Welcome back to another episode of The BIS Podcast! This week's guest is Professor Linda Treviño. Her research and writing on the management of ethical conduct in organizations is widely published and known internationally.
Treviño is the Distinguished Professor of Organizational Behavior and Ethics, and Director of the Shoemaker Program in Business Ethics at the Smeal College of Business.
00:00 Cindy Moehring: Hi, everybody. I'm Cindy Moehring, the founder and Executive Chair of the Business Integrity Leadership Initiative at the Sam M. Walton College of Business and this is The BIS, the Business Integrity School podcast. Here, we talk about applying ethics, integrity and courageous leadership in business, education and most importantly, your life today. I've had nearly 30 years of real-world experience as a senior executive. So if you're looking for practical tips from a business pro who's actually been there, then this is the podcast for you. Welcome. Let's get started.
00:36 Cindy Moehring: I have with me today, Professor Linda Trevino and I'm so excited to have you here with us today, Linda. Thank you so much for joining us.
00:44 Linda Trevino: I'm happy to be here. Thanks for inviting me.
00:47 Cindy Moehring: You bet. I've had the pleasure of knowing Linda for over 10 years in the industry. She is a professor at Penn State and has been there since '87. She's a Distinguished Professor of organisational behaviour and Ethics and the Director of the Shoemaker Program in Business Ethics in the Smeal College of Business. She served as Chair of the Department of Management and organisation from '99 to '04 and she holds a PhD in management from Texas A&M University. And as many of you will know, her research and writing on the management of ethical conduct in organisations is very widely published and is known internationally as well. And I'm just really excited to have the opportunity to dive into this conversation with you today, Linda.
01:31 Linda Trevino: It should be fun.
01:32 Cindy Moehring: Yeah, I agree. So we are exploring through a series of just videos and podcasts, how the field of ethics, leadership, to the extent that it's included within their integrity, governance, risk management, how all of that has really advanced over the last 25 years or so. And in particular with respect to business ethics, several years ago, it was criticized for the way it was taught at universities and the I thought was then it was too general and too theoretical and just impractical, it wasn't of any use to students. So you were teaching then, I'd like to know what your thoughts were about that back then, and whether or not you think it's still the case today?
02:28 Linda Trevino: So it's funny, I was doing research in the area of behavioural and organisational ethics. I actually wasn't teaching business ethics in 1993 when Andrew Stark wrote his article, I was teaching organisational behaviour, and one of the reason... And management, and one of the reasons that I wasn't is because I couldn't find a textbook that I wanted to use and would feel comfortable using. So at that time, virtually all of the textbooks were written by philosophers and they would lay out... This is I'm generalizing but I think it represents most of the textbooks. They would lay out the normative theories and then apply them to cases and say, "This is what you should do," and that's useful. But it just wasn't me 'cause I'm not a philosopher, and I'm very open about that. I am a social scientist, and I saw business ethics as a management issue, and that's the way I had been studying it, that's the way I intended to study it. So I ended up having to write one and I did, and it was, the first edition was published in 1995, and that's around the time I think I started teaching it.
04:09 Cindy Moehring: Undergrad. So at the time, it sounds like you would have agreed that back in the day, business ethics and the way universities were approaching it, was more from the theoretical and philosophical perspective, and so what are...
04:24 Linda Trevino: For most.
04:25 Cindy Moehring: You saying is you added your voice to that in a completely different way and added a number of different elements to it. So I really wanna talk about the future of all of that, but first, we have to go through where we are today and what the advancements are that have been made in the last 25 years before we can really get to, where does it need to go in the future. And I think you've made some very dramatic advancements in the way business ethics is thought about and now taught and I know that you are both teach and do some research, but the behavioural ethic side of it is and the social science side of it, it is a really big piece to me, that you've added, that you've put your fingerprints on, and they're certainly are addressed in your book. Can you talk a little bit about that and how you think it's advanced the field to where it is today?
