Imperious Institutions, Impotent Individuals

Posted by Gary Hamel on April 15, 2010

I live a half mile from the San Andreas fault—a fact that bubbles up into my consciousness every time some other part of the world experiences an earthquake. I sometimes wonder whether this subterranean sense of impending disaster is at least partly responsible for Silicon Valley’s feverish, get-it-done-yesterday work norms. Build your company quick ’cause tomorrow we might get flattened.

Like many sorts of change, major tectonic events happen very slowly and then all of a sudden. The earth’s wandering plates are held in check by friction for decades or centuries, and then one day the forces of change finally break through to the surface and the planet erupts.

Social convulsions aren’t usually as abrupt as earthquakes, but they can still be startling—particularly to those who haven’t been paying attention. Years of repressed resentments and bottled-up frustrations can suddenly burst forth and fracture long-standing relationships. It happened in 1773 when angry colonists dumped 300 chests of British Tea into Boston Harbor. It happened in 1965 when determined civil rights campaigners marched from Selma, Ala., to the state capitol. It happened in 1989 when euphoric Germans tore down the Berlin Wall.

And it’s happening right now along the fault line that runs between individuals and the institutions.

Over the past few years, we have seen a fundamental breakdown in the trust that individuals are willing to place in large organizations and in the people who run them. When asked to rate the ethics of various professions in a recent Gallup poll, Americans ranked those who represent big business and big government near the bottom. Only 12% of respondents rated the ethical standards of business executives as “high” or “very high.” Members of Congress fared even worse at 9%.

Percentage of respondents who ranked each profession “high” or “very high” in ethical standards:

Nurses 83%
Doctors 65%
Engineers 62%
College teachers 54%
Clergy 50%
Chiropractors 34%
Bankers 19%
Business executives 12%
Members of Congress 9%
HMO managers 8%
Car salesmen 6%

In the recently updated Edelman Trust Barometer, barely one-quarter of Americans said they would regard the information they receive from a company CEO as “highly credible” or “extremely credible.” Neither do employees place much trust in their managers. In its 2007 Global Workforce Study, Towers Watson found that only 38% of employees believe their managers communicate openly and honestly.

While some might argue this trust deficit is simply the byproduct of a few high-profile scandals, like Enron and Lehman Brothers, I believe something deeper is going on. The tectonic plates of individual interests and institutional interests are moving in different directions and have been for some time—at least from the perspective of “ordinary” workers and voters.

When a politician bends the truth or a CEO breaks a promise, trust takes a beating. Nevertheless, I think the disaffiliation of individuals and institutions is the product of something more fundamental than a few inadvertent fibs or even the occasional Dick Fuld-scale delinquency.

It’s not just that individuals have lost faith in the integrity of their leaders, it’s that they no longer believe society’s most powerful institutions are acting in their interests. As I write this, only 11% of Americans believe their legislators in Washington are doing a “good job.” And in the Towers Watson study, fewer than 4 out of 10 employees said they believed their managers were genuinely concerned with employee wellbeing.

Trust is not simply a matter of truthfulness, or even constancy. It is also a matter of amity and goodwill. We trust those who have our best interests at heart, and mistrust those who seem deaf to our concerns. Deceit and dereliction can undermine a relationship, but so, too, can a slow erosion of affinity and goodwill.

If legislative bodies are dominated by politicians who consistently put the interests of their financial patrons before the interests of their constituents, or who blithely sacrifice their country’s long-term economic security for short-term political advantage, then the institutions of government will be mistrusted—whether or not any ethical guidelines have been breached. Likewise, if business leaders treat employees like expendable “resources” while rewarding themselves handsomely, or hack away at employee benefits while retaining their own lavish perks, corporations will be viewed suspiciously—whether or not any laws have been violated.

I don’t know if institutional leaders have become less honest in recent years, but it does seem that they have become less responsive to the interests of their citizens and employees. The causes of this disconnect are many. In the case of government, they include a campaign finance system that turns legislators into special interest lapdogs, gerrymandered voting districts that shield incumbents from challengers, and a candidate selection system that gives undue influence to party extremists. In business, the misalignment is the result of competitive pressures that create incentives for wage arbitrage, of executive compensation systems that discourage long-term thinking, and of authoritarian management practices that undermine morale and frustrate contribution.

Another more insidious culprit is the centralizing impulse of both corporate and public sector leaders. Those who have power often want more of it—and are usually skilled at concocting arguments for why they should have it. Who can argue with the need for a “comprehensive solution,” for “harmonization,” “shared services,” “best practices,” or “economies of scale?” Yet as power moves away from the periphery and toward the center, individual influence wanes and policies become less attuned to local circumstances. The result: a population that feels aggrieved and impotent.

I believe the growth of the Internet has also been contributing to the rift between individuals and institutions. In recent years, millions of us have rushed to take advantage of the Internet’s open and meritocratic architecture. We have used the Web to express our opinions, to expose the misdeeds of the powerful, to build online communities and launch new, grassroots initiatives. And as we have done so, we have become less tolerant of the closed, top-down power structures we encounter in the offline world.

Whatever the cause, the data are clear: More and more of us feel that our institutions are run for the benefit of those who are leading them. Loyal Catholics around the world feel dishonored by their church’s laggardly response to the cancer of sexual abuse. Tea party activists feel disenfranchised by politicians who seem to take their orders from Beltway lobbyists rather than hometown voters. And frontline employees feel marginalized by managers who view them as semi-programmable robots.

When viewed from the bottom of the pyramid, the problem at the top is less blatant dishonesty than imperial disregard. It’s hardly surprising, then, that populism is an increasingly potent political force in the United States, or that job-hunting MBA students now rank “caring about employees” almost as highly as “starting salary” when evaluating a future employer.

As the economy has tanked, employees have become more concerned with job security. In the 2010 edition of the Global Workforce Study, Towers Watson found that employees are more willing than ever to trade employment perks (like training, bonuses and regular pay hikes) for job security. Problem is, it’s unlikely that any additional security will be forthcoming. Companies that didn’t reward fidelity and devotion in a tight labor market are even less likely to do so in the midst of a recession, when employees have fewer choices. Instead, it’s more likely that executives will use their newfound bargaining power to further trim employee benefits. The faltering economy may push turnover down, but resentment is likely to go up—a psychological phenomenon familiar to any parent whose college-educated children have been forced back home by a wretched job market.

Whatever happens to the economy, the threads that weave individuals and institutions together will continue to fray until leaders of all sorts rethink their fundamental assumptions about the relationship between human beings and organizations.

I think there’s a way of reconnecting individuals ands institutions, and in my next post I’ll throw out a few ideas on how to get started.

Now, dear reader, a couple of questions: Why do you think individuals have lost faith in their organizations? Are other factors at work besides the ones I’ve mentioned here?



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