OPINION: What corrupt companies should do to regain our trust
This week saw renewed discussion of Steinhoff, as former CEO Markus Jooste was scheduled to appear before Parliament on Wednesday. But South Africa has long been nurturing an atmosphere of distrust in the public and private sector.
The country dropped 14 positions in this year’s Global Competitive Index. That’s a significant drop and corruption is the main culprit.
The World Economic Forum’s Partnership Against Corruption Initiative (PACI) has only just wrapped up its research operations into corruption in Argentina and is now on its way here for phase two. South Africa will be a case study in the research to understand the nature of corruption and how to get rid of it.
Being known as a prime example for corruption should worry everyone in the country.
Less trust = more corruption
Corruption is toxic and, according to PACI, it thrives in environments where trust in institutions and companies has been eroded.
In the fight against corruption, it is essential therefore to regain trust, but most will go about it all wrong.
Of course, it doesn’t help that the list of scandalised institutions keeps growing almost daily.
In April, in a report entitled The Time is Now, Corruption Watch said there were 25% more complaints in 2017 than the year before.
Big names in the economy have been in the headlines for over a decade: The South African Revenue Services, the prosecuting authority, the police, and even the Hawks.
Eskom, KPMG, Trillian and McKinsey surfaced in allegations of state capture, alongside other, equally significant allegations of corruption in the private sector.
Both public and private institutions have taken actions that have broken the trust of close stakeholders and the public at large, and the perception inside and outside the country is that things will only get worse.
A recent Ipsos Report shows that 73% of South Africans surveyed said the country is on the wrong track.
Another 68% said financial and political corruption are at the top of the list of concerns. This is a lot of distrust.
If we are ever to dig our way out of this hole, regaining trust ought to be the top priority for both public and private companies. But how can this be achieved?
The quick fix: Brand management
The quick fix approach is deeply flawed, but unfortunately also the road most travelled.
When Volkswagen Group were caught faking emissions readings in 2015, they essentially shook it off without too much fuss. They apologised, recalled the cars, fired a few people at the top, laid out a plan to remedy the situation, paid fines, and then blended into the background until the news cycle moved on to something else.
Considering their engines produced 40 times more nitrogen oxides than what is allowed, they got off lightly.
But have they changed their internal culture that led to this degree of deception? We don’t know.
This approach is a PR exercise, a bandage, which involves a few individuals, sensationalised actions, and big promises. It is the easiest way out: say you’re sorry and pay your dues, but change very little about yourself that led you into the trouble in the first place.
This ignores the widespread and deep-rooted toxicity that is required for corruption to actually take place.
What usually happens is that the new people stepping in after a scandal find that they’ve inherited a world of problems.
CEO of KPMG South Africa, Nhlamu Dlomu, was 'thrown to the wolves' when she took up the position just after the SARS and Gupta scandals.
She inherited an exodus of clients and a target on her back, while the executives who resigned during the scandal were all paid severance packages and given get-out-of-jail-free cards.
Unfortunately, the newly pared client list and rotating cast of characters in top positions will not change the more systemic issues that led to the front-page scandals.
Unless the leaders of KPMG take steps to dig into that more fully, there is a good chance of more scandals rocking the group.
The same principle applies anywhere management changes but the systemic issues do not.
The positive route
The other route that organisations can take to rebuild trust is to commit to a shared purpose, re-establish the driving values, bring in and develop the right people, and put in place as leaders only those individuals who live these values and set an example for others to do the same.
Every company should have a set of values that become part of the living fabric of the company’s day-to-day existence.
These should be built around a shared and clear purpose, the why the company does what it does.
When things get ugly, it is important to see whether the organisational culture has perhaps veered from these core values or lost the sense of their common purpose.
Are all operations, promotions, procedures, rules and regulations, and decisions still revolving around achieving the organisation’s purpose and in alignment with its values?
Do the people in the organisation still resonate with these values?
Are the organisation’s best interests still aligned with the best interests of the individuals inside the organisation and the society outside it?
If leaders want these values to be lived, they have to hire and invest in their people accordingly.
While skills are obviously important, the right person for the organisation should be someone whose passion and core values fit with those of the organisation.
Are the employees committed? Are they fully engaged? Or are they maybe just going through the motions and waiting for a bigger pay cheque to come along somewhere else?
Handling it constructively
Leaders have a key role to play. No organisation exists in a vacuum and the leaders in the organisation have a responsibility to create an environment where internal and external pressures are less likely to cause people to stray from their values.
Are the leaders ensuring that the organisation’s structures, culture and people are pulling together to handle these pressures? Are they avoiding or tackling challenges constructively?
A clear historical example is that of Johnson & Johnson in 1982, faced with a potential catastrophe of trust after several of their Tylenol capsules were poisoned, resulting in the deaths of seven people.
The company immediately pulled all of its Tylenol stock (resulting in huge losses in earnings), proactively engaged with law enforcement to find the culprit, and came up with tamper-resistant packaging that is now the norm.
Accountability is no easy task, and leaders must take steps to ensure that they build their personal resilience, too.
A self-reflexive practice of some kind is helpful to be able to hold themselves accountable to the values of the organisation they lead.
After coming clean, organisations and institutions facing breakdowns of accountability must take a long, hard look inside and ask themselves how they can rebuild their organisational structures, re-establish their values, and align their goals with the goals of their workforce and the nation in which they operate.
Maybe then they’ll begin to regain a little trust.
Dr Tim London is a senior lecturer at the Allan Gray Centre for Values-Based Leadership at the UCT Graduate School of Business. Views expressed are based on the content of a talk delivered at this year’s Leaderex conference on 4 September.