Managing risk with integrity
Jude Munro
CEO Adelaide City Council
9 July 1998
Jude Munro: Thank you very much and it's great to be here. My topic is ethical leadership and I'd also encourage you to get stuck into the orange juice, the fruit and other things and not wait.
I want to cover three elements today: first, an initiative which has at its wellspring responsiveness to customers and an ethical approach to them; secondly, my own struggle to be an ethical leader; and, thirdly, building an ethical culture
I was principally asked here to speak about the City of Adelaide's initiative, Building Bridges, which won an Australian Human Resources Institute award in 1997 for ethics. This I can do fairly simply. The Building Bridges Program was introduced as a response to a perceived problem. The City of Adelaide is ringed by 720 hectares of parklands. These parklands contain shrubs, trees, public toilets, picnic shelters and bridges. They provide beautiful surrounds and amenities for Adelaidians for picnics, horse riding, sport and general recreation.
They are also home to about 60 homeless people. These homeless people sleep in the shrubs, under bridges, in day shelters, and there's one person who's even built a platform in a tree and sleeps on that. They use public toilets. Some use the basins in the toilets to wash themselves, some don't wash at all. They're homeless for many reasons - rejection, poverty - and in some cases they've actively chosen to live by themselves away from society. This has been evoked very recently in a Ruth Rendell novel. I don't know if any of you are crime readers at all, but there's a very interesting book that has as its overall milieu the life of homeless people in London.
Of course, also in the parklands some gay men use public toilets as beats where they meet and have sex and some other people use the parklands and its facilities and they have an intellectual or psychiatric disability and often people who are homeless, have intellectual or psychiatric disabilities. We have 120 Adelaide City Council staff who work in the Park Lands and squares and these staff are generally motivated by a love of horticulture. They like to prune the heritage roses - some of them even tried to teach me how to do that and were mortified at the prospect of me mistreating the roses - cut grass, plant and nurture shrubs and trees. They keep facilities clean and tidy. They're very proud of their Adelaide parklands.
Over a period of time though, it emerged that there's a great deal of conflict between the parklands staff and some of the groups I've described. Parklands staff feared the men on the beat, gay men - they thought they were paedophiles . They abhorred the behaviours of homeless people, found them smelly in some cases, scared of them, and of people with intellectual and psychiatric disabilities. This was picked up by managers, staff in our human resources area, and the leader of a diversity training program.
As a result, a community development . and conflict resolution approach was adopted and a training program developed. The trainers of people consisted of those who understood each situation and they sought in turn to understand the staff's concerns and they dispelled myths, you know, that a proportion of gay men who are paedophiles is the same proportion as straight men who are paedophiles. The sessions were facilitated and there was lots of discussion and growth in understanding.
The staff in turn worked out new ways of dealing with particular situations. They now open toilets and virtually invite the homeless in so they can have their morning washes, leave them in peace and then they come back and clean the toilets and clean the facilities. In brief, council staff and the people who live and frequent the parklands have learnt to coexist and live in harmony. The name of the program is in fact an apt one: Building Bridges. Of course, ethical leadership is an important goal for those of us in management. Honest, forward-looking, inspiring, competent are the four characteristics which have been consistently picked up over the last ten years in research as the most admired leadership characteristics, with being honest consistently coming in as the top scorer. So ethical leadership is actually about what our people are saying is the most valued characteristic, the one of being honest.
Ethical leadership I think is important to think of also in terms of risk management. A risk management framework is important to building an ethical organisation. The concept of risk is a framework that is used to assess financial, environment, physical hazards and the probability of various occurrences. It's a framework that requires identification of risks and to take actions to minimise those risks. Risk management also relates to the concept of managers taking due diligence and duty of care. It implies a use of judgment, it implies managing and juggling competing priorities. It's crucial to managing for responsive customer services and a healthy and safe workplace. Running through these ethical criteria you can see transparency, clear and public process, openness, fairness, knowledge, participation and the opportunity to be heard and independence.
