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(originally published by Booz & Company)


Peanut Butter on the Chin

Letting Information Flow
Although Zimbardo mentions business organizations with only a passing reference to the WorldCom, Enron, and Arthur Andersen accounting and corporate governance scandals of the past decade, his general conclusions illuminate the source of unethical company behavior more adequately than do most of the published analyses specifically addressing that topic. His observations belie the standard explanation offered by business leaders when people in their organizations are caught misbehaving: Hey, there are a few bad apples in any barrel. Zimbardo argues that, in fact, ethical problems in organizations originate with the “barrel makers” — the leaders who, wittingly or not, create and maintain the systems within which participants are encouraged to do wrong. Hence, instead of companies wasting millions of dollars on ethics courses designed to exhort employees to “be good,” it would be far more effective for managers to make an effort to create corporate cultures that reward people for doing the right thing all of the time.

Zimbardo’s conclusions are important for business leaders not simply because they explain the behavior that leads to costly debacles like the Enron scandal. More immediately, they shed light on the organizational pressures to conform and the reluctance to speak the truth to supervisors and others in power that the CEOs in Aspen found so hilariously familiar in “Peanut Butter on the Chin.” These same forces hamper a company’s capacity to innovate, solve problems, achieve goals, meet challenges, and compete.

Research shows that successful organizations need a free flow of information, much as the heart needs a continuing supply of oxygen-bearing blood. For example, organizational theorists Robert Blake and Jane Mouton documented in one study that the ways in which airplane pilots interacted with their crews determined whether the crew members would provide essential information to the pilots in the midst of an in-air crisis. Stereotypical take-charge “flyboy” pilots who acted immediately on their gut instincts were far more likely to make the wrong decisions in trying to avoid disaster than were the more open and inclusive pilots who, in effect, said to their crews, “We’ve got a problem. How do you read it?” before they made up their minds on a course of corrective action. In essence, the silent crew members knew from experience that their leaders were not going to listen to them, wouldn’t listen even if they volunteered useful information, and, worse, were likely to reprimand them if they dared speak out of turn. It’s a matter of trust, and it is the leaders themselves — and their organizations — who suffer most in untrusting cultures. By not listening to their colleagues, too many leaders shut out sources of potentially useful information. That’s why transparency is simply good management.

Indeed, there is only one effective antidote to organizational opacity and groupthink: creating organizational transparency — a culture of candor in which information flows unimpeded to those who need it when they need it, and in which no one fears the consequences of being forthright and honest with those above him or her in the company.

The potential benefits of transparency are, on the one hand, quite tangible. Edward Lawler, a professor at the University of Southern California Marshall School of Business and founder and director of USC’s Center for Effective Organizations, has found, for example, that posting everyone’s salaries on a company bulletin board or in a database boosts employee morale and increases trust in top management. Equally important, however, are the less obvious gains that transparency offers. When executives gratefully welcome information or suggestions from those down the line — even stories that perhaps they don’t want to hear — organizational perspective is broadened and groupthink is marginalized. In practical terms, the information those at the top need at any given time may be located anywhere in the organization, and that’s why clear channels of communication are a sine qua non of organizational effectiveness.

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  1. Warren Bennis, Daniel Goleman, and James O’Toole, Transparency: How Leaders Create a Culture of Candor (Jossey-Bass, 2008): Three leadership experts explore the lack of cultures of candor at companies and suggest ways to achieve a healthy openness.
  2. Robert R. Blake and Jane S. Mouton, “The Managerial Grid,” Thinkers (March 2002): Examines a behavioral leadership model that proposes five different organizational management styles and identifies which one is optimal in a particular corporate culture.
  3. Art Kleiner, “Jack Stack’s Story Is an Open Book,” s+b, Third Quarter, 2001: An exploration of the open-book management practiced by SRC Holdings Corporation Chief Executive Stack.
  4. Edward E. Lawler, Rewarding Excellence: Pay Strategies for the New Economy (Jossey-Bass, 2000): How to use money to motivate workers, and the value of posting salaries within an organization.
  5. Philip Zimbardo, The Lucifer Effect: Understanding How Good People Turn Evil (Random House, 2007): The book discussed in this article describes the Stanford Prison Experiment and applies its findings to historical examples of injustice and atrocities.
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