What is the matter with famous and large international players? Not the individual actor is less integrated and compliant. We have to talk about the organization itself, its integrity, especially about the possible lack of organizational integrity.
Why talking about organization al integrity?
A superficial look at the current newspapers is sufficient to get an impression of the specific situation of some organizations today. Not only the case of VW, but also the cases of Siemens and Deutsche Bank are leading us to the question: What is the matter with such famous and large international players?
Especially in Germany, we face a larger number of scandals dealing with misconducting managers. Some managers of the Deutsche Bank manipulated, in cooperation with British bankers, special interest rates. Managers of Siemens AG bribed officials all over the world (a financial damage for Siemens of about 4 Billion Euros in penalties). Even the German soccer association is accused of having achieved the hosting of the soccer world cup in 2006 only by bribery of the international committee. It seems like management in Germany is overflowed by criminals. As a matter of fact, we can recognize a difference between the legal system and the behavior of some German managers. And because of that, German prosecutors are currently seeking the handful of managers responsible for that catastrophic development at Volkswagen and the worldwide case of fraud; as they have done in the case of Siemens and in the case of Deutsche Bank, too. But is all that a problem of an absence of ethical orientation of a few individuals? Or is it the missing of compliance departments and the missing of internal rules in these specific organizations?
I will argue that one cannot blame neither the individual nor the missing of formal regulation. One has to recognize the specific organizational situation of these scandals. Not the individual actor is less integrated and compliant, we have to talk about the organization itself; about organizational integrity, and especially about the possible lack of organizational integrity. There may be other variables to explain misconduct too, but I will focus on the organizational part. Why?
What is organizational integrity? Is it possible that respectable citizens without any evil intentions will lead their organizations to a behavior which an outsider like a prosecutor would describe as illegal?
What is organizational integrity? An analytical framework
Analyzing corruption or other kinds of misconduct in organizations sometimes leads to a discussion about the particularities of different cultures. There is a lot of literature dealing with the correlations between the Chinese culture, the Russian culture, the Indian culture or the Hungarian culture and corruption. Of course it is very easy to blame culture for misconducting people and somehow it seems to be self-evident to point out the specifics of different regions of the world. But from a practical point of view this dimension is not very helpful. Perhaps we can describe culture but we can definitely not change it. You can blame this situation for the discussion about international standards and more ethics in managerial behavior. But that discussion makes the analytical problem even worse. If we cannot change culture how can the focus on ethical behavior solve the problem of misconducting managers? As a matter of fact, we can observe in all day live misconducting employees and we are tempted to assume bad manners or criminal personalities. You can blame society and you can blame the individuals but what I tried to do is to focus on the missing link between society and individual. We have to take a look on the organization itself, not only because this is easier to analyze but also because it is changeable.
How can I call the organization the missing link between society and individual? As we all know organizations do have a great influence on individual behavior and especially on interaction. That is the reason for the existence of organizations: to force people to the specific behavior in benefit for the organizational goals. One might not recognize this power standing behind every organizational objective but there is still this power determining the relations and interactions between individuals in organizations. There are still correlations between society, culture, and the personality of people, too. What we have to do is to understand the organizational part. And we do it in deconstructing the action into different analytical spheres. And what we will see is that we can figure out specific but sometimes inconsistent values one cannot describe without that analytical deconstruction. There are actually inconsistences between culture and society but also between expectations in organizations.
There are three variables which are responsible for interactions: 1. individuality (as the institutional part of our personality), 2. organizations and 3. society. For our case, we can divide societies into a legal system and the culture or, if you prefer: into legality and legitimacy. To understand corruption, it is essential that there is a difference between legality and legitimacy at all times. Most research leads us to that conclusion. So you can find especially in different Western societies almost identical regulations of corruption but completely different perceptions of moral behavior. Because of that, international standards do not lead to the same kind of implementation of anti-corruption rules in different societies. For this, we have to blame culture.
The second sphere we have to talk about is the organization as an institution. Here, w can divide the internal standards and rules as part of the formal structure of organizations on the one hand and informal rules and real behavior, you might call “organizational culture”, on the other hand. I prefer to make a distinction between “talk” and “action”. Mostly the “talk” of organizations or: the formal structures are fitting to the legal structure of society, but even this can possibly be a part of the problem. It might be that the formal structures of an organization do not fit to the legal system of the society. If this is the case, we have to talk about compliance and the creation of a compliance department. But that might not be the solution if we have got a difference between talk and action dealing with corruption. The reality in organizations is often more connected to the informal, cultural part of society than to the legal. One can recognize this issue in every company which gets subsidiaries in other cultures. As an American company, you can well implement specific procedures, for example for recruiting in your Indian factory, but at the end of the day you will be surprised by the correlation of individual position and the Indian caste system. You can’t help it. Even if you understand the relations, things are going different in other cultures, even if the organizations have got almost identical internal rules.
All this defines the situation in which the individual employee stands as a social institution itself. Every person is forced to recognize the differences between normal patterns and social structures. But this recognition is not only an accomplishment of a single person. The organization the individual is working for as an employee is giving leadership through that ambivalent situation. Because of that I call the organization “the missing link” between society and individual, and because of that, I am speaking about the individual in an organization as a social structure, an institution. This institution can be described as a set of expectations to the individual as an employee. But also this set of expectations has to be divided into a formal and an informal part. And that is the greatest part of our problem.
