The Ethical Taint of Post-It Notes — and the Power of a Company Policy

News yesterday (5/27) from the pharmaceutical industry that may prove the insidious power of promotional materials, and how little it may take to taint what is supposed to be impartial, objective decision-making.  But what’s really interesting in this news, and less ambiguous, is evidence of the power of organizational policies to set ethical norms.

The news is of research about how promotional items, like pens and note pads, that bear the logo of a drug, affect the attitudes of medical students toward that drug.  You’ve probably seen these pens and pads, and the like, all over your doctor’s office. The ones in the study promoted the anti-cholesterol drug Lipitor. The study appears in the Archives of Internal Medicine.

Reportedly, the study found that the little trinkets worked!  According to the New York Times:

The researchers worked with 352 third- and fourth-year students at Penn, which bans most gifts, samples and meals from drug companies, and the University of Miami, which allows them.

Using a series of psychological tests, the researchers assessed whether the students had positive or negative associations with the cholesterol drug Lipitor and a competitor, Zocor, which is available generically for less money.

Most students from both schools viewed Lipitor more favorably, the researchers said.

But when the researchers sought to influence the students unconsciously by having them use promotional materials like Lipitor clipboards and notebooks, they found that the fourth-year students at Miami showed stronger positive feelings for the drug.

The Philadelphia Inquirer dug a little deeper on how the promo items made the Penn students wary of Lipitor.

The results weren’t due to an Ivy League bias, said study lead author and Penn doctor David Grande.

The environment is important, he said. Grande and his coauthors, including a University of Miami business professor, speculated that Penn’s restrictions on marketing seem to have primed students there to react negatively to even a small marketing message.

This study is especially interesting given changes that became effective in January 2009 to the leading pharmaceutical industry trade association’s code of practices, the PhRMA Code On Interactions With Healthcare Professionals.

(Some quick background: The PhRMA Code first took effect in 2002, amid concerns over “kick-backs” in the drug business, where drug companies allegedly rewarded doctors who wrote lots of prescriptions for their medicines by showering them with monetary favors. Clearly, you wouldn’t want the pharmas to outright bribe docs to write scrips: first, it would mean we are all underwriting those bribes as they become built in to the cost of drugs, especially because the government is such a big buyer; and second, you’d hope your doctor prescribed a particular medicine solely because it was the best thing for you. Extending this idea, various laws, regulations, government “guidances” and codes have made verboten favors from pharmaceutical (and medical device) companies to doctors — like lavish meals, golf junkets, and lucrative “consulting” contracts that do not involve any real work.)

As of January 2009, for companies that adhere to the voluntary PhRMA Code, even the formerly ubiquitous post-it notes and pens bearing a drug’s logo are now disallowed. PhRMA says the revised Code:

Prohibits distribution of non-educational items (such as pens, mugs and other “reminder” objects typically adorned with a company or product logo) to healthcare providers and their staff. The Code acknowledges that such items, even though of minimal value, “may foster misperceptions that company interactions with healthcare professionals are not based on informing them about medical and scientific issues.”

Pharma compliance leaders complained bitterly off the record about this level of restriction, but the research announced yesterday provides some vindication for this aspect of the new PhRMA Code.

On the other hand, it may simply show that advertising works.

So to me, the more interesting news in this research is the different reaction of students in the two schools studied (all the more interesting to me because I went to the law schools of both of these universities!).  At U of M, where the trinkets favorably disposed the med students to Lipitor, there was no school policy about students receiving promotional items from drug companies.  But at Penn, there is a policy banning promotional items — and it was at Penn that the give-aways wound up making med students feel less favorable towards Lipitor.

This is one of the neatest pieces of evidence I have seen to prove that an institution’s policies don’t just establish “the law of the land,” something that could be the basis for employee discipline. The policies do more: they establish an ethical norm, they help create the culture of the institution.

What becomes a CEO most?

There is so much about corporate leadership that is, and is not, in David Brooks‘ New York Times column this week, “In Praise of Dullness” (and in the research he cites), that it may take me a few posts to react.

