A More Effortless Authority

Written by:

In all the years the U.S. society has tried to enact legislation to control conduct, we’ve never gotten it right. Instead, we’ve put in laws that are often overbearing and choking us, and at the same time, they haven’t protected people from harm. I invite you to look at the situation in a novel way, which will point to a more simple and elegant solution.

The Problem

Let’s take the case of the U.S. government trying to ensure we don’t create another economic recession similar to the one in 2008. The Dodd–Frank Act is a huge financial regulatory reform signed into law in 2010. It is heavily criticized as both insufficient to prevent another financial crisis or additional “bail outs” of financial institutions, and as having gone too far and unduly restricts the ability of banks and other financial institutions to successfully conduct business.

In reading the Wall Street Journal just one day last week, I saw some of the ridiculous results that this legislation is creating. The new Consumer Protection Financial Bureau, which was created by the Dodd-Frank Act, is set to begin reviewing non-bank financial institutions, yet they can’t articulate what they’ll be looking for in a way that makes sense to those who are being reviewed. Furthermore, the Volcker Rule, which is a section of the Dodd-Frank Act that aims to restrict banks’ ability to make bets with their own money but allows them to be made to hedge risk or facilitate customer trades, can’t be logically administered. The problem is that the only way to distinguish between the two types of bets is to analyze the traders’ intentions, which will require the judgment of a psychiatrist. This is crazy, and I haven’t even brought up the point of how much all of this is costing taxpayers. I question whether we need this legislation, at least to the degree that we’re taking it.

The Solution

Instead of this debilitating legislation, I propose that it’s enough to let the natural consequences be felt by those responsible and be visible to everyone else. For example, Dick Fuld is a great deterrent for any leader considering making careless or immoral decisions with other people’s money. He was the Chairman and CEO of Lehman Brothers during the financial meltdown in 2008. He’s become one of the most widely blamed contributors to the meltdown, and is now generally described as an outcast that is despised and to be avoided. The HBO movie “Too Big to Fail” reports that prior to the meltdown, Fuld held a billion dollars of Lehman Brothers stock that fell to a new value of $56,000. The firm says he left as CEO in 2008, with no bonus or severance payments. All you need to do is read a snippet of a post-2008 account of his life, and you know you don’t want to end up like him. He’s a fallen and shaken man, and he’s the best incentive for leaders to be more responsible in their roles.

This concept of natural consequences is reflected in how businesses deal with employees who make careless or immoral decisions. Let’s say an employee does something detrimental, such as decides to take a three-hour lunch break which leaves their team short-handed during a critical period. Some businesses would react by imposing new rules and management monitoring activities that try to ensure nobody ever does this again. Perhaps they tell all employees that lunch has to be taken between noon and 1p, and they station management watchdogs at building entrances to catch the offenders. One Fortune 500 company that I worked for did exactly this, and this is analogous to our government’s approach enacted by the Dodd-Frank Act. In contrast, a more enlightened approach would be to use natural consequences and reprimand the one employee, get his team to articulate the negative impact that his actions created, make all of this visible, and expect that it won’t happen again. The former approach causes indignation toward overbearing management and an over-bloated management hierarchy to do all the supervising, whereas the latter approach causes a natural reaction of no more long lunch breaks.

What Needs to Change

So why aren’t we letting natural consequences be the deterrent to careless or immoral behavior? My explanation is likely to be controversial, yet worthy of consideration.

It seems we think we need an authority figure to keep us from doing bad things. This stems from a widespread belief that we’re inherently immoral and must be controlled. Many of us were taught we are naturally sinful and need an authoritarian God to keep us straight, and this leads us to believe we need an authoritarian government to keep us straight. Let’s recognize that this belief was instilled by zealots who wanted to solidify their power, and it’s time to let it go. Many businesses have realized that authoritarian management doesn’t create the best results. These days it would be much more difficult to find management watchdogs stationed at the entrance to buildings. Let’s take a cue from the business realm and put more trust in people and in natural consequences.

Do you believe that natural consequences can be an effective answer to our overbearing legislature? Are there other countries that react differently, perhaps letting natural consequences be the guide?

As we learn more from neuroscience about the incredible power of group emotions, we see reasons to adopt techniques beyond the ordinary. For more on shaping team emotions to increase creativity and performance, including research references, get notified of the upcoming book Primal Teams: Harnessing the Incredible Power of Group Energy or sign up for a monthly summary of articles.

9

About the Author:

Jackie Barretta is a writer, speaker and consultant helping organizations strengthen agility and performance by shaping emotional energy. She is a thought leader bringing to light the new science of group emotional energy and connecting it to business performance. She has had a 28-year award winning career as a C-level Fortune 500 executive and Big Four consulting firm professional.
  Related Articles

Comments

  1. John Anderson  January 24, 2012

    Jackie — I totally agree but allowing “Natural Consequences” would require personal responsibility and you know we can’t have that.

    If people were responsible and accountable for their actions and public disclosure of inappropriate and/or illegal behavior were possible without getting sued, we would get better results.