This whole ethical framework is actually about fairness, equity, transparency, openness of decision making and it's really quite critical to management. Just as a side comment, the best book I read last year was John Keegan's History of Warfare. Has anyone read that? A fantastic book. It's actually about the development of civilisation. I recommend it for reading. Did you know that it was Genghis Khan that introduced the principle of merit and promotion by performance, and that with using horses and developing them as fast animals to take his hordes across the plains was actually the winning combination. So he decided that he would not use what had been the traditional ways of promotion which was basically by nepotism and he replaced it with his best people. So there you go. I didn't ever think that an authoritarian would be responsible in that way, but that's the case.
We know about the 1970s and the white shoe brigade in Queensland. I can say, having lived there in the nineties, the white shoes might be a bit dirtier but there's still a few around. The excesses of the eighties of course with corporate cowboys and the nineties, the era of the travel rorts and The Canberra Times page 1 story today. This other end of the ethical continuum also includes dishonesty towards customers, stealing someone else's ideas, reading other's mail, insider trading, product safety problems, even calamities such as the Challenger space shuttle explosion. I don't know if you remember, but two project engineers had actually warned that that might happen. Also unethical behaviour is about abusive, exploitative, bullying work relationships as well.
I want to actually go on now and describe four scenarios arising in the life of a manager. They're a mix of my own experiences and those of others, and I'll invite you to think about these dilemmas and see if there are lessons for us as managers. The first one I've entitled as To Spy or Not to Spy. I've been at a dinner with my HR manager and some union officials when I was CEO at the city of St Kilda and, believe it or not, that's not the ethical dilemma
I've been out at dinner with my HR manager and some union officials, as I was saying, and the HR manager drove me home and reported to me on Monday that she'd driven home behind a car which she'd identified as that of a local laws officer. This was at about quarter to 12 on a Friday night. She said she'd had her suspicions and wanted to check it out. She did, but on advice from me very carefully, that staff member was supposed to be on roster until 2 in the morning. She was going to ask the team leader to ask him if he was sick but I said "No, don't do that". I suggested she wait to see if he reported in as sick. Something was starting to niggle me already, that is, the old hand manager being suspicious. I was somehow concerned that this might be a widespread practice amongst the staff. As it turned out, he didn't report in as having been ill that night.
I asked to meet with the HR manager and his team leader. The team leader had been a store detective at David Jones, so she was up to a whole series of devious practices as a manager, and I'd had experience at busting some staff ripping off stores when I had had responsibility for the largest intellectual disability care facility in Victoria. We discussed confronting the staff member but I remained concerned, so we decided to employ a private detective firm and also install a spy camera in the local laws office in the team leader's area.
As a result, we discovered over a period of some months that there had been four staff who were regularly not working their full roster. They were not patrolling the St Kilda night-time areas, they were not issuing parking infringement notices. They were going home. We discovered one staff member who was the union delegate who had been breaking into the team leader's locked filing cabinet in order to read personnel files. We further discovered a racket apparently involving two council staff and employees from the security firm that we employed to take the money out of parking meters on the foreshore ripping off up to $60,000 a year.
Now, from an ethical perspective all the things we did were in part justifiable because we stopped fraudulent behaviour. But using private detectives and cameras is not typically one of the tools that managers use and that employees feel at all comfortable about. Other employees tend to abhor the use of such methods and see it as dishonest and covert operations. Using such methods can build mistrust in an organisation. It raises the ethical questions of whether any means justifies the ends.
Should we have involved the union, should we have interrogated the staff member first? Why did I have a niggling concern back on the Monday immediately following that Friday night. Suspicion and management nous are part of the answer to the last question, but from a risk management perspective regulators - and they can be the enforcers obviously in terms of parking control officers - are some of our most vulnerable staff in the public sector, their relationship with local traders, their relationship with developers. So from a risk management perspective I think I have that instinct that they were in fact very vulnerable. I leave you to ponder the ethics of that action.
The second scenario I call Dealing Behind the Scenes. I'm baring all today. It's one of being CEO of a local council subject to amalgamation. On the one hand, supporting the council in the political arena to stand alone and not be amalgamated and at the same time working with staff to help them make career choices and for each to plan for their future on the basis that the council would be amalgamated. So it's like being in two different time dimensions. On the other hand, working with the council and the executive to establish that a split council was the worst scenario. That is, half of St Kilda going to Port Melbourne and South Melbourne and the other half of St Kilda amalgamating with Caulfield Council. If you just look at councils on a map, amalgamate means nothing but, if you're actually talking about communities, it can be really quite an important issue. The St Kilda community was a very heterogeneous community but held very, very strongly and passionately together. They love their St Kilda.
