House Upon A Hill

About a year and a half ago I was driving with my family from our home in Gaborone, Botswana to Cape Town, South Africa. We were headed down to Cape Town because the maternal and child health services there are highly regarded, and my wife was about to give birth to our son. She was already 8 months pregnant when we started the trip to Cape Town, and we had our three-year old daughter, our nanny, and a 70-pound Labrador packed in the car with us, so we decided to split the 18-hour drive into small, manageable segments over four days. We took our time ... there was no rush.

The leisurely pace of the drive was cool for many reasons, but one of the coolest happened as we drove into Worcester on the final day of our trip. Worcester, South Africa is a small town that is surrounded by tall mountains on all sides.  As you make your way down the mountain pass, approaching the town from the Northwest, the first thing you see is a white office building perched above the rest of the town, just sitting there all by itself.  As you get closer you discover that the striking white building perched up on the hill, against a backdrop of tall mountains, is a practice office for the firm PwC. 

As we drove past the building a wave of nostalgia hit me. Powerful feelings associated with the decade I'd spent working for the firm at the beginning of my career ... Representing PwC was always a great source of pride for me. I was so moved by what I was seeing out the window that I pulled the car over so I could get out and walk around and try to capture it all with some photos. I grabbed the camera and jumped out.  My wife could tell it was important to me so she slid over into the driver’s seat and took the rest of the crew down the road to find some lunch, let the dog out to do her thing, and fill the car up with gas. A half hour later she was back. I’d gotten a bunch of good shots (like the one below) while soaking it all in so I jumped back into the car and drove off for the final stretch to Cape Town. I tried to keep one eye on the view of that iconic “house on the hill” in the rearview mirror ... but after a few minutes it was gone.

Offices of PwC in Worcester, South Africa

I had forgotten about that whole trip down memory lane in Worcester until I read an article on LinkedIn a couple weeks ago written by an old colleague of mine from those days at PwC. His post explores the virtue of “Doing the Right Thing” and concludes that it takes a lot of courage to do the right thing, but courageous leaders do it anyway. That is a sentiment I’ve always shared and tried to practice, and have written about before, which is probably why reading that piece on LinkedIn once again summoned up those feelings of nostalgia and pride that I’d felt when I encountered that "house on the hill” in Worcester eighteen months ago. Once again the sentiment was so strong that I decided I should probably try to figure out what was driving it.  I’ve spent the last few weeks reflecting on it, and for today’s blog post I’ve decided to share the story.

In order to figure out what was driving all the sentiment about PwC I realized that I had to take a step back so that I could look at it in a broader context.  I needed a framework to help put it into perspective. I finally found one in Dan Ariely’s latest book entitled “The (Honest) Truth about Dishonesty”.  For those that don’t know him Dan Ariely is a behavioral economist that became famous for his empirical research on irrational behavior, which has been blowing massive holes in the field of economics for the last ten years. This new work of his on dishonesty is really just an extension of his original theories. It is similarly rooted in creative empirical research and seems equally poised to disrupt many of our conventional ways of thinking.

The premise of Ariely’s work on dishonesty is based on a fairly straightforward construct:

• As human beings we are constantly torn by a fundamental conflict. On the one hand, we each have a strong desire to see ourselves as good and honest people. On the other hand, we each have a deeply ingrained - some would even argue biologically necessary - propensity to lie to ourselves and others.  
• In order to reconcile these competing forces we have to be able to justify any dishonest behavior by telling ourselves stories about why our actions are acceptable. This complex process of justification is called rationalization. 
• Therefore, any individual’s capacity for dishonesty essentially becomes a function of their capacity to rationalize dishonest behavior.  

Ariely’s empirical work on dishonesty has involved a bunch of creative experiments that he conducted on about 50,000 people to examine/measure the effects of various forces that are believed to influence any individual’s capacity to rationalize dishonest behavior. For example, his research confirms that creative people have a higher capacity to rationalize. It also shows that observing other people behaving dishonestly enables individuals to rationalize more dishonest behavior of their own. How about this one ... his research demonstrates that collaboration actually leads to higher levels of dishonesty!

What about the forces that decrease dishonest behavior, or have no observable impact? Well, Ariely found that people behave less dishonestly when they are given moral reminders before taking action, or when they are required to first take a pledge - or sign a statement - to behave honestly. And, while counterintuitive, it turns out that increasing the amount of money to be gained, or increasing the chances of being caught, doesn't actually have much of an effect on dishonest behavior.

