Winning Isn't Everything

In business, as in baseball, there’s an intense focus on winning. But what happens when the drive to do well becomes an imperative to succeed — and at all costs? As the recent Houston Astros sign-stealing scandal illustrates, it can lead to ethical lapses, a toxic culture and, ultimately, a systemic level of corporate corruption. But the case of the Astros, as well as recent events at Boeing and Wells Fargo, also offer an opportunity to examine how the seeds of corporate corruption often get planted and grow, how they can be rooted out, and how organizations can recover.

“There’s a sense in a really competitive environment that being corrupt can be the right thing,” says Dean Peter Rodriguez of Rice University’s Jones School of Business, an economist who studies corruption. In an intensely driven corporate culture, when a certain task is especially hard, the feeling can arise that achieving success — getting that win — requires cheating. And not only that, but that cheating is actually the correct thing to do, Rodriguez explains. “This proves how devoted I am to my tribe, to my group of people,” he says, characterizing employees’ rationale for cheating.

And while we may think of corruption as coming from the top, Rodriguez’s research has found the opposite is more often the case. “It’s not the CEO who develops the scheme,” he says; instead it’s “usually some VP who has enough shelter from the public eye but also enough power to say, ‘We’ve got to win this, and my team, we’re the best. We deserve to win. We’re going to tip the scale and run with it.’ ” They may know it’s wrong, he notes, “but they decide it’s right in the larger sense — or even that it’s just the way the game is played.”

The folks in the corner offices aren’t blameless, however. Wells Fargo executives may have insisted that it was just a few bad apples (5,300 of them) that caused the company’s retail banking arm to open millions of unauthorized accounts.  Boeing, meanwhile, may hold that damning emails suggesting that the 737 MAX disasters stem from lack of concern about safety simply weren’t representative of the company. And Major League Baseball may have found Astros owner Jim Crane innocent — or at least ignorant — of the sign-stealing scheme his management and players used to help the team win the 2017 World Series. But, says Rodriguez, although “it’s not the top saying ‘Let's cheat,’ it is the top that’s giving this ‘Win at all costs’ directive. That trickles down.”

Corruption Rolls Downhill

If an organization’s culture is created at the top, MLB’s one-year suspensions of Astros manager A.J. Hinch and general manager Jeff Luhnow may not be enough to root out the underlying causes of corruption — even though they were subsequently fired by Crane.

“It’s scapegoating,” says Ann Skeet, a senior director at the Markkula Center for Applied Ethics at Santa Clara University. “When you have the level of involvement that you seem to have here” — with the players themselves participating in the technology-assisted signal stealing banned by the league — “you have a much more systemic problem,” she notes. “And I haven't heard anything to suggest [Crane] is holding himself accountable for the culture of the team. Without that at the leadership level, it’s hard to expect that people south of him are going to get it right.”

Skeet sees the seeds of corruption sewn even higher than ownership, too, at the level of the league and its commissioner, Rob Manfred, who she thinks haven’t made clear what their expectations and standards are going to be for the game.

“There are some inherent conflicts of interest,” she notes. “The commissioner works for the owners, so the fox is in the henhouse, and it makes it hard to feel confident that sanctions and rulings at any time are in the best interest of the sport.” It’s an observation that echoes the arguments critics have made about government regulators of the industries they oversee: an EPA in the palm of fossil fuel companies, for example, or an FDA beholden to big pharma.

In addition to the suspensions, MLB fined the Astros $5 million — the highest sum allowed under the league’s constitution — and will make them forfeit their first- and second-round draft picks for the next two years. But if MLB really wanted to send the strongest signal possible to everyone in the sport, Skeet says, they would vacate the Astros’ World Series title. “That would have been the most significant sanction and gotten players’ attention,” she says. Instead, she worries the message being conveyed is that cheating is acceptable as long as you win, not that it’s how you win that matters.

And that, Skeet says, is a classic case of “ethical fading,” a term that refers to an organization or individual losing sight of the fact that they even have an ethical issue in front of them. “You recast it as something else,” she says: a business decision, a hit to your bottom line, or a necessary step in the process of winning, whatever the cost.

Building a Better Culture

So how does an organization rebuild its moral code after the ethical equivalent of a fade to black? According to Skeet, it takes much more than the firing of some supposed “bad apples,” even if those apples are at the top of the food chain.

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Much of her recent work has focused on creating good corporate culture, rather than penalizing the bad. What happened with the Astros, she continues, “suggests the culture of the team isn’t terribly healthy, and they could use realignment. But if leadership isn’t committed to changing culture, or even acknowledging there’s a problem, it’s going to be very challenging for them.”

