CHAPTER 9 The Incident at Harkins Industries – The Decency Code: The Leader's Path to Building Integrity and Trust

CHAPTER 9

THE INCIDENT AT HARKINS INDUSTRIES

Case Study: Leadership Recovery with Decency and Integrity Following a Damaging Incident

By James E. Lukaszewski, America’s Crisis Guru®

Harkins Industries*

Corporate Profile

•   Private Company

•   Headquarters: Chicago

•   Branches: Across the United States

•   35,000 employees

•   Average Employee Education Level: High School, High School Diploma

•   Management: B.A./B.S. Minimum Requirement. Advanced degrees are increasing in number

•   Known For: Honesty, Integrity, Responsiveness, Hiring Veterans and Rehabilitated Prisoners

•   CEO: Tim Harkins

•   Founded: 1996

•   Status: Likely to be acquired by a British conglomerate

•   Motto: Helping America Succeed at Every Level

*Fictitious Company Name

For Tom Harkins, longtime CEO of Chicago-based multinational Harkins Industries, yesterday was the worst, most embarrassing day of his life. Two of his Texas recycling facilities were raided by the FBI representing the federal Environmental Protection Agency along with Texas State Police. Computers and documents were seized, and the plant manager at each facility received a subpoena.

As the raids were happening, Harkins was contacted by the Texas bureau of the Wall Street Journal and several Texas media outlets who, tipped off by police officials, were covering the raids as they occurred. The company specializes in recycling volatile liquid products. Harkins was recently featured in the Wall Street Journal for receiving a national award for hiring wounded veterans.

To reduce tedious reporting complexity, the local Harkins branch and several of its larger Texas regional customers, including a US Army base, had conspired to allow Harkins to round up quantities of liquids collected in certain cases, and round down in other cases, to standard volumes—quarts and gallons. They stopped reporting fractions of these quantities. These decisions were made below the contracting level at customer locations by local managers. However, the reports to the government are required to be exactly accurate, and false reporting is a crime. The CEO was alarmed that this story was going to blame the entire company when it was the act of a few local managers.

Senior management described the situation as a “sensationalized press issue.” The company itself had never been the subject of any major adverse publicity. This became a national story, front-page news in several publications. The CEO’s outrage convinced his internal staff that they needed to get help to resolve this “press problem.”

I received a call from the company’s Chicago headquarters office alerting me that the CEO would be calling me directly. I was briefed on the situation. The caller told me that while the company’s PR team was more than adequately experienced to handle the situation, the CEO insisted on using outside counsel. The caller’s message was this:

1.   The CEO didn’t understand public relations and needed to learn the value of the function.

2.   The CEO’s current temperament was paralyzing senior management. He needed to be calmed down so that he could listen to reason.

Shortly after that call, the CEO was on the phone with me. “It was a press problem,” he said. The press doesn’t understand business, the CEO complained. This was a local issue caused by local managers. The company has always been known for its quality, integrity, and fair play. He protested that the media exaggerated the facts and refused to hear the truth. At this point, it was clear that we were not going to get to the “what can you do for us” question anytime soon. I interrupted his self-righteous diatribe and simply asked him, “Mr. Harkins, whose name is on the door?”

Silence.

“It’s your reputation that is at stake. It’s going to be up to you and the company to put together an immediate strategy to deal honestly with the allegations being made by the Wall Street Journal.

Silence.

Then he said, “I’ll think about it.” And hung up.

My experience with these kinds of calls is that they’re rarely returned, at least not immediately. I assumed that’s what would happen here. The next morning, to my surprise, the CEO’s assistant reached out to me and said the CEO would be calling me by the afternoon, with a much more reasonable tone.

A calmer and more rational CEO called by noon. “I’ve been thinking about what you told me, and I think you are right,” he said. “Most of my leadership team has been adamant that you are wrong and that we need to come out swinging, or we’ll look like sissies if we don’t. I’m planning a road trip to all the branches to talk about the episode. I’m torn between what my colleagues want me to do and what you appear to be advising, so what’s the plan? Our people believe the Wall Street Journal should apologize and retract parts of the story that we believe are flat-out wrong.”

