Lecture 4 Flashcards
(52 cards)
The psychology of supervision
Stimulating compliance (= following the rules) and ethical behaviour of individuals and groups working in regulated organizations as a supervisor. By applying and enriching psychological insights.
Way of working: together with colleagues in supervision and in academia.
Difference in approach: academics vs psychologists
Many academics think that they have an important topic, they dive into the literature and write an article, they hope that the world will read it. Psychologists do it completely different. They ask what the problem is and start from there.
Regulation
Rulemaking
What is supervision?
Supervision = monitoring and enforcement
“Supervision should ensure that an institution subject to regulation follows the rules correctly and uniformly, that they adequately manage their risks and that they adhere to certain minimum standards.” - European Union Committee
“Collecting information on whether an act or matter satisfies the relevant requirements, followed by forming an opinion, and, if necessary, intervene” - Dutch Government
Why is supervision needed?
Think evil: how can you maximise your profits as a company? Some examples:
- Forming a cartel
- Ask for consent and sell their data for a lot of money
- Faking reviews
Therefore, everything is regulated.
What does the AFM do?
They ensure fair competition between businesses and protect consumer interests.
Definition unethical behaviour
Any organizational member action that violates widely accepted (societal) moral norms.
What types of behaviour do supervisory bodies discuss?
There is illegal behaviour, there is unethical behaviour and there is illegal and unethical behaviour.
As a supervisor, it is very easy to focus on the overlap, illegal behaviour that the society is angry about or finds important.
But there are also a lot of behaviours that are illegal but not unethical. Maybe not a lot of people get angry about this, but there might be a good reason for it being illegal.
People do worry a lot about unethical behaviour, even if it’s legal. Sometimes something is not regulated, and thus not illegal, but very immoral. A lot of scandals are because of unethical behaviour. You need a moral compass to do the right thing.
Supervisory bodies don’t only want to discuss illegal but also unethical behaviour.
What does Sparrow (2000) say to supervisors?
You are too scared, you only focus on the illegal stuff, but please focus on the important stuff. Focus on the unethical stuff too. Pick important problems, fix them, and tell everyone about it!
Supervisory bodies are then also trusted by the general public, because you actually want to trust the food you eat.
Supervision from a legal and economic perspective
Rules and regulation => organization (a black box of human behaviour) => outcomes
Assumption: Rules and sanctions (e.g., fines) are known to all concerned and automatically steers human behaviour in the right direction.
Rules and regulation are in place and known to everyone. The organization deals with the rules and regulation in a black box. And thus the outcomes will automatically be in line with the rules and regulations.
Supervisors will put their focus on the outcomes of the organisation. They will look at these outcomes and check whether they are in line with the legal requirements. They will find the companies that don’t align and/or who don’t comply, give them a large monetary fine. They then hope that the other organizations somehow read about the fine and be deterred from engaging in that same behaviour.
However, those legal enforcement trajectories of finding take years and years. Furthermore, many other organizations don’t even read about the fine, or they don’t identify with that organization and therefore won’t look at if their own company complies with the rules. The fine of the other company does not really impact them.
The law is the most important in steering human behaviour in society, they’re the rules we all agree on. But it can never capture everything (e.g., unethical behaviour).
The supervisors only look at the outcomes, not the rules and regulation or the organization.
Supervision from a psychological perspective
Supervisors advocate to really understand human behaviour in the organisations that are under supervision. And how they are stimulated or not to comply with the law and behave ethically. They are going to open the black box. They also look at themselves, supervisory behaviours.
Inside the black box: for example look at leadership, how employees are managed. How the culture is in the organization. How they structure the culture, for example their reward structures (ethical or not).
Thus, behaviour and culture supervision (psychological perspective), looks at supervisory behaviour, organizational behaviour and the outcomes.
It’s not always easy to follow the rules, there are a lot of rules and sometimes are contradictory. Therefore you cannot even assume that everybody knows the law, that they want to comply with the law, or that they can comply with the law. Sometimes, the way they are incentivised steers them in a totally different direction.
Supervisory behaviours
How supervisors in supervisory organizations behave towards the CEOs of the organizations they supervise, how they communicate with them, what they focus on and what they expect from them.
What power do supervisors have?
They have a lot of power, not only to impose a penalty/fine, but they can also revoke the license to operate.
- E.g., when there is real misconduct in a bank, the AFM can retract their licence to be a financial organisation. They can also fire the CEO or the whole board. They have real power.
Regulatory pyramid
From bottom to top:
- Convince, instruct or advise
- Collaborate to influence prevailing norms
- Give warning
- Impose penalty
- Revoke license
The first three are promoting willingness, the last two are connected to law enforcement.
Emphasizes the importance of starting with less intrusive interventions and escalating only if these measures fail
- Base: persuasion
- Middle: deterrence (afschrikken)
- Top: punishment
What kind of warnings can supervisors give according to the regulatory pyramid?
A formal warning: an official letter stating the consequences when they don’t comply.
An informal warning: a call asking whether they knew about it.
Collaborate to influence prevailing norms
Second step of the regulatory pyramid.
For example a dialogue with the board of directors or the supervisory board.
Convince, instruct or give advice
First step of the regulatory pyramid.
They can also educate, make the knowledge more comprehensible for the organizations. It is a really good thing when supervisory bodies make it really easy and understandable for firms what they have to comply with. This way they cannot state it is too difficult.
What is culture?
Culture is the pattern of artifacts, norms, values, and basic assumptions which describes how the organization solves problems and teaches newcomers how to behave.
“The way we do things around here.”
People wear similar things and do similar things. They look around at the behaviour and adjust themselves in order to fit in.
What is a healthy organization culture predictive of?
- Financial performance of the organization
o Financial organizations need to perform in a stable manner - Organizational effectiveness
- Employee well-being
- Ethical behaviour
- Compliance
- Learning
- Innovation
- Quality of service to customers
True or false: a healthy organization culture is less important than formal control
False.
A healthy organization culture is more important than formal culture (e.g., systems, procedures, structure, and strategy).
Saying: “Culture eats structure for breakfast”.
Who do employees look at to infer the culture of an organization?
Employees look at each other, but more importantly, they look up to their supervisors and boss. They want to perform well so they look at them.
Bad apples or corrupting barrels? Preventing traders’ misconduct
Example of viewing misconduct in organizations:
Kweku Adoboli, the British trader who was fired and convicted in 2012 for losing $2.3bn of the Swiss bank UBS. Adoboli spent nearly four years in prison for exceeding his risk limits and hiding this by booking fictitious hedging trades. For years, using these methods, he made millions for the bank. In 2010, he was promoted as the Director and was awarded a ￡250.000 bonus (which he never received), on top of his ￡110.000 salary.
Adoboli’s co-worker: “Kweku Adoboli was the man to turn to if you had screwed up. He would fix it for you. We didn’t know how he did it, but we didn’t want to know.”
Adoboli: “Others did in fact know, and actively encouraged it”
Would you be satisfied as the responsible supervisor?
No, he probably wasn’t the only one. He’s probably part of a bigger problem and that problem isn’t fixed yet.
They need to evaluate the culture and investigate their personnel.
The bank itself is probably really happy because it is easy damage control.
Corrupting barrel approach
One bad apple is often part of a bigger problem (e.g., the social system, the culture).
You always have to know whether it was indeed just one bad apple, but oftentimes there were bystanders that let it happen. Therefore you often have to dive into the barrel as well, and into the climate of the organisation.
Social psychological root causes of misconduct in teams
Task
Relationships
Climate
