- Leandro Herrero - https://leandroherrero.com -

The Bad Apples Theory on colossal business fiascos. (It’s the basket, stupid!)

Volkswagen has declared that the Diesel fiasco and the massive installation of software, built in to deceive outputs and pass tests, is due to a ‘small number of employees’. I don’t think Volkswagen is lying.

Some of the past problems in banking (admittedly so many of them, that it’s easy to say ‘pick one’) have been attributed to a few individuals, to a particular ‘trading desk’ or a small subgroup. Often one single person has been singled out and initially prosecuted. I don’t think these banks were lying when they said that.

In fact the Libor (London Interbank Offered Rate) manipulation that started many years ago had one ringmaster, Tom Hayes, now sentenced to 14 years. An excellent artcicle in Bloomberg Businessweek, Was Tom Hayes Running the Biggest Financial Conspiracy in History? Or just taking the fall for one? explains how the whole thing started and how the Libor system was handled by 12 individuals across all banks.

Back to the Enron times, surely you could not blame the entire work force of 20000 people at the time, as the originators of the scandal and further downfall.

It all seems to support the Theory of the Small Number of Bad Apples.

However, the Bad Apples are together with the Good Apples and the Apple Managers and Leaders. So, we blame the culture.

But what is that we blame exactly when we blame ‘a culture’? If we treat that culture as an onion, we would find different layers: those who got away with it, those who knew but did not say anything, those who did not know, those who suspected, those who managed those who knew, etc.

If anything, for sure, the ‘culture’ allowed the coexistence of those layers. If anything, the failure is one of leadership, not the entire culture. A leadership that allows the shelter of small groups, or individuals, or ‘desks’, mostly because they are doing very well, thank you. Like the untouchable sales rep who creates organisational and team havoc but delivers extraordinary sales and gets rewarded. Tom Hayes was one of those who did very well, and that when he was headhunted was given a 3 million dollars just for joining.

Small groups, individuals, ‘trader desks’ and other Bad Apples are like those slow growth cancers that are undetectable for a long time, but that could be detected with a good screening, There is no excuse for leadership not to dig into the realities of sheltered or protected, sometimes high performing groups or individuals. There is sometimes a conspiracy that is bigger than any other. It is the conspiracy of omission.

Volkswagen has wonderful mission, vision and value system in their walls and digital Real Estate. All the banks have the same. Enron had ‘Respect, Integrity, Communication and Excellence’ in their value system. All bad Apples are in a basket together with Good Apples. The basket-culture has leaders. The leaders hold the basket. To focus on the Bad Apples is a waste. But, it is technically true, there are Bad Apples, and Volkswagen says they have found them.

It’s the basket, stupid!