Here’s essentially what I told him:

1.   Forget the Wall Street Journal. The allegations are about you and your customers and your reputation.

2.   You need to take concrete steps at the earliest possible time to reach out to all your stakeholders with a letter that accurately describes what happened and apologizes for the breach of your own ethical standards and policies. You need to explain what you’re learning from this situation, what you intend to do about it, and that you intend to keep them informed directly until the matter is resolved. I told him I would draft a proposed letter, send it to him, and that he should release it as quickly as possible. And, of course, copy the Wall Street Journal as well as other news outlets that have covered the company over the years, including trade journals.

The silence on the other end of the line was deafening, and his comment was, “This is going to be a tough sell to my colleagues.” My response was, “Is their name on the door?”

The edited letter he sent back was a page longer than my draft. Harkins admitted that the story was entirely true. He added that he was ready to talk about the letter in person to anyone. His communications advisor called me, asked me if I was out of my mind, and said that this could spell the end of the company, that publicly shaming himself for something he had no direct responsibility for was something that would create a backlash! The entire management team was adamantly opposed to sending the letter.

The CEO, in one courageous act of leadership, sent the letter nevertheless. He called me to say he was awaiting the damning—perhaps ruinous—comments from all corners. I asked him to sit tight and to call with any reactions he was getting. The first reaction came via an e-mail from the Wall Street Journal reporter doing the story simply saying, “pretty gutsy . . . that’s more like it!” The CEO was dumbfounded.

By the end of the week he’d called or heard directly from each of his major customers in the Texas region. All were congratulatory compliments, and no one mentioned the Wall Street Journal. They applauded the company’s courage, transparency, and decency.

The CEO went on the road, visited each company operation, and universally achieved hero status. He thought about how this situation, which had at first seemed devastating, could be used to prevent this circumstance from ever occurring again. Over the next few months the company executives initiated a Code of Conduct process and reviewed and enhanced their company values statement.

Broader Lessons this Story Illustrates

1.   Ethical leadership, responsiveness, courage, truthfulness, and decency are required and expected most during emergency situations and crises.

2.   A crisis is an event that is people-stopping, show-stopping, product-stopping, and reputationally redefining that creates victims and often explosive visibility. The operative word in this definition and the most important by-product are the “victims.”

3.   In our experience all questionable, inappropriate, insidious, unethical, immoral, predatory, improper, victim-producing, and criminal behaviors are intentional. It’s also true that all ethical, moral, compassionate, decent, civil, and lawful behaviors are also intentional. Those who lead always have a choice.

Six Leadership Recovery Strategies that Establish Trust After a Crisis

There is a definite pattern of recovery behaviors that helps leadership reestablish trust following a trust-busting, reputation-redefining circumstance. The message is this: when a trust-busting situation occurs, get trust recovery strategies working immediately, so the uncertainty, doubt, and fear that loss of trust creates can be eliminated more quickly.

1.   Stop producing victims and critics. Change your behavior, your language, your vocabulary; recognize the power victims have to further damage your reputation and trusted relationships.

2.   Build/rebuild followership. Reconnect, reestablish, and reconvene with those who are critical to building and recovering your leadership and trust.

3.   Build trust at every opportunity. Trust must be vocalized; trust must be explained, expected, and modeled.

4.   Rebuild and maintain your base. Focus initially on those closest to you—employees, retirees, their families—as well as those with whom the organization has relationships.

5.   Manage the victim dimension. Victims and critics will outlive you. They are always with you. Pay attention to them, literally, until they no longer care. Failure to do this often reignites their victimization, their criticisms, and your untrustworthiness.

6.   Manage your own destiny. Everything said, written, broadcast, or otherwise created about you and your organization now lives forever. You need a strategy to correct, clarify, and comment on the ethical observations of others. Failure to manage your own destiny leaves it to somebody else you may not even know. There always seems to be somebody ready to do it for you if you fail or delay doing it for yourself.

Remember your post-crisis recovery mantra: Decency requires a commitment to verbal and written communication that is predominantly positive and declarative. The associated behaviors should be simple, sensitive, sensible, constructive, positive, helpful, and empathetic. Any other pathways lead to trouble, prolong problems, and delay mitigation and resolution. In this context, empathy means positive deeds that speak louder and more constructively than words. The conventional wisdom about empathy, demonstrating that you understand the emotions and feelings of the victims, comes off as disingenuous and self-forgiving.

