Not such a simple case of follow my leader...

The Chinese saying that a fish rots from the head down has long been bandied about in business circles to reinforce the importance of strong leadership. Now new research from the Rotterdam School of Management at Erasmus University signals the same: middle managers will mirror top management’s bad behaviours, regardless of how ethical they are as an individual.

The research, conducted in partnership with Cambridge University, shows that in cases of unethical leadership at the top of an organisation, middle managers will treat their subordinates unfairly if the social and spatial distance between them and the top management is low. In turn this will lead to employee dissatisfaction, lower organisational commitment and increased employee turnover.

In contrast, the effect is reversed if the social and spatial distance between managers and top management is high. Middle managers, who are unfairly treated by their bosses, will treat their employees fairer if, for example, they are based in different offices or buildings from their managers, and the social distance is high.

So the research also shows that the structure of the organisation plays its part too.

Dr. Gijs van Houwelingen, says: ‘’ We demonstrate that higher level management unfairness can have detrimental effects throughout the organization and it is passed down from high management to middle management, but only if the spatial and social distance is low.”

So what the research seems to be saying is that the head rotting fish concept is only valid when the structure of the company enables it. Indeed, for any organisation to go toxic, there has to be an organisational structure, that allows the toxicity to take root and then to flourish. In some companies, problems do not necessarily develop because of one person. The toxicity develops over time and because of the people and the systems.

The financial crisis and a series of scandals at non-financial companies points to this too and have prompted more focus on culture as a significant risk to corporate health. Boards are increasingly concerned to embed a sound corporate culture to protect and enhance their company’s ability to generate sustainable value.

The leaders may indeed set a tone, but it is the people and the institutions that slowly bend to their will or dismiss them. I suppose while the rot may be most apparent at the top, the rest of the organisation is part of the process too. In the end, the rot is from the inside out and not necessarily from the top down.

On that note, the Institute of Business Ethics has just published a new briefing which sets out the role of internal audit in advising boards on whether a company is living up to its ethical values.

Dr Ian Peters, chief executive of the Chartered Institute of Internal Auditors commenting on the report said: “The public is increasingly focused on how poor organisational culture has led to failures in the public and private sectors. Through a properly positioned, resourced and independent internal audit function a board can satisfy itself not only that the tone at the top represents the right values and ethics, but more importantly, that this is being reflected in actions and decisions taken throughout the organisation.”