Ariely provides a good summary of what he concluded about all these forces that shape dishonesty in an exhibit at the end of Chapter 10 of his book, which I’ve recreated for your convenience below.

Summary of the Forces that Shape Dishonesty from Chapter 10 of Dan Ariely’s book

Enough about the details of Ariely's empirical research and methodology for now. Hopefully your appetite has been whetted for more. If it’s a topic that interests you I highly recommend reading the whole book yourself; it’s a pretty quick and easy read with lots of good stuff! What I want to focus on now are the implications of Ariely’s research ... i.e. what does it all mean?

One of Ariely’s biggest findings is confirmation of the notion that just about everyone in this world cheats (yes ... even you and even me).  While that may be a little disheartening, it isn’t his most important discovery because his data also make it clear that most people, when left to their own devices, actually cheat less than a theoretically "rational” person would. This is because most people have fairly tight limits on what they can rationalize or justify as honest behavior. In other words, most of us often don’t even realize when we’re being dishonest because for the most part we’re actually pretty honest ... and because we set up nice little narratives for ourselves to rationalize our behavior when we aren’t.

The real problem that Ariely's research points to is the discovery that dishonesty is infectious, like a virus, and it becomes worse and worse in an organizational context when it goes untreated over time. This is the finding that really interests me because it has significant implications in terms of how organizations manage professional conduct, and ultimately, the connections between professional conduct and program outcomes. Which brings me back to the whole point of this blog post ... explaining the unusually strong, nostalgic feelings that I have about the decade that I spent working for PwC at the beginning of my career.  And here’s what has become clear to me over the past few weeks as I've reflected on it in the context of Ariely’s research ... PwC had already figured out 20 years ago most of what Ariely’s new research demonstrates empirically. In fact, PwC was the most ethical, courageous, and results-oriented place that I’ve ever worked, and that’s what made it such a memorable experience.

I realize that this is a pretty strong statement, so to help illustrate the point I thought it might be useful to share a few examples of what I remember PwC did to work against the forces that Ariely found to increase dishonest behavior, as well as what the Firm did to harness the forces that Ariely has found decrease dishonest behavior.

First, we had a clear code of professional conduct, and we took it seriously. And all of the Firm’s professional staff were required to re-read it every year and re-sign a pledge to abide by it. And we did. The important thing about our code was that it went a lot further than just a commitment to comply with laws and regulations. It actually codified the professional values that were important to the firm and enabled us to hold each other accountable to those higher standards of professional ethics. Because of the code it usually didn’t take a lot of effort to figure out the right thing to do.

We also had a methodical and selective process for screening/selecting new business opportunities, and then for managing the business we won. The methodology eventually became known as the Seven Keys To Success. These seven keys distilled the Firm’s important values into salient points and became a lens for management to use across the program lifecycle - a constant reminder of the Firm’s values and objectives at all key decision points.

There was always a strong organizational commitment to - and process for - identifying and managing actual and potential conflicts of interest. Potential conflicts were constantly surveyed and identified as part of the Seven Keys. When regulators started to become concerned about the rapid growth of consulting revenues, the Firm developed a formal, rigorous process for confirming independence on an annual basis.

The Firm wasn’t perfect. As is the case everywhere, mistakes were made. What I always respected was PwC's instinct to disclose, and take responsibility for, mistakes when they were discovered -  regardless of what kind of mistakes were made. All of the ethics training and behavioral conditioning that professional staff went through was structured to help you realize that while there were always going to be some consequences for making mistakes, it was nothing compared to what would happen if someone ever tried to cover something up.

I don’t think it’s a coincidence that two of the up-and-coming partners that I worked for and watched model the highest professional standards of ethical conduct all those years ago, Tom Craren and Tim Ryan, ended up serving in senior leadership positions in the Chairman’s office years later in their careers. In fact, Tim Ryan - who wrote the Linkedin article that I referred to earlier - has just been made the US Chairman of PwC. It’s hard not to respect an organization that fills its highest office with a young leader that you watched first hand walk the Firm’s talk through some tough situations.

On an individual level you were expected to tell the truth - or suffer the consequences. I remember during my second year with the Firm I got called into one of the partner’s offices because he wanted my opinion about a delicate situation that had come up with one of our clients. When he asked me the question I responded with, “Jim, can I be honest with you?” I’ll never forget his response: “Only if you want to keep your job Drew.” Pretty clear message, eh?

In fact, it’s really tough to find an element of Ariely's dishonesty framework that PwC hadn’t already figured out 20 years ago. When you look at it all from a big picture perspective you see that the Firm pretty much had it all nailed. I’ve updated the Ariely exhibit from before to illustrate the point (below).

