How the Co-op bank got it seriously wrong, a cautionary tale of the darkside of leadership

 

The Co-op, the “ethical bank” has surpassed itself! 

The latest events at the Co-op are in keeping with the recent events that have blighted the banking sector.

Two of the more high profile banking fiascos have been the demise of the so called HBoS 3  and the dramatic fall from grace of the ex-Chief Executive of RBS, Sir (now Mr.) Fred Goodwin.  

The so called HBoS 3, namely the former Chairman, Lord Stevenson, former Chief Executives Andy Hornby and Sir James Crosby.  These men, according to the Government's Commission on Banking Standards, led a bank whose business model was “inherently flawed”,  and served on a board that was a "model of self-delusion".  They managed to land the taxpayer with a £28bn bill for good measure.

Fred Goodwin , who, according to recent reports,   obsessed  on minutiae – from office hygiene to the design of Christmas cards – at the expense of the responsible strategic management of a world-leading investment bank, which collapsed spectacularly requiring a £45.8bn government bailout.

However, there is one thing that separates the so called HBoS 3 and Goodwin from Paul Flowers, the now disgraced, former Co-op Bank chairman; at least Stevenson, Crosby, Hornby and Goodwin had CV’s, if not personalities, that might suggest they were up to the job of running a major bank.

 In this blog I will be examining, how the very traits that make leaders successful, can develop in to dysfunctional dispositions that can cause them to derail.

In the Flowers case, there is a bigger governance issue, but again I am not surprised.  In the tradition of putting a DJ and television presenter in charge of a Broadmoor task force (any half decent background check would have shown that Saville was not remotely suitable).  The Co-op Group put a Co-op movement activist in charge of its bank (again any half decent background check would have shown that Flowers was not remotely suitable), for good measure, like Saville, Flowers had no qualifications to suggest he had the technical know- how to carry out the duties of the role.  These are issues about governance, and are for another day!   However, generally speaking, I am surprised at how often there are no meaningful background checks carried out for key executive appointments.

 

When selecting leaders most organisations look for the competencies they do want, rather than the behaviours and traits  they don't want.  In fact, some dysfunctional behaviours, when displayed by intelligent, educated middle class individuals, can be considered an  asset.  Bullies can be described as "not suffering fools...", egotist as "having self belief ..." , and recklessness as "being willing to take risks".   At certain points in the business cycle these personality traits can prove useful, but in the long term they are almost always unhelpful and destructive. 

The fact is, when considering individuals for selection or promotion to a leadership role, the focus is usually on the "bright-side" of the candidate’s leadership personality.  The bright-side of leadership personality reflects a person’s strengths and weaknesses when they are on their best behaviour.

  

 An example of the bright side characteristics we often look for when selecting or promoting leaders include:

·         Self confidence

·         Assertiveness

·         Tough mindedness

·         Attention to detail

·         Drive

However, when selecting leaders, we rarely consider the "dark-side" of their leadership

personality.  "Dark-side" characteristics are invisible at interview or assessment center, but become apparent when leaders  are under pressure, or when they let down their guard down.

It’s not difficult to see how Stevenson, Hornby, Crosby, Goodwin and Flowers have bright side characteristics that would excite interview panels, shine at assessment centers and impress on social occasions.

 

•  Goodwin has a very impressive intellect, an eye for detail, and was brimming with self-confidence and self believe.
• The HBoS 3 were bright, savvy, highly experienced business leaders with terrific track records
• Flowers, a politician and a “committee man”, is described as clever, persuasive and forceful

However poor leadership is not simply just the result of the absence of "bright-side" characteristics. Individuals can have “dysfunctional dispositions”.  Dysfunctional dispositions are strategies, often developed in childhood, but that continue to be used in adulthood in ways that are no longer effective.  The over reliance on these inappropriate interpersonal strategies, can become unhelpful and dysfunctional.  In many cases It is not that the person is inherently bad, but that they have employed the wrong strategies.  In that sense, people can be overly accommodating, overly attentive to detail, overly analytical or overly assertive.  They can, in fact, have "too much of a good thing”.

 

Paradoxically, the factors that have helped achieve success in the past in more junior, less strategic or less interpersonally demanding roles, can be the very factors that are responsible for derailment.  Studies suggest that when looking back on those whose careers have derailed, there are often little foibles and peculiarities, around social skills, and emotional regulation such as:

 

• Temper tantrums
• Sarcasm or bullying
• It’s never their fault
• Overreaction

Articles, biographies and press reports often point to the interpersonal idiosyncrasies of those people whose careers have derailed:

 

·        Fred Goodwin obsessed over minutiae from the colour of biscuits to the design of company    Christmas cards. He also bullied those around him, and often intimidated others from speaking their own mind, for fear of his reaction

 ·       Lord Stevenson claimed the reckless lending at HBOS was not his fault, because he was "only there part time"

·         In 2005 Sir James Crosby sacked Paul Moore, the senior risk manager of HBOS, for warning the bank that they were getting dangerously exposed.  He then replaced him with someone who had no risk management experience.  

·       Hornby has been criticised for establishing a “high pressure sales culture", and for pushing HBOS into risky lending to drive profits, with little regard for the long-term cost. 

·         A picture of Flowers is emerging as an individual with narcissistic self-belief. He has described himself as "known for an objective rigour and for asking the questions others might avoid".  He has been described by others as an insufferable and pompous person, who throws his weight around, and considers those less educated than him as peasants.  Also as some one who doesn't take blame or criticism.  When he was vice chair of the Rochdale Social Services Committee, it was heavily criticised for taking “at risk” children in to care, to protect them from alleged satanic abuse.  Although no evidence was ever found to support these claims, Flowers launched a passionate defence of the staff involved.

 

At People Based Solutions we don’t consider it inevitable that dysfunctional dispositions will prevail.  However, we do believe that organisations can make bad appointments.  Looking at the "dark-side" leadership characteristics and identifying  potential leadership derailers, can help reduce the liklihood of poor appointments.   However, mangers and leaders who are open and responsive to feedback, motivated to change, emotionally literate and behaviourally flexible, have the capacity to deliver effective leadership.  With appropriate training and coaching, to help manage and control their dysfunctional dispositions those in leadership roles can avoid the pitfalls of their potential derailers.

At People Based Solutions we offer a leadership selection framework based on the Hogan Suite  that helps identify candidates' "dark- side"  dysfunctional dispositions as well as their "bright-side" characteristics, and how a candidates values and believes accord with those of the wider organisation or team.  Allowing the organisation to decide whether to appoint or promote, and if they choose to appoint or promote, to identify where best to focus any coaching or development efforts.

 

We also offer a leadership development programme the Adaptable Leader with modules that:

·         Develop emotional intelligence

·         Encourage self-awareness

·         Promote behavioural flexibility

This article has been posted by Sean McCann, the Managing Director of People Based Solutions an HR consultancy specialising in leadership selection  and development. If you would like to know more about the Adaptable Leader Programme, either public courses or in house for your organisation, or about support for your leadership pipeline, contact us at:

enquiries@peoplebasedsolutions.com