Here is the thesis:

[W]arm, flexible, team-oriented and empathetic people are less likely to thrive as C.E.O.’s. Organized, dogged, anal-retentive and slightly boring people are more likely to thrive.

Brooks cites a study by Steven Kaplan, Mark Klebanov and Morten Sorensen called “Which C.E.O. Characteristics and Abilities Matter?” Brooks says they relied on detailed personality assessments of 316 C.E.O.’s and measured their companies’ performances. According to Brooks, they found that strong people skills, enthusiasm, and strong communications do not correlate with being a good C.E.O. Rather, “The traits that correlated most powerfully with success were attention to detail, persistence, efficiency, analytic thoroughness and the ability to work long hours.”

Agreed, and maybe, obvious. But dissing enthusiasm and communications would seem to run counter with one of my basic premises, that solid and repeated communications from leadership about mission, vision, values and culture can help a business do better in both the ethical and the economic sense.

Well, let me deal with Brooks’ view first, in this post, and later turn to the research itself. I think Brooks – with whom I frequently agree, much to my surprise — gets a little lost in the midst of trying to relate to this research.

Says Brooks:

The market seems to want C.E.O.’s to offer a clear direction for their companies. There’s a tension between being resolute and being flexible. The research suggests it’s more important to be resolute, even at the cost of some flexibility.

OK, number 1, how does the market, much less your employees, know your clear direction if you cannot articulate what that direction is and why it’s worth following. And like any other important message you have to market, you have to sell it like soap — believability and memory go up with repetition. And then believability and memory go up with repetition. Score one for communication skills.

Number 2, did Brooks miss every other business writer since, I dunno, 1980, talk about the need for business leadership to remain nimble in the face of accelerating change. Or what we call, “flexibility.”

So the good business leadership formula here is being resolute and flexible: resolute on your goals, resolute on the vision, AND resolute about getting there ethically — and then be flexible about strategy and tactics.

Says Brooks:

The second thing the market seems to want from leaders is a relentless and somewhat mind-numbing commitment to incremental efficiency gains…. The methodical executives at successful companies just make the same old four-door sedan, but they make it better and better.

Sometimes. But that “incremental improvement” strategy worked out great for GM and Chrysler.  And at the moment, it is also going great guns for the newspaper business. Not.

Says Brooks:

The C.E.O.’s that are most likely to succeed are humble, diffident, relentless and a bit unidimensional. They are often not the most exciting people to be around.

So explain Warren Buffet, Jack Welch, Lee Iacocca (who saved Chrysler’s bacon last bailout), and a lot of dynamic men and women I have known who have led fast growth companies. And BTW, Iacocca’s list of 9 valued leadership traits — which I admit is hindered by his requirement that they all being with the letter “c” — includes “communications” and “charisma.”  (C is also for cookie, and that’s good enough for me.)

In summary, this column points us to some very interesting research, but it’s not one of Brooks’ best efforts.

More to the point, I think we need to conclude that dynamic, communicating, exciting leadership can’t be all bad. Granted, you need to walk the walk as well as talk the talk. And maybe if you have to choose one, choose the walk.

But myself, I think if you want your teams to walk in the same direction as you, you’d better show them the way and invite them along. More than once. Audibly.

Behavioral Econ Part II: Managing like you like it (and like them)

More thoughts on my April 25 post on behavioral economics and behavior change. This gets to the nub of what I want this blog to be (mostly) about.

Randy Cohen‘s anecdote made me think of another that appears in my no-question favorite management book: “It’s Your Ship,” by D. Michael Abrashoff. The story is about the owner of an industrial repair shop who kept his tools in a tool-issue room to avoid theft and losses. He paid the custodian of the tool-issue room $35,000 a year (this was c. 1990), and his workers spent part of their day standing in line to check tools in and out. So the owner did away with the tool issue room. No more lines. And over the next year, he spent only $2,000 to replace tools.

