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  • Writer's pictureMaxime Fern & Michael Johnstone

Leadership, courage and learning during a crisis

Poor behaviour or culture?


The NAB Chairman, and previous Secretary of the Australian Department of Treasury, recently announced his retirement after a series of appearances at the Haynes Royal Commission. Dr. Henry was variously described as petulant, arrogant and evasive and when he spoke to Leigh Sales on the ABC’s 7.30 Report. though he acknowledged “he should have performed quite differently and should have been more open.” One commentator suggested, “it was his lack of humility and defensiveness that undermined his credibility.”

Henry’s comments are strong recognition that he had missed the opportunity during the Royal Commission, to be frank, and fearless in confronting the errors his Board and the NAB had made, despite having been one of the few bankers to acknowledge the poor and accountability his Board had displayed.

It was, in the end, his lack of humility and his defensiveness that undermined his credibility.

This experience raises several questions relevant to exercising leadership, especially during a crisis and when your behavior is under scrutiny.

  1. Why do good people make such poor choices under pressure?

  2. How much is poor behavior, such as defensiveness, an individual attribute or a product of the system and culture someone is part?

  3. What leads to some people acting opening and honesty under scrutiny while others default to less than helpful behavior? and

  4. How is it they we, the observers of such events, are more concerned with fatal flaws in leaders behavior than we are with the substance of the issue they are involved in?

1. Poor choices under pressure

Few of us could honestly say that we haven’t occasionally made a poor choice under pressure. Ken Henry described as the “smartest guy in the room” and calm and balanced in his demeanor was rattled during his grilling during the Haynes hearings. Why did he revert to lecturing and defensiveness this time compared to a myriad of other times when he was probably open and curious?

No one answer would satisfactorily address this question, and Dr. Henry would probably be the last person to know the answer to this, as his actions, at the time, were unconscious, and he can only tell a “story “about what he did after the event. The story he chose to tell the 7.30 Report was one of apology and contrition. However, now he is of no use to anybody, despite his efforts to rebuild his credibility.

Research has shown that people are most likely to make, and rationalize, bad decisions and be defensive during times of limited resources, conflicting opinions, severe time constraints, competing loyalties, and significant uncertainty. There is also evidence that when people or organizations make obvious mistakes, including being responsible for illegal activities or events that have an impact on the general public, defensiveness and not owning up is more likely. Perhaps the best example is the BP disaster and what we have seen with the financial sector more recently.

There are exceptions, however, as the example of David Kalisch, the Australian Statistician, exemplifies. Faced with a barrage of severe criticism after the malfunctions of the 2016 Census Kalisch decided to get on the front foot; to go public, go fast and go honest. In a series of press conferences and public speeches, Kalisch acknowledged that he and his organization, the Australian Bureau of Statistics, had made serious mistakes. He said that he let pride get in the way of his organization reaching out to some of the key stakeholders, including other parts of government, to get input and more collaboration in the design and implementation of the new online Census. He declared “we tried too hard to deliver the Census as independently as possible” and, in so doing, placed their belief in their capacity over the needs of the challenge they faced. It is admirable to hear a senior executive acknowledge that pride got in the way of effectiveness. Sadly, this hubris is all too common in others.

In addition, the Chief Statistician suggests that they assumed that a new complex challenge, which was disruptive in nature, could be handled by concentrating effort, decision-making, and risk on the ABS’s shoulders. In reality, risk is unpredictable in its form and timing and, therefore, usually has an uneven impact on constituents and the “technical” program being implemented. The strong belief in their technical expertise may have blinded them to the faults in their thinking in this regard.

Kalisch also acknowledges another assumption that the ABS made when he said “we expected the public, media, and politicians to respond as they had in the past, and they didn’t”. The idea that past practice will be sufficient when tackling a new and disruptive environment seems in retrospect so easily flawed and yet it is a universal human action bias.

There is no doubt that to publicly acknowledge mistakes, especially those that have had a significant impact on others, takes courage. All the evidence suggests ( that not to do so compounds the problems; witness the backlash to Tony Hayward over the BP disaster in 2010 or the reactions to the defensiveness of NAB executives . Other examples include the criticism of the Centrelink over what is now called “Robo-debt” . Indeed, mistakes grow and compound in the darkness of cover-up. Ultimately, as Dan Ariely says in his book entitled "The honest truth about dishonesty", the human brain is a rationalization machine that will justify what is good for us in the short term even though it is not in the long term. In the moment usuallu good people can rationalise behaviour that subsequentky theys ee as maladaptive.