Five Elements to Leading with Civility, Decency, and Trust

Over the years, five crucial leadership strategies have emerged that deliver the personal power to move people and organizations into the future, while also being the model and setting the standard for trustable leadership with decency and honor.

Leadership with decency is the force that drives, nurtures, energizes, inspires, and attracts individuals, organizations, cultures, even societies to move forward every day. Adopt these five leadership strategies into your work and life every day, and you will be much more influential, important, happy, and successful. Those around you will noticeably improve their own personal and professional situations as a result of your example. Actively teaching others what you are doing will help them answer for themselves questions you know they will encounter along the way

These five strategies, applied with sincerity, are simple, sensible, constructive, positive, and doable. Taken together, they foster positive, decency-driven behaviors. This is the real work of leaders, providing the “how,” the “what,” and the “why” of getting things done. Using these strategies will also provide the framework for work-life satisfaction predicated on a foundation of decency.

1. Be Positive

An attitude of positivity is the single most profound and powerful change you can make in your life that will cause continuous positive change in the lives of others:

•   Use positive, declarative language.

•   Eradicate negative words and phrases.

•   Reduce the use of emotional language.

It’s tempting to dismiss these practices as simplistic. We’ve learned that taking this positive approach to work and life has a profound impact, because decency and integrity are profoundly positive concepts and aspirations. This strategy works in every culture we have experienced. How often have you approached your manager with an idea only to hear, “That’s not the way we do things around here,” or “We tried that five years ago and it failed; it won’t work now either”? How did you feel? How likely were you to volunteer ideas in the future? Negative comments almost always put us on the defensive even though we have important, positive, and constructive things to say and propose.

2. Be Constructive

•   Eliminate criticism as a method of correction, clarification, or coaching. Criticisms are negative, and they can cause permanent damage and victimization. All criticism is remembered negatively and emotionally forever. “Constructive” criticism is a toxic oxymoron.

•   Insist on constructive behavior, language, and ideas even during arguments.

•   Seek to make and solicit positive, constructive suggestions.

•   Accept only constructive performance analysis of others.

Here’s a story about criticism. A director of an organization sent the staff an e-mail requesting “constructive criticism” of the CEO. In due course, the director received hundreds of responses. The cumulative effect was devastating. The director was in a quandary. If the criticisms were presented, there was no way the CEO could possibly continue in the job. Nor could the director simply sit on the feedback. The director approached us for our advice.

The strategy we recommended was for the director to go back to the staff and, rather than asking for criticism, ask them to make one positive constructive suggestion about what the CEO might do to help them achieve the goals of the organization. The director eventually received fewer than a dozen well-considered and actionable responses. The CEO was grateful for the effort, took the feedback to heart, and worked to implement every recommendation.

The lesson here is an important one. The goal is, rather than providing lots of suggestions, provide only important, positive, and constructive ones. Providing criticism only harms and confuses those who need help. When you criticize, it authorizes others to criticize as well. You can unleash a torrent of ill feeling for which you get the blame. This strategy works at any level of an organization.

3. Focus on Outcomes

Stephen Covey was right: Begin with the end in mind. Commit to generating and maintaining forward momentum.

•   Focus on today and tomorrow.

•   Think and work in the future tense.

•   Recognize that the past generally is more often debatable than helpful.

•   Select achievable, understandable, time-sensitive, worthwhile goals; then go for them.

4. Communicate Intentionally

The main lesson we’ve learned about communication over the years is that it’s more important to have a simple, general set of standards and attributes than to customize communications to specific audiences for specific purposes. We call this communicating intentionally. We call these “intentions” because this is how we seek to operate in daily life and to teach others to do the same. These are behaviors and beliefs that build trust. At the same time, this approach defines our ethical approach to life and to work, and our response to trouble. These are the main ingredients of decency, especially after a crisis:

Candor. Truth with an attitude, delivered now (the building block of trust):

•   Disclose important information early.

•   Explain your reasoning and reasons continuously.

•   Discuss options and alternatives that you have considered.

•   Provide unsolicited helpful information.

Openness, accessibility. Be available for the disasters as well as the ribbon cuttings, and be willing to respond.

