Image via Wikipedia Xenophon

An ancient phrase says that a fish rots from the head down.  The phrase is known in China as well as Europe in the middle ages. http://www.phrases.org.uk/meanings/fish-rot-from-the-head-down.html  What is interesting about the consistency between the meanings for the phrase is the idea that the top determines the content.  Therefore, if the leader is tyrannical, then the organisation will follow suit.

In many ways, the great corporate scandals have reflected the problem of a fish rotting from the head. Enron was a case study in leadership gone nearly amok. http://en.wikipedia.org/wiki/Enron The Chairman (Ken Lay) unable or unwilling to intervene and see the problems for what they were.  A Chief Operating Officer (Jeffrey Skilling) pursuing personal gains that became a criminal activity.

A good business advice article applied this phrase to show how leaders set the tone within the company. http://www.smartbiz.com/article/articleview/228/2/3/.  On the surface, this makes sense.  If the leader is dour and demanding, the staff will be defensive and seek to avoid blame.  If the leader is supportive and outgoing, the staff will show it.  However, there are some issues to consider.

First, such a theory assumes that the leader’s will is all determining.  Many organisations thrive despite weakness, venality, or tyranny at the top.  In all but a few cases, the leaders only are able to influence their immediate reports and a few others.  Their own role is only part of the story.  What we need to consider is something else.

The second issue to consider is that for a leader to disrupt their organisation or create a toxic atmosphere, they need people to enable them.  There has to be officers willing to comply with the tyrannical aims, the venality, or the toxicity for their own purposes.  They may do this out of fear, or favour, or simply because they subscribe to the same views and approach.  At the same time, though, there is a third area to consider, the organisational structure.

For any organisation to go toxic, there has to be an organisational structure, that allows the toxicity to take root and then to flourish.  Here is where transparency and accountability within corporate governance can help, but also where it can hinder.  I say hinder because as these organisational checks are undermined (over time) the organisation starts to weaken, become vulnerable to corruption, and then becomes toxic.  The case of Doncaster Borough Council is indicative of change over time.  The problems developed and festered over 15 years before the Government took the dramatic step of direct intervention to resolve the toxicity.  The problem did not develop in an instant or because of one person. The toxicity developed over time and because of the people and the systems.  The press release is here: http://www.communities.gov.uk/newsstories/localgovernment/1587704112   The full audit report is here:http://www.audit-commission.gov.uk/inspection-assessment/local-gov-inspection/reports/Pages/201004doncastermetropolitanboroughcouncilcorporategovernanceinspection.aspx

What this illustrates is a problem endemic since ancient times.  The desire to understand, and if possible overcome, the decline and fall of regimes.  For the ancient philosophers, the question was to find a regime that would not decay or be destroyed from within and still be amenable to the good life.  While Sparta survived for over 1000 years, its internal life was not conducive to philosophy.  As such, the goal was to find and sustain a decent political order.  To that end, the philosophers looked at the sources of corruption within a regime and why they decline.  In particular, Xenophon looked at the example of Cyrus the Great. He came to power, changed Persian customs and after he died, his empire collapsed. (From Republic to Empire: Political Revolution and the Common Good in Xenophon’s Education of Cyrus, Nadon, Christopher American Political Science Review 1996, Vol 90; Number 2, pages 361-374.

http://www.jstor.org/pss/2082890)  What was interesting within this example, is how Cyrus worked to change the institutions within the Country to achieve his ends.  In that regard, the small changes became larger problems. To be sure, he was a dynamic leader casting great influence across the regime, and yet, he changed the institutions that would have resisted or at least curtailed the excesses of his vision.

In modern organisation, the same institutions exist.  In the case of Enron, the Board of Trustees was slowly undermined by the profits as well as the lack of information needed to curtail the excesses.  When they did find out, it was too late for the organisation. In another area, the HR function worked to corrupt the organisation.  The rank and yank process for selecting managers for promotion or retention became corrupted. http://en.wikipedia.org/wiki/Vitality_curve The appraisal system, intended to reward initiative, talent, and hard work, became an instrument for discipline, dismissal, and favouritism. What is particularly interesting is the following article that describes Skilling’s role in developing that culture. http://articles.latimes.com/2002/jan/27/news/mn-25002

For stronger view of HR’s role in Enron’s problem, see the following: http://www.drjohnsullivan.com/newsletter-archives/46-did-hr-cause-the-downfall-of-enron

At the same time, the institutions and the people within the organisation matter as well.  The leaders may set a tone, but it is the people and the institutions that slowly bend to their will or dismiss them.  For example, the rise of a blame culture or a blame avoidance culture is only partial directed from the top.  Senior managers as well as middle managers have a choice as to whether to work that way or to encourage it.  In many ways, the blame avoidance culture can be a sign of emergent toxicity. Here is a good description of the issue by Christopher Hood but related to a different issue of transparency and blame avoidance.

“That is why a number of widely observed but often-criticized behavioural patterns in public management seem to constitute a set of agency, policy and presentational strategies that lie precisely on this troubled frontier territory between the force of transparency and the apparent imperative of blame-avoidance. Examples include the well-known phenomenon of managers ‘managing to audit’ to minimize the risk of blame, the learning problems that arise in politicized blame-obsessed organizations where any admission of failure is taboo and apparent disproportionality in approaches to some kinds of risk (such as ‘gold-plating’ in the transposition of guidelines or directives to lower levels, efforts to eliminate the last few per cent of any problem, irrespective of cost (Breyer 1993), and a preference for blind rule-following over common sense or sensitivity to context)”. (What Happens When Transparency Meets Blame-Avoidance? Christopher Hood Public Management Review, 2007 – Taylor & Francis)

One way to look at this is to consider the amount of policies and procedures that you have to follow at work. If your judgement, initiative, and instincts are constantly constrained then you may need to reconsider the corporate culture.  For leaders, the same issue applies, but from a different direction.  What are you trying to achieve by developing policies, procedures, and guidelines that create blind rule following?  Are you encouraging your middle managers to develop policies and procedures where common sense and judgement are better suited? If common sense and judgement cannot be allowed, what are you telling staff? Will that encourage staff to speak up and resist the excesses that lead to toxicity, or will it encourage them to follow the rules and allow the toxicity to develop?

While the rot may be most apparent at the top, the rest of the organisation is part of the process. In the end, the toxicity or “rot” of an organisation is from the inside out and not from the top down.  The cure begins within and that is where managers must look.

Related articles

• Ten years on, what leaders need to learn from Enron (theglobeandmail.com)
• A Toxic Leader Manifesto (psychologytoday.com)