2. Are we are all just puppets to our culture?

Culture plays a significant role in making it more likely leaders will be, or will appear to be, evasive and defensive, let alone affecting immoral and illegal behaviours.

While it is true that some individuals have an inflated sense of self-importance and don’t suffer fools lightly, a business culture, including it's DNA and implicit rules of behavior create enormous pressure on people to behave defensively when these rules are challenged.

In order words when the status quo is being questioned or tested it is likely that many people, especially those in senior authority roles, will act to defend and protect that which they are responsible for even though they also have the duty to help it change and adapt.

Research by Joris Lammers, for example, shows that the more power executives have and the less accountability applied to them, the more they expect from others and the less from themselves. In other words, they could see it as legitimate to behave in different ways than they might expect from others.

If we follow the lead of the press and it's focus on a few senior executives who “behaved badly” it would be easy to confirm the societal default that it is individual behavior or a “few bad apples” that causes the kind of problems seen in financial institutions or when disasters occur. For example, the driver of the ore train that derailed in Western Australia was fired because he broke protocol.

While individuals do have to be held accountable, explaining people’s behavior requires more than just examining a person’s character or their actions in a particular situation. We must understand the system and culture in which the incident occurred. As Muel Kaptein states so eloquently poor choices or unethical behavior is “not just a question of rotten apples, the barrel or even the orchard may be contaminated.” In other words, we have to examine the norms and culture of an organization to understand the pressures an individual feels: pressures to adhere to behaviors that may even conflict with their values and aspirations.

Research in social psychology includes experiments demonstrating the individual components of poor behavior as well as the contextual and systemic factors. For example, research shows that people who have a weaker conviction regarding free-will, and the extent to which they could determine their behavior, were more likely to act unethically or use protective behaviors than those who believe in their agency. So those who see themselves as the product of their environment or situation are more likely to “bend in the wind,” and this paves the way for poor behaviour.”

Other research by Ann Tenbrunsel and her colleagues shows that as we overestimate ourselves and underestimate others, we are less open to criticism from others, less critical of ourselves and fail to understand the consequences or our actions in pressures situations. They also suggest we all are less ethical than we think and this leads us to take risks with either unethical practice or by behaving in an unproductive manner.

As humans, we all have the unerring capacity to experience Cognitive Dissonance, which refers to the gap between what we want to believe and what we are experiencing, and our failure to respond to the signals seen in this gap. According to Leon Festinger, we hold much cognition about the world and ourselves; when they clash, a discrepancy is created, resulting in a state of tension known as cognitive dissonance. As the experience of dissonance is unpleasant, we are motivated to reduce or eliminate it and achieve consonance (i.e., agreement). The discrepancy is a powerful motive to maintain cognitive consistency, which can give rise to irrational and sometimes maladaptive behavior. The more we are committed to an idea being true, the less likely we are to believe the signs that it is not or may not be true, even in the face of strong evidence.

The power of psychological processes, such as cognitive dissonance, as well as confirmation bias or availability heuristics, shape how leaders respond to complex adaptive challenges. There are many examples of leaders who treated a problem “as if” it were the same type of challenge as they faced previously, only to discover that the new situation had many new and different components. David Kalisch, the Australian Chief Statistician, found this when implementing the 2016 Census which, as is publically know, created a set of severe problems including an outage and a barrage of critical media. Kalisch, however, unlike bank executives, immediately set about publically acknowledging and exploring the errors made.

Do you wonder what value, both financial and ethical, the banking executives thought they were protecting when they denied wrongdoing? Perhaps they thought their good intentions were enough?

3. Conclusion

There are many other reasons why senior authorities, from all walks of life, make poor choices when under pressure. While it is clear that culture plays a significant part in explaining the recent event explored in this article, it is also necessary to acknowledge the individual part the executives involved played. Some people behave in plainly immoral ways, for example, Kenneth Lay in the Enron scandal, however, others make poor choices under pressure, for instance, Tony Howard and the BP disaster. We can learn a lot from their example and can understand more about the psychology of leadership and use of authority. It is, however, also important to find and pay attention to leaders who do “the right thing” under pressure, such David Kalisch because their example provides clues about what to do, instead of what not to do.

  • They do not feel loyal to the organization.

  • They feel pressure to “succeed” as defined by the organization.

  • They feel entitled.

  • They believe that the rules do not apply to them.

  • They do not view the act as illegal.

  • They feel pressured by their peers.

  • An inflated sense of self-importance and an absence of organizational pride usually contribute to a feeling of entitlement.

  • Just as some people drive over the speed limit, rationalizing that their business is more urgent and they are better drivers than others, some employees will assert that they should not be subject to certain policies and procedures.


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