As Abrashoff puts it, a “lack of trust was costing him money.”

Bingo. Beware of the processes that get in the way of compliance. Beware of bureaucracy that takes the name of compliance but really has nothing to do with your company staying on the right side of law and ethics, because that busy-work only makes your team resent your legitimate compliance efforts. And beware of processes that may be contrary to your tone at the top.

There are things you’ve got to button down in tight processes, like, say FCPA compliance. Then there are areas where clearly and repeatedly communicating a vision and mission — and not contradicting them with your actions – goes a long way.  (Balance. An obvious point, right?)

And let me take this moment to give a fan’s rave to Abrashoff’s book. It’s the story of his time as captain of a US Navy destroyer, and how he used simple, commonsense trust and communication — treating his sailors as he would expect to be treated– to lead it to excellence. I’ve lead companies or business teams for more than 20 years of my career, and I’ve read a lot of management books — this is the one that, as I read it, I kept nodding my head. “Yes, that’s right!”, I kept saying. (I got real annoying to my family about it.) And there’s no diluting his approach by saying that a commercial executive can’t enforce the order and discipline that a military leader can; as Abrashoff notes, he was the ultimate middle-manager — with ranks of superiors above him and an immense bureaucracy surrounding him.

This book also carries an interesting history, to me, anyway. It was published in 2002, but demand made it disappear from book store shelves overnight in the fall of 2007, when it was mentioned on Monday Night Football as the inspirational leadership guidance for Bengals QB and Captain Carson Palmer.

“Shareholder Value” and short-term thinking

Can short-term thinking in a business leader be ethical… at least when the survival of the business is not at stake?  Isn’t there something intrinsically wrong about sacrificing the future for the sake of the present?

Valuing the long-term over the short-term is at the heart of a lot of messages that company management gives to employees about ethics.  When we say, “Don’t approve a shipment of peanut paste that you know is tainted,” we are really saying, “We don’t want you to sacrifice the company’s future reputation and sales for the sake of filling this one, immediate order.”

So not being hypocritical about that message in the top-level business decisions we make adds a bit of a challenge in maintaining our “tone at the top,” eh?

And so it seemed ethically obvious when Jack Welch told the Financial Times on March 12, that the “obsession with short-term profits and share price gains that has dominated the corporate world for over 20 years was ‘a dumb idea.’ Welch says now that the concept of “shareholder value” that he championed was never supposed to be a be-all-and-end-all.

According to the Financial Times:

Mr Welch said last week he never meant to suggest that setting, and meeting, profit expectations quarter after quarter in an effort to boost a company’s share price should be the main goal of corporate executives.

On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.”

At least, that’s what he says now.

The sound of the tone

A big part of what execs are supposed to do to lead ethics in their companies, is to set and maintain “tone at the top.” That’s part words, part actions, and part the intersection of the two — making it clear that your business action is motivated by, and consistent with, your ethical vision.

Good schooling in how to do that from President Obama, right off the bat.

Put politics and policy arguments aside for a moment, and listen to what he said on January 29, 2009, when he signed the “Lily Ledbetter Fair Pay Restoration Act,” making it easier to make claims for wage discrimination.

So in signing this bill today, I intend to send a clear message: That making our economy work means making sure it works for everyone. That there are no second class citizens in our workplaces, and that it’s not just unfair and illegal – but bad for business – to pay someone less because of their gender, age, race, ethnicity, religion or disability. And that justice isn’t about some abstract legal theory, or footnote in a casebook – it’s about how our laws affect the daily realities of people’s lives: their ability to make a living and care for their families and achieve their goals.

Ultimately, though, equal pay isn’t just an economic issue for millions of Americans and their families, it’s a question of who we are – and whether we’re truly living up to our fundamental ideals. Whether we’ll do our part, as generations before us, to ensure those words put to paper more than 200 years ago really mean something – to breathe new life into them with the more enlightened understandings of our time.

Tip to self: Tone at the top = Explaining an executive action by saying “it’s a question of who we are.”

If you mean it.