The Politics of Integrity

Recently I have caught myself thinking a lot about George Orwell’s satire Animal Farm and his masterpiece Nineteen Eighty-Four. That seems to be especially true in relation to the current debate on Bush’s tax cuts. What I am wondering is why we are debating the tax cuts at all? The cuts were bad when Bush introduced them and they’re bad now. Why can’t we let them expire and introduce a new tax policy that makes sense? Change doesn’t mean keeping the same economic policy of the previous administration. Nor does it mean keeping the same economic stewards (Bernanke and Geithner), or fighting in the same wars, or keeping the same head of defense. And change doesn’t mean replacing our troops with private soldiers in Iraq and calling it a withdrawal. Orwell used terms like ‘newspeak’, ‘oldspeak’ and ‘doublethink’ to describe the craziness he saw in governments in his day. Others called it ‘doublespeak’. We used to call it lies. Now we don’t call it anything.

Safe food has a financial payoff for all.

It’s no coincidence that we’ve been seeing the growth of both the ‘eat locally’ and organic food movements at the same time as shocking lapses in food safety. Who wanted to eat mass produced eggs last summer or feed them to their kids after the horrifying scenes from the henhouses in Iowa? In recent years, Americans have been losing trust in the nation’s food supply and that’s a huge problem. Not just for a population that faces significant health care costs and job insecurity but for the food production industry as well. You’d think that instead of opposing plans to improve food safety, the industry would get on board and find good solutions for all involved. Apparently that hasn’t been the case as Michael Pollan and Eric Shlosser point out in an op-ed in today’s NYT. It reminds me of the way the financial industry opposed financial regulation after the crisis of 2008. When will big business learn that integrity isn’t a cost but an investment?

Fallout from the exploding Rolls Royce engine

Qantas announced yesterday it had checked 16 engines of its A380 fleet and was satisfied the planes were safe to fly. It would begin to bring back the aircraft into service this weekend after having grounded its flagship fleet for 19 days following the Singapore flight safety incident. Pretty quickly into the investigation, the companies involved announced that leaking oil was probably the cause of the engine exploding. So is that it? Crisis over and everyone back to business as usual?
Not so fast. The incident is revealing about the state of the companies involved. Qantas seems to have emerged from the crisis well. CEO Alan Joyce has been adamant about safety first at the expense of losing money and his approach has helped build trust with the public. Rolls Royce is another matter though. Tight lipped and not very communicative to the public, its announcements have served merely to allow doubt to linger about what’s actually going on at the company, especially in light of other high profile engine mishaps. It may be worth watching what happens next at Rolls Royce. My bet is there could be further bumps ahead.

The power behind rules that enable activity

Try this thought experiment. Have you ever tried to stop doing some activity, say cutting down on eating junk or watching television? What happens when you make a rule that you won’t do something? It’s a safe bet that after a while you’re not all that successful and you end up breaking your own rule. That’s the problem with a lot of the rules we have in our social and economic system; even in our own households! We tend to set up systems where the rules tell us what not to do instead of what to do. Admittedly, it’s not always easy to create rules enabling activity when there are certain things that we want to make sure never happen—say murder for instance. Yet in many cases it can be done and simply requires a different way of thinking about the problem. For instance, if I want to cut down on junk food I might make a rule that I eat fruit for every snack or with every meal. Or that I’ll only eat nutritious or organic food. If I’m trying to cut down on television then maybe I’ll make a rule that I read a book a week. Next time you find yourself struggling not to do something, make a rule for doing something positive instead. It really can work to change behavior.

How to make rules that work

Rules are a bit like exercise or a healthy diet. Most of us would prefer to live without yet we know that in the long run we really can’t. Part of what is undermining our confidence in our economic system is that we’re seeing one high profile case after another of rules that have been flaunted or broken. Think of the banks’ failure to follow the rules on foreclosures for instance. One way to restore confidence is to understand what makes rules work and incorporate those insights into the design of our new economic rules.

In that spirit, here are some ideas for what makes a good rule:

1. Must be based on sound principles
2. Should be clear, simple and consistent
3. Works best if it is intuitive
4. Should be designed to be self reinforcing
5. Ideally is enabling of activity not restrictive

Taking Trust to the Next Level

There’s a typical pattern companies tend to fall into when it comes to thinking about trust. A common question asked might be something like this: how do I get customer x to trust me enough to sign the contract?

But that’s where any thought on the matter usually ends. An extremely valuable follow up question should be: how can I get customer x to trust me more?

When a business starts to think about how to build more trust with its customers, it helps make transactions automatic, more frequent and more valuable. Try it!

A final thought on integrity crises:

You’re not done until you’re done! A company in the middle of an integrity crisis must keep going until it makes changes on four fronts:
1. What it does
2. What it says
3. The outcome for those who have been hurt
4. What the public thinks