She and her colleagues at the Markkula Center have developed recommendations for building healthy cultures. These range from the morally minded (nurture empathy, for example, and create an organization-wide framework for ethical decision-making) to those that are less so (tell stories, connect silos to work across functions). “Our goal here is to be as practical as possible,” says Skeet, “to take ethics out of the realm of the theoretical.”

The scandals facing the Astros, Boeing and Wells Fargo are also potential opportunities, says Rice Business strategic management professor Anastasiya Zavyalova. They can be the impetus that drives troubled companies to engage in the sort of corporate introspection and soul searching that lead to improved practices. “These crises are not just a blow to the company but a chance to learn something and maybe come back better at the end of it all,” she says.

Competence vs. Character

Zavyalova’s research focuses on negative events in organizations and the ways in which stakeholders — largely fans in the case of the Astros and customers in the case of Boeing and Wells Fargo — identify with and support the company in the aftermath.

She looks at these events through the lens of an idea in reputation research that suggests any given company has two types of reputation. One is for competence: How good is it at producing what it makes or doing what it does? The other is for character: How does it do what it does, and with what values?

When a scandal is one of competence — a product fails, say — then a company’s constituents, assuming it has reasonably loyal customers, tend to be more forgiving, she explains. But if it’s a breach of character, compromising the organization’s underlying moral code, a company risks losing even its most loyal customers.

These two buckets, competence and character, do bleed into each other, of course. We now know that the deadly crashes of the Boeing 737 MAX resulted from mechanical and training issues — that is, failures of competence — but the aftermath has revealed a serious crisis of corporate character. Customers were left wondering, “What did the company know about design flaws and when did they know it?” Did “winning” for Boeing get redefined from “ensuring safety” to “pursuing profit”?

The Astros scandal, meanwhile, may at first seem to be purely one of character: Cheating represents a moral failing, a decision to care more about winning than how they won, as Skeet observed. But the decision to cheat also calls into question the Astros’ capacity to win a World Series on their own merits — a question the team and its leaders have wrestled with in press conferences since the scandal became public.

Looking at these two cases, Zavyalova notes that the Astros’ ability to recover — even from a complex crisis of both character and competence — should be enhanced by the fact that “sports, unlike many other contexts, is one where there are really loyal constituents for the organization.” And Astros fans are particularly loyal, even among sports fans, because the team’s 2017 World Series win helped pull Houstonians out of the funk that followed the horrors of Hurricane Harvey.

In sports, fans come to define themselves by their alliances; it becomes part of their identity in a way that few consumer products ever do (except maybe those made by Apple). As a result, they find themselves unable to make a complete break with a team — their team — even after a scandal.

Instead, Zavyalova explains, the scandal leads to fans’ experiencing a phenomenon known in organizational theory as “split identification”: In contrast to more conventional business cases, like that of Wells Fargo or Boeing — where customers can abandon the brand, simply changing banks or flying on Airbus planes — sports fans continue to identify with the organization overall even as they disassociate themselves from certain leaders and certain players wrapped up in a scandal. “It’s a very difficult state to be in,” Zavyalova says. “It’s like you’re in love with someone, but that person loses your trust, and the reason they lost it is all over the news.”

Beyond the world of sports, split identification can also affect members of religious groups and alumni of colleges that have been rocked by crisis. After all, one can’t very easily convert or select a new alma mater. In the case of the Catholic Church, that has led to parishioners keeping the faith even while castigating the church leaders involved with sexual abuse and its cover-up. Similarly, Penn State alums and fans decried the sexual abuse committed by assistant football coach Jerry Sandusky, as well as the perception that a beloved head coach, the late Joe Paterno, let him get away with it, but they stayed loyal to the school — so much so that donations to the football program quadrupled in the year after the scandal.

Given our ability to rebuke bad actors without cutting ties to the organization, removing the apparent ringleaders of the sign-stealing scheme may be all it takes for the Astros to maintain fan loyalty. But it won’t remedy the more systemic problems in the team’s, and perhaps even the league’s, corporate culture.

Zavyalova, like Skeet, doesn’t see firing the top-level people associated with a scandal as the best way to deal with a crisis. “That’s a short-term reaction,” she says, “not a solution.” It doesn’t answer the existential questions the organization should be asking itself: How do we come back in the long term? How do we regain trust, loyalty? How do we change the culture? “It's not one manager, one exec, just a few bad apples,” Zavyalova adds. “It’s everyone going along with a plan to break the rules and behave unethically.

“Management change can be a start,” she concludes, “but the future will depend on how the new leaders can reshape the culture.”

Andrew Sessa is a Boston-based writer and editor.