05:21 Linda Trevino: Yeah, I think it really has made a huge difference. So we still have people in the field of business ethics who come from these different backgrounds, and I think they all have contributions to make, but I clearly was trained as a social scientist, and that's the path that I was gonna pursue. I was very much alone when I first started it. There were a few people out there who had done a study here and there, but there really was very little. When I first started working on my PhD, it was the 1980s and mid-1980s and we had scandals which people thought were unique [chuckle] to them. This business ethics thing is a fad, we're not gonna need it in a few years. And I always came at it from basically a couple of perspectives. So if you study organisational behaviour, you look at individual differences, things about people that might influence their behaviour, some people have different personalities and other characteristics that might make them more prone to engage in certain kinds of behaviours but there's also environments.
06:49 Cindy Moehring: So Linda, you've made a number of advancements in the field with this thinking about behavioural ethics and social science and all of that and actually co-authored an article with a professor at the University of Arkansas that I work with, Jennifer Gephart, who was a student of yours back in the day...
07:08 Linda Trevino: Yes, she was.
07:10 Cindy Moehring: But it was a really great article where they talked a little bit about bad apples and bad cases and bad barrels and the article was in the, the academic article was in the Journal of Psychology, Applied Psychology, I think it was about 10 years ago. But the article was just brought current again this year and was on the website for the Network of Business Sustainability, and they made it applicable to the events of today. But could you tell us a little bit about what was meant by bad apples and bad cases, and bad barrels?
07:48 Linda Trevino: Yeah, and I'll also give credit to David Harrison, who was also on that paper. It was a meta-analysis and he was an expert in how to do those. So meta-analysis is a study of studies. So what we did was pull together, and I have to say Jennifer did most of the actual legwork on this to pull together a whole bunch of studies that had looked at this question about what makes people make ethical choices. Is it something about the individual characteristics that had been studied? Is it something about the situation, like the moral intensity of the situation, the case, or is it something about the context? Is it something about the climate or culture? When something bad happens... Let's take the case of Wells Fargo, which I think a lot of people are familiar with.
08:51 Cindy Moehring: Sure.
08:54 Linda Trevino: They had a lot of problems with their salespeople engaging in behaviour where they were opening accounts for people that people didn't want, and it got pretty serious to the point where they were committing fraud. And this kept happening, and it happened over years, and the bank knew about it. And they put in place things like some training, and they fired a lot of people...
09:28 Cindy Moehring: Yeah, they did.
09:29 Linda Trevino: They did, over 5000.
09:31 Cindy Moehring: Right.
09:33 Linda Trevino: Now, I think if you're firing 5,000, 5,300 I think was the number. If you're firing that many people, I don't think it's a bad apples problem, I think you need to look at other potential problems. And if you look at that organisation, it doesn't take a rocket scientist to figure out that there was something rotten in the barrel that was causing people to behave this way. And the incentive structure that they had, that went all the way from the top down through layers in the organisation, basically incentivized this behaviour.
10:15 Cindy Moehring: Right.
10:16 Linda Trevino: And people feared that if they didn't do these things, that they'd get fired. And this was happening post-financial crisis, the last one, not this one, and there weren't a lot of opportunities out there. So people felt like they had no choice but to engage in these behaviours and their managers were incentivized too for their people to... And the bottom line was that the CEO even, I think in writing, wanted people, wanted every employee to shoot for selling each customer eight products when the industry average was between two and three.
11:07 Cindy Moehring: So quite a stretch goal there.
11:10 Linda Trevino: Yeah, it's more than stretch, it's break.
11:11 Cindy Moehring: Right, right.
11:12 Linda Trevino: Right? You're stretching so far that you're gonna break...
11:16 Cindy Moehring: And it breaks.
11:17 Linda Trevino: And it was basically an impossible goal, and they kind of knew it, but they justified away all of the bad behaviour they were seeing as something that happens in a retail environment. So the way they talked about themselves was we're a retail establishment, they had a lot of turnover too, they said, "Well, you see that, you see that in retail."
11:47 Cindy Moehring: Yes.