    Unfortunately that is not going to happen because the people in power do not want to give it up and the people who’s major recourse if voting are a combination of uneducated, uninvolved, apathetic or just like being taken care of.

    reply
  2. Deanna B  January 24, 2012

    your article is really something to think about. when someone gets caught and you see their correspondence indicating they know exactly what they’re doing, what the likely outcome will be, and how little they care about the people who are getting screwed, you realize there is a need for SOMETHING. however, whatever laws eventually get passed usually have so many loopholes that there are no real teeth whatsoever.

    i would so love to believe that natural consequences can be deterrent enough, but we see that not to be the case over and over again. once, i was talking to a childhood friend with a masters in geology about a company who was knowingly polluting water with horrible chemicals that caused all kinds of health problems in the surrounding community. i was appalled that the company could consciously do that and my friend replied that it wasn’t illegal then so why should they stop? this is a person who has children and considers herself a good christian.

    greed is an unbelievably effective motivator. i believe someone who has that sickness is unlikely to think about any possible consequences. maybe we should even let the TBTF companies go down. maybe we need to build our economy back up from the foundation.

    i believe the whole system needs to be set up differently, probably something similar to our original protections in glass-steagal, plus a lot of emphasis on local cooperation and eliminating the central banking system. even in a global economy, i don’t believe that everything (ex. food production, manufacturing) needs to be done at that scale.

    legislating conduct is a very slippery slope towards the distopia of thought police and the like. we already head in that direction with the inclusion of hate crimes, etc. i understand the reasons we need them, but don’t know what it will take to get to the point where we don’t need them.

    reply
  3. Jackie Barretta  January 24, 2012

    Deanna, you bring up some good points. I’ll add that in the case of the company that was polluting the water, the natural consequences could be that the public finds out about it and stops buying their products. So their finances would be impacted. I’ve often thought that we need a better, real-time method to inform consumers of which products on the shelf are green vs. not green, etc. Maybe there are such methods already?

    reply
  4. Mark Adams  January 24, 2012

    It is a fascinating issue. I remember Henery Miintzberg several years ago talked about types of coordinating mechanisms (rules, practices, policies, guidelines, and values I believe). He argued that each form of coordination control had appropriate and inappropriate applications regarding control of organizational behavior.

    Legislation appears to rely on the rules and procedures level of human coordination and control. Governments along with those who petition governments to act seem to prefer this rules and procedure oriented action. I can’t recall an instance where governments opted for a more “self directed” options like guidelines or values.

    It seems that when governments get involved they are asked to limited, reduce, even stop discretionary behaviors. Thus using rules oriented legislation is the safest course for them in terms of responding to the urgings of their critics, lobbiests, advocacy groups.

    reply
  5. Ashwin Baindur  January 29, 2012

    I don’t think this will work. We don’t live in an ideal world. Everyone does not have the same values of integrity, honesty, fairness, etc. Your assumption that it is generally one person’s “bad” behavior that leads to overbearing legislation is not correct. How many people are circumventing current tax laws and avoiding paying their rightfully due taxes ? The 2008 meltdown wasn’t due to one person or company. Madoff isn’t the only person to have launched a multi billion $ ponzi scheme. Why isn’t our data safe on the internet and why do we have a multi billion $ security software industry ? The list goes on and on. Folks who think that laws are meant to be broken would have no scruples if there were no laws. People thrive on being innovative and ingenious in breaking laws which in turn leads to a vicious circle of more laws to plug those holes.
    Letting natural consequences be the deterrent to careless or immoral behavior would be too late in most cases. Memories are usually short and those people would be back in business in no time. Asking forgiveness after ruining people’s lives doesn’t help if there’s no way to repair the damage done. How would such wrong doers be severely punished (via fines/jail-time) if there are no guidelines to demarcate right from wrong ?

    reply
  6. Jackie Barretta  January 29, 2012

    Ashwin, it’s interesting that most of what you’re saying about natural consequences can be said about legislation. Legislation is 1) ignored by millions in avoiding taxes, etc., 2) not deterring folks who have no scruples, 3) not deterring people who thrive on being innovative and ingenious in breaking laws, 4) too late in most cases, and 5) not repairing the damage done in most cases. So trying to control thru legislation isn’t working, yet we spend trillions trying and we choke legitimate commerce in the process.

    After what’s been publicized about Madoff, nobody is going to do business again with him even if he could do business. And if people knew about others like him, they wouldn’t do business with those folks either. Natural consequences work with larger numbers, as long as there’s visibility. And by the way, I’m not saying there will be no jails…there would be basic “protection” that when broken would result in jail time.

    I really think your points, of which I agree with many, make the case for natural consequences even stronger.

    reply
  7. Ashwin Baindur  January 29, 2012

    Jackie, I see what you’re trying to say. I’m all for none or minimal legislation, but I’m struggling to visualize the full outcome/success with just natural consequences. Let’s consider some analogies.

    Say you left your barn door open for a short while and your horse bolted out. Should you now close the barn door ? If there was only one horse, maybe not. If there are multiple, maybe you should. You could always go search for them and rope them in, but it can be expensive and time consuming.