So I lobbied hard with members of VECCI, the Employers' Chamber of Commerce, the manager of a right-wing think tank, local conservative MPs, anything to not have a split council as an outcome and promoting amalgamations effectively with Port Melbourne and South Melbourne Councils. The question is: should I have ever been dealing behind the scenes to achieve that outcome when my Council increasingly had a public agenda to stand alone? If any of you had been living in Victoria at the time, my council was really taking on the government in a major way. From a risk management perspective there was almost no probability of the council not amalgamating but a real probability of a split council. I judged from a community and council perspective that this would be the worst outcome and worked behind the scenes against that possibility. It was a very, very stressful time for me personally, but was I stepping outside my legitimate role?
My third ethical dilemma was the invitation to seriously consider. I was invited to sit on a board because of my position as CEO - not as a CEO but as an individual. I felt like taking up the opportunity straight away. I wondered whether I should ask my employer, my council. I thought initially I probably should but I didn't really want to in case they rejected my request. The board position would build my experience, increase my networks in a new-found city. It was remunerated, it was attractive, but I felt uneasy. I checked with internal legal advice. Previous CEOs had accepted positions on boards without going to council. My partner suggested I take it to the Council just to be safe. I struggled with it for a while but decided that that advice was probably sound. I checked my contract. It said that for any employment or business or any activities whatsoever that I should get my Council's approval.
I wrote the report, explained my motivations, created Chinese walls, didn't include a recommendation on me going on to the board and left it open to the council. In the end they unanimously voted for me to be on that board and I felt enormously relieved that I'd done the right thing. That was in fact a message I think for all of us. My contract actually resolved the ethical question but my decision to talk it over with a range of people had been critical. Being tuned into my sense of unease was also very important. Talking it over got to the heart of the dilemma. What was custom and practice, being open, being transparent produced an outcome with which I ended up feeling very comfortable.
The fourth scenario, which is an absolute boomer, is the case of the missing manager. Our esteemed human resources manager left and we all felt devastated but knew we had to get on with life and advertise the HR manager position. We got a reasonable field with quite a few external people, a couple of in-house talented people. We interviewed the top six short-listed people and these three remained with the external person still looking fantastic. She'd been employed by some of the top firms in Australia and had substantial HR networks and knew all the HR leading edge practices. We decided to interview the top three again and to quiz the external one and our preferred candidate on why come to our city and to local government. Her responses were strong and convincing. We did the referee checks. We offered her the job. She sent us back a signed contract. She said she'd be starting in six weeks. I felt that was a bit quick because I've a bit interstate and said "She said she wanted to get into it".
Bob, the General Manager Corporate Services, the line manager of the HR position, rang her on the Wednesday before she was due to start. She wasn't home. He faxed her at home with a phone reply from her on the Friday to say she was in England and flying back and she'd see us on Monday. We all thought that was a bit quick but, you know, these things happen. We live in a global village. Monday came, no new HR manager, so he rang her at home. There was no one at home. He faxed, got a fax back to say she was having trouble with her furniture removalist and would be starting work on the Thursday. What a relief. She was going to be starting work on the Thursday.
Thursday came, no new HR manager. Bob rings, faxes, no one home, no reply to the fax. I rang an interstate council colleague who worked down the road to go and check her home out. The bins were inside, they'd been taken in and out. The household furniture was on the deck. The house looked occupied. Bob rings, Bob faxes, no reply. I talk it over with Bob and you know my past history: I get legal services to get in a private detective very briefly. They can't see her but see her mail's being picked up and her bins being moved out for pick-up and being moved back in. We check her referees. This is most uncharacteristic behaviour. We think she's sick, we think she's lost her marbles, we think she's had a breakdown, we think she's found a boyfriend in London if she was ever there.
All these are discounted. She had family and friends. They would have responded to the received faxes if there was anything really seriously wrong with her. Then I felt a strong urge for revenge. I told you this was warts and all. To let any of her future CEOs know about her approach, then sue her for breach of contract. I was out for blood. She'd wasted our time, she'd wasted our money. Our second-best applicant, an internal person, had left the council. The mystery woman certainly did not act ethically, which struck Bob and I as really odd behaviour for an HR manager. Of all professions, professionals trained to be able to deal with conflict and hard decisions. The question that arises from this is: what is my next step? Do I count it off as bad luck or make sure that others know of her behaviour? Should I be telling you this story at all? What are my responsibilities?
