Co-Dependence at the Helm
by Jim Finkelstein and Karen Sella of FutureSense, Inc.
We’re missing the point, and we’re all to blame. Somehow, in the culture of corporate America, we have decided that everyone else is to blame for the fundamental lack of ethics that we are witnessing. With the Enron and WorldCom disasters, we are looking to vilify the corporate executives who were at the helm, the Board, the advisors, the analysts. The President, Congress and business pundits are calling for reforms in accounting and accountability – all of which are necessary – but will not solve the problem.
In reality, the villain is our venerable culture itself—a corporate America that has allowed such shocking misuse of power to become so commonplace. In the quest for corporate celebrities, we have elevated mere caricatures of leadership into power and into office. It is time for all business people to stand up and take a stand—to recognize our complicity in our complacence and exercise more due diligence in our business relationships. It is everyone’s business to re-establish trust in business.
Can You Trust Your Trusted Advisor?
Perhaps, we should start with our most trusted alliances—our advisory relationships. It seems all too common these days to discover that the foundation of mutual trust between advisor and advisee has eroded beyond recognition—that there is instead an unholy alliance between advisor and advisee that is based on avarice and arrogance. Clients used to expect unbiased, third party counsel, and consultants used to provide it. Clients depended on consultants to provide impartial expertise, and consultants depended on clients to provide work opportunities. It was a simple contract based on a mutual regard for the truth.
Clients still depend on consultants to provide impartial expertise, and consultants still depend on clients to provide work opportunities. But the contract has changed; the truth is no longer regarded as essential. The truth is that clients don’t always want to hear what consultants have to say, especially if it challenges their assumptions, and consultants don’t always want to say what clients need to hear, especially if it costs them more business.
Today’s relationship between advisor/consultant and advisee/client is often predicated on the granddaddy of addictions—co-dependence. Clients pay consultants to say what they want to hear—not what they need to hear. And, consultants say exactly what will lead to the next piece of business—not what they need to say.
At $1Million+ A Year, How Objective Can You Be?
If you put yourself in the shoes of the Arthur Andersen partner who orchestrated a $25+ million a year account at Enron, or at WorldCom, or at Harken Energy, it’s not surprising. Imagine the power of “owning” that relationship, of leading a large team in “service” to that account. There is direct correlation between the value of that account and the number of Partner “units”—his /her measure of status and wealth—to which he/she is distributed personal income during the year. Believe it or not, a Partner with that type of account was clearly earning at least $1 million per year from that account alone!
When the client suggests that the sky is pink – and not so subtly alludes to the fact that many other consultants would agree—do you think that the Partner will reveal that the sky is blue? We think not. Despite claims to ethics and integrity, when faced with the possibility of losing the account—a choice between morals and money—many partners fail to tell the truth. After all, the truth is inconvenient. It’s much easier to simply agree that of course, the sky is pink—and pocket the green.
And so it goes. This unholy alliance—where the truth is never spoken—is established. Is this bribery? Not entirely. Is it co-dependence? Absolutely. The Client gets what they want—justification for their perspective; the Partner gets what he or she wants—a happy client and a fat wallet—until the truth is revealed, and they are exposed. It’s the co-dependent perversion of “the client is always right.”
Co-Dependence Beyond Creative Accounting Practices
Co-dependence in the relationships between advisors and advisees exists well beyond the field of creative accounting. We see it in relationships between consultants and clients, corporate executives and boards of directors, stockholders and analysts. It’s evidenced in the development of excessive executive compensation programs, the installation of problematic enterprise systems, and failed mergers and acquisitions.