    Consider airport security. Some folks once tried to smuggle in explosives material onto an airplane in their shoes or a lotion bottle or tube. Airport security is now all focused on these. Would anyone now try to smuggle explosives the same way ? Not as long as airport security is focused on these. People may try other ingenious ways. Can we afford to not have airport security implement rules that tubes and lotion/liquid bottles not be present in carry-on luggage ? No, because having a suicide bomber blow up an airplane is not a risk we can take and leave to natural consequences.

    The point here is that we may need/want legislation for certain things, whether to act as a deterrant and significantly reduce offenders, or prevent them altogether. End result may be reduced expenses somewhere or prevention of a catastrophe.

    OTOH, there may certainly be areas where we don’t need any legislation or need minimal legislation, relying on natural consequences. So instead of going into a death spiral, using knee-jerk reactions to cover every loophole every time it’s found, we should certainly take a rational and pragmatic look before adding new legislation. Sometimes, one may need to start from scratch for a fresh look.
    In some cases, not having any legislation could mean setting a lower bar (or lower moral values) which gets accepted in future generations as the way of life, leading to moral decay of society. We need to be careful we don’t go down this path. One would also need more vigilance and quicker exposure of bad practices (if we can define what bad is).

    reply
  8. Peter Donlevy  January 29, 2012

    Jackie, it seems to me to be the opposite, the type authority granted by laws is effortless. It is authority that is not mandated that requires us to act as leaders to inspire people to act the way we believe they should. Even policemen will tell you that when facing a group of people the law only gives them limited authority to get people to act. Their demeanor and the way they interact with people is what causes people to follow their commands without resistance.

    I agree that laws should be minimal. As I’ve stated in other discussions we should view this as a clock with Anarchy (no laws) at 11:59 and Totalitarianism (total control) at 00:01. Minimal laws (Libertarianism) 9:00, Central committee collective rule (Socialism) 3:00. European style (Social Democracy) 4:00 – 5:00, US system between 6:00 and 8:00. Capitalism (the natural expression of commerce by free people) occurs between 3:00 (fully constrained) and 11:59 (unconstrained).

    I suspect that even though people have said I seem a tad to the right of the John Birch Society (9:15?), I would place more constraints in the form of laws than you. Let’s keep in mind however that most of us are within the 5:00 – 7:00 range and definitely within the 4:00 – 8:00 range.

    @Ashwin, airport security is in my view an example of over-reactive rules. Before 9/11 airlines were responsible for security which they did through contractors. In the seventies hijackings tended to be relatively non-violent affairs. Based on this crews were instructed to not resist hijackers even with minor weapons like box cutters. As for bombings positive bag match, (bombers unlikely to travel with their bags containing a bomb in the hold) was introduced in the ’90s.

    The only real hole in the system was the conflict of interest for the airlines. Yes airlines want safety above all but the safest airline is one that doesn’t fly. So to respond to customers wants and needs airlines had to balance security with customer demands for quick easy service.

    After 9/11 the Bush administration way over-reacted on this. Control and oversight of airport security could easily have been taken from the airlines without federalizing the contractor workforce.

    Restricting a businesspersons hair gel to 100 mg / 3.2 oz is overkill. Instead we should get over our idiotic obsession with appearances and screen the most likely threats. Yes Profiling. Treating all people as suspected terrorist until proven otherwise is the same lazy use of authority that leaders take when they put excess rules in place to respond to their own failures to address problems head on.

    In the case of our person taking a three hour lunch, challenge the PERSONS behavior immediately then layout the expectation going forward to everyone. When they cross the line again without an acceptable reason, Fire them. When leaders set expectations and enforce failure to respect them and reward people who adhere, there is very little need to police your employees.

    reply
  9. Jackie Barretta  January 29, 2012

    Peter, I agree that it’s much easier to lead when all you’re doing is enforcing the rules. It’s true that it takes real leadership to inspire and direct when people are more empowered and self-directed. I used to lead a 700-person IT group, which consisted of self-directed teams, and my Directors and I used to always say that our job would be much easier if we just told people what to do. So I guess saying that natural consequences are “more effortless” may not have been the best choice of words. However, as far as creating a business or society that really works, I hold that we can get there with less effort without all the rules and legislation, and in fact, we’ll never get there with all this legislation. It’s an ineffective crutch.

    Can you be more specific about which laws, “in the hands of an untouchable administrator”, you would change if you could?

    Ashwin, your airport security analogy points out something important. People expect the government to put in more legislation when something bad happens. They see it as a sign that the government is doing their job. And this is the root of the problem…people believe we need to legislate morality. The government is just responding to this belief in order to stay in office. It’s the belief that needs to change.

    I agree that natural consequences isn’t the full answer. In the case of incidents such as terrorist attacks, we need to do a better job of addressing the root causes of why people want so badly to kill us that they’ll kill themselves in the process (and it’s not because they’re just evil or hate freedom, as some would have us believe). This also takes a lot more effort than just passing new legislation, but it’s necessary. I think we’re all agreeing that simply putting in reactive rules to prevent the re-occurrence of events that have already taken place is ineffective and debilitating.

    I’m really not advocating for a lack of laws, but rather trying to get people to see that we’ve taken it too far and there are better methods to create the society we desire.

    reply

Add a Comment