Why all these sophisticated differences? Because if you try to understand corruption and misconduct you get wrong if you focus only on the legal system of society, the internal rules and compliance of an organization, or the settled standards of processes. Perhaps if you do so you close your eyes to reality.
I hope this little introduction to my analytical framework contributes to a more precise understanding of integrity. The integrity of society depends on the possibility to reduce the difference between legacy and legitimacy. The integrity of an individual depends on the individual competence to reduce ambivalent values between informal and formal expectations. And the integrity of an organization depends on the implementation of structures which reduce the difference between talk and action.
To apply this analytical framework in reconstructing reality, we cannot blame only the culture of society or the employee for misconducting and corruption. We sometimes have to blame the organization itself and its organizational integrity. My very message on that point is that it would be a great mistake to label this topic as “compliance”. We are not talking about compliance as we do not talk about ethics and moral, as we do not talk about criminal persons. We are talking about the integrity of organizations. That is perhaps not the whole mess but organizations are changeable.
How to analyze organizations. A discussion of methods
Survey: if we try to get information about the difference between formal structures and informal behavior we cannot ask the employees directly about their individual possibilities to avoid legal structures. In our surveys we never ask the employees directly about their own behavior. Not even do we ask about corruption and misconduct. The topic of our survey is something completely different. The topic of our survey is “risk”. Why? In all organizations we have got instruments and sometimes departments responsible for preventing misconduct and corruption. The topic of a survey cannot be to measure the degree of implementation of these instruments. What we have to measure is whether these instruments (or the work of the responsible departments) are showing any effect on the real behavior in the organization or not. We are looking for outcomes, not for the output of legal structures. Let me give you a case in point: most organizations have got standing orders how to deal with personal gifts and professional situations. The question is not if the organization has got formal regulations. The first question is: do the employees know these orders, and second: do they consider them in their daily behavior? To measure that we describe in our surveys specific situations of interactions. And we offer some answers which make it virtually impossible for the interviewed person to know what we are looking for. To formulate such questions and to create specific situations to describe is not such ease, but we are testing the instrument to make it reliable. You might know such instruments from completely different circumstances; for example, from assessment centers in recruiting. We call this part of our research a risk-analysis.
Discussion circle: our second instrument is a little bit more offensive. We arrange meetings with personnel all dealing with the same process in the organization. And we ask them to explain to us completely the process they are dealing with. We gather them in small groups (about four or five people), and explain to them that they would have to find a common explanation of their processes. One of our scientists investigates the discussion starting in that small groups and takes notice of every possible disaccord our disagreement. Sometimes these discussion circles do insist on their formal process description, but mostly this description is so far away from their mind that they are not able to recall it. To evaluate the results of these discussion groups, we ask the groups to present their results in a larger group of employees. This larger group consists of employees from other departments or other organizations which are also deeply involved in the focused process. One of our scientists is in charge of starting a discussion by asking the larger group if they would agree with the description of the smaller group. Mostly they disagree from their point of view. After that second discussion we offer our opinion about what was actually the matter with the focused process.
We have to turn out that in these discussions we never speak about misconducting or corruption. Especially we blame nobody for his or her personal behavior. We tell the participants that they are actually seeking for a less risky way of working and, if possible, for a more efficient way to coordinate their work with other units in the organization without getting problems. Our explanandum, the topic we wanted to explain, is the reality in the organization, the correlation to misconduct or corruption is not the business of our discussion groups. That is the task of our later analysis. It is the duty of us scientists to recognize the possible link to misconduct or the weak points of the focused processes. In that part of the research it is not our business to accuse employees for misconducting, nor is it our business to seek criminal activities. Our job is to minimize risk. The participants are almost always very thankful about that scientific position. And because of that they mostly try everything during the discussions to help us accurately and honest. We call this part of our research a weak point analysis.
Interviews of experts: least, we almost make individual interviews with those professionals in the organizations responsible for compliance and/or anticorruption. We do this for two reasons. First, we want to know how or if the organization itself is aware of the weak points in its processes. Second, we want to know if the organization has any structures for supervising the reality of the processes actually working. We do so to start the discussion with the responsible professionals. Our intention is to seek very special solutions to eliminate the weak points and to minimize in that way the degree of risk in the organization. On that point it is our job to offer some solutions to the professionals. In each case it is necessary to deliberate about whether instruments in human resource management, in organization or in leadership would be helpful to eliminate weak points without being too inefficient. At the end we have to recognize that every informal procedure has got good reasons, mostly reasons depending on efficiency.
Autor: Prof. Dr. Carsten Stark ist Professor für Personalmanagement und Organisation an der Hochschule Hof, Privatdozent an der Universität Siegen und Leiter des Institutes für Korruptionsprävention IfKp. Den hier veröffentlichten Artikel “Organizational Integrity” hat er zunächst 2016 in Form eines Vortrages an der Weber State University in Utah präsentiert.