A Lean Look at Citigroup’s Ethics Improvement Efforts

David Miller (no known relation) is a morality improvement consultant. That’s not morale, as in how people feel about their work, but morality, as in whether we are good people or bad people, in ethical terms. Featured in the Wall Street Journal article, the banker-turned-seminarian trying to save Citigroup’s soul, Dr. Miller is a Princeton professor with a doctorate in ethics, serving as an “on-call ethicist” for Citigroup. The bank consults with Dr. Miller on questions that are a bit more grey but in the general area of, “We sure could cheat ’em, but do we?”

Let’s take Lean look at Citigroup’s efforts at improving ethical behavior.

Why is the purpose? Citibank has some expensive quality problems in their finance factory. In 2015 Citigroup made $1 million in revenue from dubious foreign-exchange trading while paying roughly $2.5 billion in penalties from them. Well, if increased morality can add a few billion to the bottom line, why not?

Why not just get rid of the cheaters? Dr. Miller says don’t blame the people, blame the system. When there are asymmetries in how incentives and risks are borne within a banking system, this can turn people into cheaters. Poor processes allow people to make and justify unethical decisions. It is better to shore up standards and processes rather than swap out for more ethical people to work within broken processes.

Why do these process problems exist? One reason is that Citigroup is plagued by mura, or inherent variation in what we mean by “good”. This makes it hard for an organization to stick to one set of ethical standards. Citigroup has operations in nearly 100 countries. World cultures have different ideas of virtue, vice, and the cost of immorality in this and potential future lives. Different local norms can result in varying behaviors when faced with a choice, even when a common corporate ethical standard exists.

The first step to systematic improvement is the early exposure of small problem by people on the front lines. How comfortable are people at Citigroup in identifying and raising ethical issues?

The CEO was surprised when employee surveys found some workers weren’t comfortable escalating concerns about possible wrongdoing.

Really? But it’s no surprise that the CEO gave this answer. In general, these types of statements indicate how out of touch the senior leader is with the company culture, rather than indicating that a minority of people not getting “blameless workplace” memo.

How can we make more ethical decisions? The article does not reference the 5 whys, but Dr. Miller does have the 4Ms for ethical questions. What would your mother think? What would your mentor think? What would the media think? What would your maker think? These questions assume that people are generally good and that the person being questioned is not a sociopath lacking shame or empathy. Perhaps a better set of questions would be, “How would your decision make your mother / your mentor / the media / your maker feel?” A follow up, “How does that make you feel about making that decision?”

What is Citigroup’s ethical True North? Guided by Dr. Miller, Citigroup executives framed it as three questions: Is it in our clients’ interest, does it create economic value, and is it systemically responsible? These are great guideposts for business ethics. Citigroup is communicating their ethics True North training manuals and mission statements on office walls “including in big letters in the lobby of its Manhattan headquarters.” The big letters in the lobby are a bit of a red flag.

What is the connection between the big letters and day-to-day pressures to make ethical decisions at the thousands of locations worldwide? At a minimum, the leadership should create a system of layered checks from frontline teams all the way up to the board for compliance with and improvement of ethics standards. Occasional C-level consultations with ethics professors are good, but without local, daily process checks of standards,  entropy sets in and defects result.

What is Citigroup’s leader standard work for ethics? These frequent checks should not be policing actions but face-to-face opportunities to communicate, clarify and reinforce the fact that the firm is taking ethical decision-making seriously. Based on how Dr. Miller’s role as described in the article, I am skeptical if that this is Citigroup’s plan.

Dr. Miller’s role at Citigroup is strategic. He doesn’t walk the trading floor, hold office hours at call centers or even have an office. Instead he reviews projects, ideas and locations where top executives have concerns.

While a good first step, no strategy survives contact with frontline day-to-day realities. Dr. Miller needs to look up the word gemba, gain appreciation for go see activity, and spur Citigroup leaders to develop ethical thinking by engaging people in exposing and solving problems.