the practiced decision-making paradigm and processes, and thus point directly to senior management. Management determines the resources and processes used and is responsible to control and evaluate their efficacy and efficiency. If this is NOT managements job, what benefit does executive management really provide the enterprise or shareholders? During the recent US Senate inquiry, Senator Elizabeth Warren stated the following conclusion of Stumpf’s testimony, “OK, so you haven’t resigned. You haven’t returned a single nickel of your personal earnings. You haven’t fired a single senior executive. Instead, evidently, your definition of accountable is to push the blame to your low-level employees who don’t have the money for a fancy P.R. firm to defend themselves. It’s gutless leadership.” Not only do the staff not have money for a P.R. firm, they are bi-products – collateral damage – of a widely practiced dysfunctional management paradigm that shift remuneration upward in the hierarchy while shifting accountability downward, whereupon the hapless whistle-blowers were retaliated against.  Retaliation is the evil instrument of corrupt management administered by HR. Compliance lawyers are also complicit in the retaliation that allows the corrupt to receive salaries and bonuses all the while receiving protection from corporate legal power. Isn’t this a form of enterprise embezzlement and fraud?

Research shows that the climate of an organization influences an individual’s contribution far more than the individual himself. ~ W. Edwards Deming

A real decision is measured by the fact that you’ve taken a new action. If there’s no action, you haven’t truly decided. ~ Tony Robbins 

Mobbing and bullying is also used as a weapon of management to rid workplaces of undesirable employees. According to research conducted by the Workplace Bully Institute (WBI), every whistleblower is bullied. Corrupt organizations misuse power and resources to protect corrupt agents. Mobbing is cooperative bullying with management fully aware with the intent of forcing the target out of their employment and often profession. Targets of bullying are often experienced, ethical and honest staff who expose fraudulent practices. Targets are usually more technically skilled than their bullies. Targets are often better liked and quite likely possess greater emotional intelligence. Targets tend to be guileless. The most easily exploited targets are people who desire to help and develop others. (The kind of people that one would want to do honest business with, most would think.) The hierarchical authoritative decision-making paradigm is self-serving. It is fortunate that such pathetic scapegoating can be seen on video with the CEO and CFO in the hot seat. But, this is only because the fraud had accumulated to millions of unauthorized accounts and dollars. Wasn’t each individual account likely a non-compliant act or a crime? And the whistle-blower who finally revealed the massive fraud was fired, as is usually the case. The reason is obvious, isn’t it? Corrupt organizations are always non-compliant to some measure. They are always managed by either corrupt or negligent agents/executives to some degree that through their decisions and processes create the culture and environment which facilitates the corruptionProcesses and agents will either detect and remedy corruption or hide to facilitate its continuation. Why would anyone really expect internal governance mechanisms to work under the beadledom of a corrupt senior management that can simply remove whistle blowers without public or stakeholder outcry? It happens every day in every type of enterprise because the criteria for performance all too often doesn’t require any more validity than being annoying enough to challenge the corrupt who measure any revelation their business practices by how it effects themselves and not the enterprise and shareholders. This is the gift we collectively give to white-collar criminals who are fortunate enough to be in top-management roles: they no longer are required to be either responsible or accountable for their decisions.

Toxic enterprises become toxic based on how decisions are made. At the very base level of the enterprise or an economy, every worker performs within the constraints of a managed system.  How such performance is assessed has significant economic impact to the individual and the system. It is at the base of income inequality where one type of work is diminished in importance to another without basis. Evaluating worker performance incorrectly and applying the wrong methods to correct and improve is actually form of corruption that reduces overall enterprise performance. Overwhelmingly, HR propagates a dysfunctional and destructive device, the annual performance appraisal, and therefore legitimizes the practice. This instrument, which has been applied for years, shifts accountability for performance from top-management who actually designs and implements processes and resource use, to the individual employee who is within the system. It is a system given power through hierarchical authoritative decision-making which profoundly impacts the workplace. All enterprises are systems of interconnections and relationships. How information is shared to form decisions determines culture. Unchecked authority combined with little accountability for the decisions made by those who hold the authority sounds like a risky way to manage a business. Indeed, it is. The dysfunctional paradigm that too often allows arbitrary hierarchical based determination of performance without the guidance of processes and expected outcomes too often protects corrupt and/or inept. Workplace hazards, such as harassment, bullying, and especially mobbing, are facilitated through the misuse of power. This misuse of power is the definition of corruption and is actually built into the hierarchical authoritative decision-making paradigm. Power is too often and too easily misused precisely to hide senior-level corruption and incompetence. Progressive nation states long ago abandoned such tyrannical forms of governance, and it is time that workplaces do the same. There needs to be a new workplace paradigm that holds a better understanding of performance adopted by employment law, management and especially HR, where it all begins.

If we have built on the fragile cornerstones of human wisdom, pride, and conditional love, things may look good for a while, but a weak foundation causes collapse when storms hit. ~ Charles Stanley

Corporate culture matters. How management chooses to treat its people impacts everything – for better or for worse. ~ Simon Sinek


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