How Leadership Goes Wrong. Leaders Set the Tone from the Top.

How Leadership Goes Wrong. Leaders Set the Tone from the Top.

Not happy with the results you are getting from your people? Consider how you might be contributing to this. Next time you wonder why your people are not doing what you want them to, or behaving how you would like. Or when they are not meeting your expectations, consider this. You set the tone. You model leadership. Of yourself, your tribe, and your world. You show others what leadership is all about.

Want to be a leader? Then accept this responsibility.

In the early 2000s in Australia there was a huge news story in the finance markets. In one of the big four banks, NAB, a few traders on the foreign exchange desk made some bad trades, and they incurred losses for the organisation in the hundreds of millions. Rather than admitting this had happened, they decided they would try to recover those trades. They thought they would make better trades going forward, and they would recover the loss, and therefore there would be no need to tell anyone about the losses incurred.

A big cover-up ensued as the traders tried to recover from this loss. They couldn’t. The situation became worse over time, creating a huge exposure and financial risk for the bank. Yet it was covered up. Ultimately, there were many people involved in this cover-up process.

The information about the trading loss was not reflected in the reports being shared to managers, and then shared to the managers of managers, and ever more senior leaders. Eventually, the details of the loss and cover-up came out. It could not be concealed any longer, and there were significant implications arising. Investigations led to changes in some of the regulatory requirements in the Australian finance industry. This was huge front-page news for an extended period.

But here is the interesting thing. This activity happened in the depths of the organisation. This is an enormous organisation with thousands and tens of thousands of people employed, in Australia and around the world. What the investigation revealed was this: even though these activities happened quite low down in the hierarchy of the organisation, what allowed them to occur was the culture of the organisation.

These people, who were not only responsible for the loss, engaged in criminal activity by covering up and lying about transactions, and were falsifying the reporting in the organisation, thought that what they were doing was okay. They thought that it was in line with how the organisation operated. The investigation found that this culture was created by leadership because the people directly involved in the transactions and cover-up genuinely thought that what they were doing was congruent with expectations.

What allows something like this to happen?

The findings from the investigation were that the tone was set from the top. The way we do things around here is set from the top. What is okay is set at the top.

Despite not having any direct involvement in the dealings and activities of the foreign exchange desk, and being many hierarchical layers removed, the responsibility for the activities and outcomes of the traders and the losses belonged with the CEO and executive, because they created the environment in which this series of events could take place. Needless to say, jobs were lost, and charges laid.

As a leader you set the tone for what is possible, what is acceptable, and how you and your people create the future. So if you want a culture that is about creating a sustainable, relevant future for your organisation, it starts with you. You set the tone. If you want to have people step up and be accountable, to participate and contribute, you need to set the tone.

I’d love to know your thoughts.


(an excerpt from Big Leadership, How CEOs Create The Future)

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