How Good Governance Can Resolve Bad Behavior

Vincent Tophoff | September 15, 2014 | 1

In most organizations there are people that you want to work with and people that you have to work with. Of course, there can be many reasons for not wanting to work with someone—for example, personalities that don’t mesh—but, frequently, people find it difficult to work with colleagues who display bad behavior, such as bullying, currying favor, following personal agendas, criticizing or accusing people, badmouthing, yelling, claiming credit, displaying great disinterest in others’ activities, double-crossing, harassing, etc. Truly a very long list!

Bad behavior that goes unchecked seriously affects peoples’ efficiency and effectiveness and, through that, their organization’s performance. It is, therefore, essential that everyone in the organization, and management in particular, needs to identify and address bad behavior in a timely manner.

The flip side of this is that people who enjoy working together typically perform better and, thus, create sustainable value for their organization. Good governance transforms bad behavior into a positive spiral and professional accountants in business can support their organizations in this respect.

In an interview with IFAC, South African Governance icon Mervyn King said:

“You all have heard of ‘the tone at the top.’ I talk about ‘the tone at the top, the tune in the middle, and the beat of the feet at the bottom.’ The board and top management have to make sure that the whole company has bought into the strategy and is facing in the same direction. I know from my executive days that if you get your strategy right and you get buy‐in, you get ordinary people to achieve the most extraordinary things! But if you don’t get it right and it doesn’t fit in with the milieu of the day, you can have the most extraordinary people, but you won’t even achieve ordinary things.”

So, the tone at the top, the tune in the middle, and the beat of the feet at the bottom need to be in sync with each other, and any dissonant voices need to be corrected. This is especially true today as a growing body of research shows that bad behavior ruins much more than good behavior can heal.

But knowing this doesn’t solve the question of what to do about it. A good place to start is usually individual communication—getting people to communicate with the person concerned, as he or she might not be aware how his or her behavior comes across or affects the working relationship. This gives the offender the opportunity to improve, and perhaps a method to do so. This also gives the person objecting to the behavior a stronger position down the road if they have tried to resolve the issue themselves as a first step. Many people might not realize it, but being able to reasonably speak your mind and address these kinds of issues is also a sign of good governance in an organization.

If this individual, personal approach does not improve the situation, or makes it worse, it becomes time to consult others. People that come to mind first are the direct supervisor of the person or persons that persist in their bad behavior. Others options include the human resources department or specially designated counselors. The challenge is that many people perceive such steps as detrimental to their own position or career and instead suffer in silence, underperform or, worse, deliberately frustrate the achievement of the organization’s objectives, or resign. So, bad behavior does not always come to the surface easily or readily.

For that reason, everyone in an organization, especially management at all levels, need to be aware of signs of bad behavior, even ambiguous ones, and act on them. Some gifted managers have almost a sixth sense for identifying these issues but most don’t. Managers often interpret a lack of complaints or issues as a sign that everything is fine. They also need to be aware that the behavior they see and experience may not be the same as what lower-level staff members see and experience, which can make things worse. What is more of a motivation killer in an organization than seeing bad behavior rewarded?

So, as managers cannot trust what they see and hear themselves, they should establish and enforce top-down, formal governance mechanisms that are capable of timely detection of bad behavior and, subsequently, take action to resolve any surfacing issues. Examples of suitable detection mechanisms include open discussion, periodic staff surveys, 360 degree reviews, designated counselors, whistleblower policies, and exit interviews. Possible corrective measures include communication and consultation, setting good examples and ensuring they are followed, and having the difficult conversations with those involved and, in some cases, removing them from the functions or duties, or even the organization if necessary.

Once people see that issues are addressed, the organization will find itself in a positive spiral where people are less reluctant to come forward. This, in turn, enables the organization to better resolve any remaining issues and create an atmosphere in which people truly want to work together and, doing so, achieve extraordinary results.

Professional accountants in business are typically in a position of cross-functional leadership to plan, implement, monitor, evaluate, and improve the governance arrangements in their organization. Therefore, they should also be aware of the importance of these “soft” or cultural governance issues and ensure that they are appropriately addressed as well.

In recent years, the IFAC Professional Accountants in Business Committee has developed a number of resources that support professional accountants in these processes. Evaluating and Improving Governance in Organizations, part of the International Good Practice Guidance (IGPG) series, for example, provides a framework and principles-based guidance for professional accountants in business and their organizations. Recognizing that varied organizations and cultures take different approaches to governance, the guidance is based on the premise that certain factors and behaviors can lead to better outcomes and increased stakeholder value across all entities.

Defining and Developing an Effective Code of Conduct for Organizations, which is designed to assist professional accountants and their organizations in the development and implementation of a code of conduct in a values-based culture is also helpful and relevant for these issues.

Through support for their organizations in these delicate matters, professional accountants in business can greatly contribute to the creation and preservation of value in their organization! How do you contribute to resolving bad behavior in your organization?

Vincent Tophoff

Senior Technical Manager

Vincent Tophoff is senior technical manager with the Professional Accountants in Business (PAIB) Committee of IFAC. Previously, he was a partner at INTE-Q Integration Management, a management accountancy consulting firm in The Netherlands and senior lecturer at the postgraduate accountancy program of the Vrije University in Amsterdam.  See more by Vincent Tophoff

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Alan Johnson September 15, 2014

Last week I read an interesting survey of Board Leadership published on August 27th by the Harvard Business Review. I found the statistics interesting, although somewhat surprising. Despite pressure from shareholders and corporate governance bodies, the majority of publicly listed US companies still have the roles of Chairman & CEO combined, with very slow progress in the separation of these roles over the four year period 2008 to 2012 (S&P 500 from 39% to 44%), although more progress was made by the S&P 400 companies (up from 44% to 55%). In Europe there is a strong view that separating these two roles improves governance, and many national corporate governance codes require such a separation. Is this an area where more mandatory requirements might accelerate the separation of these roles and move towards greater global harmonisation?

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