11:48 Linda Trevino: Instead of thinking about themselves as a bank, where you don't see as much turnover really. So they weren't looking at the root cause, they weren't looking at the culture of the organisation, and especially the performance management system, which is such a key part of the culture and leadership messaging. So if you think about their... It could be something about people, you could have 5000 bad people, but I don't think so. So maybe there's something about the organisation that's influencing those people to behave the way they are. It could be leaders, it could be the reward system, it could be other kinds of climate and culture.
12:39 Cindy Moehring: Right, right. Right. So they truly had a bad barrel problem, almost a systemic cultural issue.
12:49 Linda Trevino: Yes.
12:50 Cindy Moehring: And I see some parallels to that with some of the other issues that are in the news more recently, if you kind of bring it current into today with racism and some of the police brutality and that thought of reframing a cultural police force reference from... Well, to guardian from warrior, I mean, even those words just bring about such different visions in your mind.
13:16 Linda Trevino: It does.
13:16 Cindy Moehring: So you can see where that could definitely address the cultural kind of bad barrel or systemic issues, if you will, similar to like in an organisation, when you have to truly sit back and look at the incentive systems that have been devised and to figure out whether or not you're in system systems, incentive systems like what you were talking about with Wells, are designed in a way that it's going to literally push individuals to obtain it at all costs, because they know they'll get a big bonus, if you will, for example.
13:50 Linda Trevino: It's understanding your role as a manager, understanding how people behave and think, understanding how the organisational system is likely to influence their behaviour. I mean, that's so key, I think for aspiring manager who charmed a whole bunch of old men board members that she put on the board, including Henry Kissinger and George Shultz.
14:18 Cindy Moehring: I know.
14:19 Linda Trevino: And it's just a fascinating story because the whole basis for the company was a fraud.
14:29 Cindy Moehring: Yes.
14:30 Linda Trevino: I mean, I think she had an idea that she thought she could pull off, and then she couldn't and she never admitted it. And so many people were fooled and companies were partnering with her and oh just a nightmare.
14:49 Cindy Moehring: I mean, I think it was $8 billion at one point, it was a huge company.
14:51 Linda Trevino: Yes, it was valued at 8 billion.
14:54 Cindy Moehring: Valued at, right.
14:56 Linda Trevino: Yeah.
14:56 Cindy Moehring: Yeah.
14:57 Linda Trevino: And to me, one of the most interesting things was there were some young people who worked there, I think all of them Stanford either grads or people who didn't graduate which is the thing to do I guess and Tyler Shultz was among them and he was the grandson of George Shultz, who was on the board. And he's the one who ended up talking with this Wall Street Journal reporter and being the whistleblower. And actually, I encourage people to look for an interview with him that was done at Santa Clara University that I've used in my class, 'cause it's really fascinating to listen to him talk about his decision-making around deciding to be a whistleblower and to talk to the reporter when everybody was telling him not to.
15:56 Cindy Moehring: Not to, including his grandfather at one point, yeah.
16:00 Linda Trevino: Oh, his grandfather very much against it. And a friend of his who was ended up also being a whistleblower, but she was I guess Asian, she had an Asian name. She ended up just leaving, going to Hong Kong. She just wanted to get out of here. But yeah, that to me is fascinating.
16:23 Cindy Moehring: I loved that one, watched the movie and read the book too. It was really good. Well, Linda, thank you so very much for your time...
16:29 Linda Trevino: You are welcome.
16:30 Cindy Moehring: Your stories, your advancements in the industry, and your thoughts on where it needs to go into the future. I really, really appreciate. This has been great.
16:41 Linda Trevino: Yeah, I've enjoyed it. Thank you.
16:42 Cindy Moehring: Alright, thanks, Linda.
16:44 Cindy Moehring: Thanks for listening to today's episode of The BIS, the Business Integrity School. You can find us on YouTube, Google SoundCloud, iTunes or wherever you find your podcasts. Be sure to subscribe and rate us. And you can find us by searching THEBIS. That's one word, T-H-E-B-I-S. Tune in next time for more practical tips from a pro.