“Leadership is personal. It’s not about the corporation, the community, or the country. It’s about you. If people don’t believe in the messenger, they won’t believe the message. If people don’t believe in you, they won’t believe in what you say. And if it’s about you, then it’s about your beliefs, your values, your principles.” – James Kouzes & Barry Posner

The current news cycle is largely consumed by the topic of impeachment. Regardless of opinions on President Trump and impeachment, the process itself has been fatally flawed. The perception of its integrity was sacrificed for expediency. Recovery won’t be possible.

Why?

The impeachment process is riddled with conflicts of interest.

I recently learned, probably along with many Americans, that the rules governing impeachment aren’t structured or set in law. They can be and are written as Congress goes along. This was a surprise to me.

Resultingly, the process will always be held suspect[1]. I don’t write this cynically or politically. But whenever a process is open to being “gamed” it will never be trusted. Even if no one “games” the process.

If the process can’t be trusted, then the “other side” only has the options (or perceives they have the options) of not engaging, resisting, or seeking to game the process themselves. You can see all of that happening right now.

As a result, whatever win either side accomplishes will never be respected by the other. Because the process itself is subject to question.

Why does this matter to leaders?

Your average leader doesn’t have to deal with impeachment. But they depend on credibility on a daily basis. Credibility is the currency that leaders deal in.

If a leader (or anything they lead) lacks credibility, their ability to actually lead is compromised. Workplaces become Machiavellian, where the manipulation of power is confused for, or accepted as, credible leadership.

Conflicts of interest aren’t wrong, in and of themselves. In fact, they are often unavoidable. But how they are dealt with is absolutely important. When they are dealt with poorly, the leaders and what they lead will usually experience:

• A loss of reputation
• Damaged trust
• Breakdowns in communication
• Increases in conflict
• Disengagement amongst some stakeholders
• Increased use of manipulative politics among other stakeholders

All of the above degrade your ability to lead effectively or get the job done. Whatever the job is.

All of the above divert energy away from vision, or focus, or goals, or purpose, or productivity – and towards the game of survival or domination.

What are conflicts of interest?

Some of the largest and most damaging issues that I’ve seen in organizations have to do with poorly related-to conflicts of interest. Conflicts of interest are difficult to tightly define. That’s one of the challenges that surround them.

Generally, conflicts of interest are described as any time there is a competition between interests or loyalties that might compromise someone’s decisions or actions.

Leaders are assumed and often obligated to be primarily loyal to whatever it is they lead. Not their own personal interests, not someone or something else’s interests.

Conflicts of interest aren’t wrong. They aren’t unethical. On their own, they are neutral.  But how they are related to matters.

Examples of conflicts of interest:

• Hiring relatives
• Dating or having sexual relationships with employees
• Personal benefit from business activities
• Dual roles
• Receiving gifts from vendors/suppliers

None of the above are necessarily wrong or unethical on their own. But they all create opportunities where:

1. A leader’s decisions may be influenced by something other than what is the best interest of the organization they lead.
2. A leader may be perceived as having been influenced in an inappropriate way.

Conflicts of interest are situational

Conflicts of interest change from context to context. The nature of your organization and the structure of ownership has some impact on which conflicts of interest matter most and how they should be related to.

A family-owned business and a publicly owned corporation will likely relate to hiring family members differently.

But just because a family-owned business accepts the inherent conflict that comes with employing family – doesn’t mean that the problems associated with conflicts of interest go away. In fact, most family enterprise specialists typically have backgrounds or team members who specialize in family counseling and/or mediation.

The point is, they may exit. But there is always a cost to be paid for not having a credible process for dealing with them.

Common examples:

• A senior vice president is allowed to hire family members who report directly to him. One of his family members consistently underperforms yet is promoted.
• An executive who oversees a company’s use of facilities owns some of the facilities that are leased to the business.
• A professional services provider advises their clients to buy a particular product or service that generates a back-end financial reward for the provider.
• A small group of board members who, together, hold a controlling vote. They like to spend time together socially and inevitably the conversation turns to business. At times, they make decisions that they bring back to the full board.
• Whenever an employee is also in a governance position of either a for-profit or non-profit.
• A leader responsible for the success of multiple departments but compensated for the success of only one. Especially when those departments compete for resources.

How to relate to conflicts of interest

In my experience, developing a good policy or best practice around conflicts of interest is on the top of almost no one’s list of priorities.

However, it is also my experience that issues and problems that emerge out of poorly related-to conflicts of interest often dominate many leaders’ lists of priorities.

So, it matters.

Three major approaches to managing conflicts of interest

There are three major ways to manage conflicts of interest: prohibition, disclosure with review, and a hybrid model.

Prohibition: The prohibition model defines all of the prohibited relationships or activities. It operates from the assumption the conflicts of interest (or the perception thereof) cannot be managed and must be avoided.

In some ways, it is the simplest to manage because most of the work is done through the process of creating the policy.

Drawbacks include that it may be unnecessarily restrictive, or it may have “loopholes”, or it may not foresee future circumstances.

Disclosure with review: The disclosure with review model assumes that conflicts of interest are unavoidable and, in some cases, can be managed.

It’s the easiest to set up because it doesn’t attempt to foresee all the possible conflict scenarios, but is instead based on stated principles and board guidelines. But it can require more effort to manage because it is dependent on self-reporting and the time needed for adequate consideration.

The drawbacks are that it is dependent not on self-disclosure, but also on the sophistication of the reviewer/reviewing body. When the reviewer(s) are not sufficiently familiar with how some conflict of interest dynamics play out, they may not identify real issues or be able to determine adequate methods for managing them.

Hybrid: A hybrid model is a combination of the above. Where specific conflicts of interest are identified and prohibited (usually the most likely or troublesome) and the remainder are subject to disclosure and review.

The hybrid model is often the most practical model, providing both structure and flexibility.

However, while it can mitigate the concerns of the prior two models, it also exposes itself to the drawbacks of both.

How to structure your approach

1. Avoid the conflict or appearance thereof.
2. Mitigate the severity or consequences if it can’t/won’t be avoided.
3. Manage the conflicted dynamic as transparently as possible.
4. Develop a written policy: Ensure that your policy is written and agreed to by everyone it covers. A written policy should describe the following:
   • What constitutes a conflict of interest (generally and specifically)
   • When and how to disclose a conflict
   • Options for distancing yourself when a conflict occurs
   • Guidance for self-regulating if in an approved conflicted relationship
   • Define acceptable/unacceptable activities or relationships
   • Define how oversight, implementation, and accountability will occur
   • Define how a violation will be addressed and enforced

Credibility matters.

It takes a long time to earn trust and build a good reputation. But credibility can be lost quickly. Paying attention to how you relate to conflicts of interest is a critical part of a leader building or losing their credibility.

Take good care,

Christian

[1] President Trump himself has had a presidency overshadowed by conflicts of interest as well. His way of relating to them has fed into the distrust and friction that has dogged him from before he was inaugurated.

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