Based on what I remember about my time with PwC: 1993 to 2002

It’s important to emphasize that the approach and culture around conduct wasn’t built for the purpose of moral dogma. It wasn’t ethics for ethics' sake ... it was a business strategy. It was always clear to me that the Firm’s standards for professional conduct, and the institutional structures that had built to encourage and enforce those standards, were designed to protect the interests of the Firm AND to provide real value for its clients.

Naturally, integrity was always one of the key products that PwC sold. And not just in the form of audit opinions. All of the analytical work we did for our clients had to be balanced - that was our niche. Our advisory engagements were structured to be objective. It was not our job to be persuasive - we weren’t advocates. But it went even deeper than just the basic notion of selling integrity. The attitudes went down into all the management consulting work that we did on systems development, process improvement, change management ... and yes, even into our work implementing development programs for USAID.

I still recall several occasions where our USAID consulting practice had to make some tough calls on whether or not to go in a certain direction with a program that a Mission was leaning towards. If we believed that proposed modifications to a scope or a new activity would undermine USAID’s long run development interests, we always took the time to lay out the concerns and outline some other options that we felt could satisfy everyone’s interests. Whenever we couldn’t resolve those kinds of sticky issues at the project level, the Firm’s leadership got involved to try and help facilitate a solution. On those very few occasions where there was no clear path to resolve differences of opinion on the best way forward, the Firm had no objection to quickly winding down its program so that USAID could engage another contractor that could support the approach. I know it was never easy for the Firm’s leadership to volunteer to walk away from revenue in the short term, but they were able to make those tough decisions when it became clear that the client’s preferred way forward was going to undermine the Mission’s objectives and/or threaten the Firm’s strong reputation within the industry.

Ironically, the USAID Missions we worked with almost always held a higher opinion of the Firm after we had to draw the line on something. This is because it usually turned out that differences of opinion around a proposed approach were driven by inter-agency issues i.e. they were most often cases where USAID was being pushed to do something by the Department of State, the Department of Treasury, etc. that it didn’t necessarily agree with from a development perspective, but felt that it had to go along with for political reasons. In a lot of these cases, the fact that PwC’s leadership drew the line often caused whatever agency was really driving the agenda to soften their position, which ultimately created some space for us to work together with the Mission at the project level to develop a way forward that made sense from a development perspective. In other words, USAID was often able to leverage PwC’s courage and reputation for integrity to keep more of its funding focused on development impact.

The key point of all this - a point I don’t think I can emphasize enough - is that at the core of the Firm there was a deep institutional commitment across all of our service lines to create long term value for our clients. That was always clear to me while I worked there; that’s largely what inspired me to work as hard as I did, and it’s what I credit most of the success to that I had in my decade with the Firm.

I’m sure this is why I also think the most important discovery that Ariely has teed up for us is the idea that there is a clear link between how a professional services organization approaches professional conduct and that organization's ability to help its clients focus on long term goals and long run value creation. Ariely explicitly made this connection in an interview at Wharton where he emphasized that his research clearly demonstrates that “the human brain [is] a rationalization machine that is going to rationalize what is good for us in the short term – not what is good for us in the long term, and not what is good for the organization.”

The implications of this are profound. What it means is that if you are a provider of professional services, and your goal as an organization is to help your clients create long-term value, you have to establish and maintain very clear and high standards of professional conduct. Tim Ryan probably said it best in his LinkedIn post when he wrote: "I feel very fortunate to work at an organization where integrity and courage are highly valued. That doesn’t mean that it’s always easy to go against the grain, but it sure helps.” 

By now I’m sure you’re asking the question: “So what does this all mean for the international development industry?

Granted, PwC is always going to be an outlier because it, along with the rest of the Big Four, represent "the shining city upon the hill" in terms of professional conduct. It may not be reasonable to expect all of USAID’s development contractors to bring the same level of rigor, discipline, and integrity to their engagements and their client relationships. I know ... because I've spent the better part of the last 10 years trying!

I can accept that there are probably some inherent limits on how our industry manages professional conduct given the nature of development assistance, the institutional power arrangements currently in place to deliver that assistance, and the political context shaping it. However, I remain absolutely convinced that there is a tremendous amount that our industry can learn and apply from a PwC-type approach to setting expectations around conduct and managing conduct against those expectations. In fact, I’ve come to strongly believe that a coordinated focus on professional conduct may ultimately be the best thing we can do to enable our industry to make significant leaps towards more powerful and more sustained development impact.

- DS