In an organisation with integrity, people tend to work together, say what they believe and generally behave in healthy ways. The key elements of building an ethical culture in an organisation are a value statement, codes of conduct, education and training to reinforce values and appropriate behaviour, clear policies on areas such as tendering, strengthening checks and balances in accountability systems, establishing grievance procedures, using a risk management approach because it's a fundamental principle that it's more cost effective to get things right the first time than to make corrections afterwards, so actually to design out fraudulent behaviour and other behaviours, audit practice, recruitment and selection, contracts reinforcing the importance of ethics. On that area of education and training, just another quick Dilbert cartoon. Have you taken the mandatory training for business ethics? No, but if you say I did then you'll save some money on training which you can spend on decorating your office. Luckily I haven't taken the training myself. I hear it's mostly common sense.
Professors Pierssen and Thiess of Copenhagen University wrote about the first ethical accounting statement of a leading European bank which they designed. I quote:
"Many people think of ethics as a personal matter that really cannot be discussed. Others regard ethics as some kind of check list that can be used to determine right or wrong. We have a different perspective. The idea behind our statement is that ethics are socially constructed and that they can and should be discussed. A discussion of ethics does not elicit any unambiguous answers but rather initiates a process in which the parties involved each have their own values, must determine what they can agree is right and wrong. Ideally a decision is ethical if all parties influenced by it agree. Therefore, ethics deals with values which are strong enough to be shared and with conflict resolution via attunement to these values"
I agree strongly with this statement. Introducing a code of conduct into any organisation should not just be the result of a negotiation between management and unions in an isolated fashion. It needs to involve at the very least a focused group of staff, a vertical slice of staff, where examples can be used and discussed through, a bit like my ethical dilemmas. I'm intending to take some of those and talk about them with my senior staff and just explore what the issues are.
As CEO at the city of St Kilda, I introduced the need for a code of conduct. We got together a group of shop floor representatives and when it got to the session on gifts, everyone got involved in quite a heated discussion. Lucia, the HR manager, suggested that no gift above $5 should be accepted without a note being given to the person's general manager. Someone else suggested $10, so, you know, they were trying to raise the stakes then. Someone else raised the issue that there was a feeling amongst residents that if they didn't leave out beer for the garbos at Christmas they'd be in for a hard time for the rest of the year. One of the home and community staff, Ethel, said she felt her clients at Christmas sometimes expressed their gratitude for her services by leaving out a small gift and didn't feel she should have to report that to the general manager.
But then me with my stock of examples, I then gave an example of where a home support worker had been so important in a particular client's life or so ingratiated herself to her client that she was actually left the client's house on the death of the client. The home support worker then obviously went on to workers' compensation and left the employment of the particular council but with the house. Everyone agreed when I raised this example in our discussions that that was exploiting the client. Ethel said the relationships were important but should be kept professional and that she also thought that was wrong. She thought that had gone too far in that situation.
We ended up bringing in a code of conduct that everyone in the group agreed on and we used examples and had staff meetings to discuss those examples. The Christmas following, a home care support worker brought in to her supervisor a tin of biscuits she'd been given, just an ordinary tin of biscuits, but then what she did was took off the lid in front of the supervisor and in there was a $100 note. So my sense in that situation was that our discussion on the code of conduct had actually worked. It was really good.
Ethical dilemmas are ones that will continue to confront us all, perhaps increasingly so. You think about all of those bio-ethical issues. Should everyone have access to the latest medical treatment and diagnostic tools irrespective of cost? How is information technology going to be used? What information is going to be stored on smart cards and stored value cards that is going to end up being sold and traded and is probably happening now between organisations? What about genetic engineering? We know in our hearts we cannot regulate everything and perhaps that's not desirable to do so. This is I think one of the dilemmas of building an ethical organisation because in the end for all of us it's a struggle associated with ethical leadership. We want to encourage personal and organisational responsibility, and I stress the personal responsibility, the question of personal integrity. Initiatives I believe like the Building Bridges Program can develop and grow in that environment. Thank you very much.