When the winds of change smell foul……

Karen Nokes writes on hubris and what we learn from the Post Office management team recommending and then paying itself bonuses based on a falsehood.

When an organisation needs a culture change, where better place to start than with incentives and rewards? After all, rewards and incentives send a handy signal to employees to say, ‘can we have some more of this and maybe a bit less of this please.’ And where better to start in that culture change than Executive Remuneration. After all, the senior management in any organisation is responsible for setting not only strategy and vision, but also to set the ‘ethical tone’ for the business, to lead so that others follow – at least in theory that is how it should work.

In moving away from a previous reward scheme that saw what bonuses are paid to the upper echelons of the Post Office, the Post Office’s new executive reward scheme, the Transformation Incentive Scheme set a new range of Key Performance Indicators (KPIs) to hit in order for senior management to be rewarded with hard earned taxpayers’ money. Seems like a good move? How wrong could we be? Nick Wallis' excellent piece on the use of the incentive scheme to tie in ‘performance’ at the statutory inquiry succinctly sets out for all to see the truly rotten nature of this new KPI, the use of a non-existent confirmation by the Inquiry Chair of the KPI being met) and the roles played by various parties including Herbert Smith Freehills in having to ‘explain away’ what went wrong and the ex-Chief People Officer, Lisa Cherry. It seems that the Post Office now accepts it made a serious mistake (presumably in setting the metric in the first place) but one wonders how anyone in the Post Office thought the use of such a metric tied to their performance at the Inquiry was an appropriate one – it is quite shocking. And shocking with a very large dollop of hubris with a side order of a lost moral compass (lost years ago and there is no sight of it being regained anytime soon it seems).

The Post Office has long set itself up for being top of the leader board in the Hubris Hall of Fame, joining erstwhile winners such as Royal Bank of Scotland, Lehman Brothers and Carillion, who leaders gained infamy for not only the destruction of their own businesses but the destruction of anyone who was unlucky enough to be caught by the wake of their arrogance, recklessness, and greed. Hubristic leaders commonly overestimate their own abilities, are over-ambitious, remain invulnerable to the criticism of others and are truly wedded to their own convictions. Warning signs of hubristic leadership include leaders showing excessive confidence in their own judgment and a contempt for advice and criticism. This absence of the perceived wisdom of reflection and challenge are two main ingredients in “groupthink”, a psychological phenomenon where a group of people tend to overlook potential problems in the pursuit of consistency. History has shown us that is a commonly a recipe for disaster quite literally.

Hubris operates as a cognitive bias which systematically affects decision making. It leads people to see themselves as exceptional and believe that the normal conventions and standards don’t apply to them which is probably sounding all too familiar when one looks at the Post Office leadership and the behaviour of some of the lawyers concerned. Flawed decision making is much more likely to lead to unethical behaviour – hubris and moral awareness are not happy bedfellows – no need to think carefully about what people and information around you might be telling you could be ethically challenging – all you need is you. Myopathy rules here. The decision to set up the KPI for performance in the Inquiry in the first place is breath-taking – the very organisation that has caused years of misery to ordinary hard working people, been found to have wrongly prosecuted innocent people and to have had an extraordinary approach to the disclosure of information was seeking to publicly pat itself on the back for their performance in an Inquiry, set up purely to get to the bottom of what went wrong in their organisation. It reeks of arrogance, over-confidence, and the resounding belief that the Post Office can still ‘come out well’ in this scandal. Culture change in an organisation is hard, but it nigh on impossible when the hubris is at home.

Karen is a lecturer at UCL Faculty of Laws.