Take executive compensation, for example. Executive compensation used to be about rewarding excellence in performance—where all stakeholders win—the employees, customers, shareholders and executives. Nowadays, corporations depend on executives to be prestigious figureheads, elevating the organizational status and company stock price; executives depend on corporations to elevate their professional status and professional stock price. While we can certainly argue that there are far nobler aspirations for organizations and their leaders, this alone is not without merit. It generally works well for everybody—until people get greedy. Then, the goal becomes celebrity status and corporate glory at everybody else’s expense. In a codependent relationship, both the corporation and the executive achieve widespread recognition and the company stock price and the executive stock price are raised (inflated) beyond reason.
How many times have we seen the demise of an organization where the Executives get theirs at the expense of everyone else? How many employees could be re-employed for the billions of dollars spent in aggregate floating obscene golden parachutes or “competitive” (or rather, excessive) compensation packages? Executive Compensation is out-of-control and demonstrates an unhealthy co-dependence between executives and the Compensation Committees of the Boards.
Then, there’s those widely touted and highly expensive enterprise systems. How many organizations have been encouraged to implement an enterprise-wide system by their “independent consultant” to see millions of dollars wasted on a system that doesn’t deliver the desired results? How many consultants provide “objective, third party” feasibility studies that simply validate the need for them to do the implementation work? Implementation revenues for the consultant may be ten to twenty times the amount they got for their “objective” work.
And, what about mergers and acquisitions – the transaction fees that occur when consultants secure an M&A account for just one behemoth is a legendary career maker. How often have you heard that at least 60%-70% of mergers or acquisitions have failed to deliver what they were intended to deliver to shareholders? The truth is that due diligence studies performed by trusted advisors typically only examine the financial fit – and frequently fail to explore the people and cultural fit (often referred to as the “soft stuff”). Most mergers and acquisitions fail because the people dimension is forgotten. Convenient, eh? Co-dependent—most assuredly. Check it out with the folks on Wall Street promoting these deals. What is their motivation to say no? And perhaps more importantly, what motivates them to say yes?
Twelve Steps to Battling Co-Dependence at the Helm *
Obviously, there are completely trustworthy and functional relationships between advisors and advisees, but with the increasing evidence of widespread ethical morass, we think that it is important to review the foundations of advisory relationships. An honest exploration all too frequently reveals a surprising erosion of ethics that requires a fundamental reconstruction or termination. It is time—really, long past time—to apply some reality checks—to reconstruct and re-establish the fundamental trust and integrity required—or should be required—to lead in business.
* The concepts here are derived from basic Twelve Step programs:
1. Admit you are now powerless over the entire situation and that the system is totally out of control!
2. Start believing that only a major change in how you conduct yourself in business is necessary or only government and regulatory intervention can restore sanity to this mess.
3. Make a decision to turn these relationships over to a truly independent advisory board or incur the scrutiny of government, Congress and Harvey Pitt.
4. Make an honest inventory and assessment of what is not working; stop being in denial that “it isn’t happening here.”
5. Admit to your stakeholders the exact nature of your relationships with advisors. Assure them that the Independent advisors are truly independent. Disclose your fees and the value received.
6. Be truly ready to make a change – not an incremental one, but a sweeping change – as to how you conduct business.
7. Discover the true meaning of the word – humility – and start building an ethical organization from the ground level – again and again if necessary.
8. Understand the impact that previous and new decisions have had and will have on all of your stakeholders – employees, customers, shareholders and executives – and be willing to change them if they do not meet the standards you have set.
9. Acknowledge the damage caused by these relationships and be willing to make amends to your stakeholders as necessary—particularly to people who have suffered unnecessarily (most likely your employees and customers).
10. List your relationships in the forms of assets and liabilities – and make the balance sheet work for you. Limit your liabilities and maximize your assets. Don’t hide behind the excuse that “it is too hard to change advisors” – sometimes it is the hard work that makes things better.
11. Develop a conscious awareness of the nature of all of your relationships and keep examining their ethics, values and morals.
12. Carry these messages to others in your business community.
It is only through constant awareness and commitment that we will break the cycle of this dysfunctional system—the unholy alliance between advisor and advisee—and bring trust and integrity back to the forefront.