Truthfulness in crisis. Lukaszewski’s definition: Truth is 15 percent facts and data, 85 percent emotion and point of reference:

•   Point of reference matters more than facts; determine which facts matter.

•   In crisis, all facts will be debatable.

•   Factual overload victimizes people and makes them feel stupid, and they may find their own experts to debate the facts presented.

•   Too many facts destroy the ability to be humble.

•   Special note: Harkins’s letter to customers and others worked because it focused on admission, contrition, and apology, but still laid out facts that mattered.

During a crisis most management focus tends to be on defending and explaining by using facts. When the facts overwhelm acts of decency, integrity, and compassion, victims are traumatized, and additional critics are created.

Unconditional honesty, from the start.

Empathy. Actions that speak louder than words.

Responsiveness. Answering questions candidly in every situation, including setbacks, validates your integrity:

•   Every concern or question, regardless of the source, is legitimate and must be addressed.

•   Answer every question; avoid judging the questioner.

•   Avoid taking any question personally.

Transparency. Avoid secrets, because important facts will always come out.

Engagement. Face-to-face is the communications approach desired by just about everyone including every victim.

Destiny management. It’s your destiny, which only you can manage in your own best interest. Relentlessly correct, clarify, and comment rather than waiting for someone else to do it for you. The wrong people often show up and get you in deeper trouble.

Apology. The atomic energy of decency, apologies tend to stop bad things from starting, including litigation. Leaving any element out or adding in self-forgiveness or excuses invalidates the inherent positive power of apology:

•   Acknowledge personal responsibility for having injured, insulted, failed, or wronged another.

•   Explain what happened and the known reasons for the circumstance.

•   Talk about what you and your organization have learned that will help prevent it from ever happening again.

•   Sincerely ask for forgiveness in exchange for more appropriate future behavior and making amends.

•   Make restitution.

5. Relentlessly Seek Positive, Incremental Personal Improvement Every Day

Invite everyone around you to follow your example. Most everything we do, know, or create came into being incrementally, occasionally leading to important breakthroughs, which are often too few and far between.

Leaders who practice incremental improvement daily automatically ask themselves several questions at the end of each day or throughout each day. This is a discipline that will ensure that even your most frustrating day produces some useful results:

1.   What’s the most important thing I learned today?

2.   What’s the most interesting thing I learned today?

3.   What do I know now that I didn’t know when I came to work this morning?

4.   How many people did I help today, from their perspective?

5.   What questions arose today that require answers or responses? When?

6.   What will I change tomorrow based on what I learned today?

Trust Matters

“Trust is the absence of fear, and fear is the absence of trust.”

—JAMES E. LUKASZEWSKI

Great Place to Work coproduces the annual Fortune magazine “100 Best Places to Work” rankings (see Chapter 7). Trust is the most important criterion in identifying the winning corporate cultures, and those companies rise to the top in terms of financial performance. Professor Nicholas Epley, in his article “How to Design an Ethical Organization,” proposed that employees are likely to behave differently if they think the organization is being guided by the ethics of Mr. Rogers, the relentlessly kind PBS show host, versus that of Gordon Gekko, the relentlessly greedy financier in the film Wall Street.1

Avoid These Trust-Busters, the Enemies of Decency

Entire books have been written on trust. For our purposes, trust means confidence that the other party will act in an expected manner. Trust is the absence of fear, and fear is the absence of trust. It’s often easier to talk about trust-busters, behaviors that destroy trust. Here is a partial but useful list of trust-busters:

•   Arrogance. The absence of empathy. Taking action without consulting those directly or indirectly affected. Making decisions unilaterally, without important input from key stakeholders.

•   Broken promises. One of the crucial bases of trust is that each party can rely on the commitments of the other, both implicit and explicit. When those commitments are broken without prior notification, understanding, explanation, and warning, the first element of the relationship to suffer is trust. Losing the sense of commitment can call into question most other elements of the relationship as well.

•   Chest-beating—mindless, needless, and useless bragging. Unwarranted self-congratulatory, self-validating behavior puts distance between those who want to be trusted and those who need to trust. It is a form of self-deception through self-talk. It is reasonable for a company to be proud of its achievements but take care that the emphasis is more on the achievements than the pride.

•   Deception—intentionally misleading through omission, commission, negligence, or incompetence. In a relationship, deception creates a feeling of separation and distance. Deception also creates a sense of disappointment because the individual, product, company, or organization failed to recognize that, at the very least, there should be a sense of candor between the parties no matter what the circumstance.

•   Denial. When a product underperforms or there is an injury, the temptation is to conclude that the problem may not be as serious as it appears. Denial is always a costly mistake. Failing to promptly come forward and relate the circumstances candidly, with empathy for those who are affected, changes a relationship of trust into one of suspicion and caution.

•   Disparagement. Anytime you hear such phrases as “They have their own agenda,” or “He’s uninformed,” or “They’re just looking to raise money by their action,” or “It’s politically motivated,” or “They just don’t understand,” you immediately suspect that the exact opposite is true, and you’re likely to be right. All critics and opponents have friends elsewhere. Some of those friends are your friends as well. Victory is never achieved through disparagement. Disparagement causes suspicion, damages relationships, and creates permanent critics. Enemies accumulate.

•   Disrespect. Even adversaries can trust each other, to some extent, if there is respect. When an individual, product, or organization is minimized, trivialized, or humiliated, there is a sense of uneasiness and discomfort that leads to frustration, anger, and public negative response.

•   Failure to seek forgiveness or to apologize. Often even the best public and private approaches are diminished in value when, either for reasons of arrogance or stubbornness, an organization avoids a direct, overt approach for seeking forgiveness from the parties harmed or indirectly affected. Failure to quickly say, “We’re sorry” diminishes trust and leads to litigation.

•   Holding back. Deliberately withholding support, withholding admiration, withholding cooperation and collaboration, but especially withholding information corrodes trust.

•   Lying. Often starting with simple misunderstandings, the truth to one individual or organization can easily seem untruthful to a victim, competitor, critic, or angry neighbor. Truth can be complicated and emotional.

•   Self-forgiveness. This is self-talk designed to ignore reality. Symptoms of self-forgiveness include such self-serving phrases as “Mistakes can happen, even to the best companies,” “We’ve been paying taxes in this community for decades,” “I didn’t know what was going on,” “No one told me,” “We’re only human,” or “People make mistakes.” Self-forgiveness destroys trust.

•   Victim confusion. Avoid exhibiting an irritable reaction to reporters, employees, angry neighbors, and victims’ families when they call asking for help, information, an explanation, or an apology, such as “We’ve been a good corporate citizen,” or “We’ve contributed to the opera, the little league, the shelter program,” or “We don’t deserve to be treated badly.” All of these answers say, “Hey! We’re victims, too.” These behaviors are an attack on the credibility and honesty of real victims. It’s accusatory and destructive.

The Decency Code: A Leader’s Pathway to Integrity and Trust

Ethical expectations of leaders are present in cultural settings, families, businesses and work, communities, and whole societies. What’s remarkable is the simplicity, similarity, and power of these expectations, wherever we see them, including during crises. The information in this chapter applies everywhere. Ethical expectations of leadership are present and required, whether these expectations are recognized at first or not. Most leaders will ultimately be held accountable for their ethical performance. Fortunately for us during our careers, in several important cases employee groups were polled and systematically interviewed about their ethical expectations of leadership during adverse times. The nine ethical expectations they mentioned as necessary to maintaining ethical and decent cultures we find frequently duplicated around the world:

1.   Find the truth as soon as possible: Tell that truth and act on it.

2.   Promptly raise the tough questions and answer them thoughtfully. This includes asking and answering questions yet to be asked or thought of by those who will be affected by whatever the circumstance is.

3.   Teach by parable. Illustrate or underscore self-evident truths, principles, or moral lessons.

4.   Clarify; then vocalize core business values and ideals constantly.

5.   Walk the talk. Be accessible; help people understand the organization within the context of its values and ideals at every opportunity.

6.   Help, expect, and enforce ethical leadership.

7.   Preserve, protect, defend, and foster access to the top of the organization.

8.   Be a cheerleader, model, teacher, and coach of ethical behavior.

9.   Make values more important than (or at least equal to) profits.

Our interpretation of these ethical expectations is the essence of The Decency Code and form a leader’s pathway to integrity and trust.