Pride often goes before a corporate fall

WHEN organisational consultant Susan Long thought about the rogue behaviour of companies, the seven deadly sins came to mind. Thus her book, The Perverse Organisation and its Deadly Sins (Karnak Books), and her conviction it is vital to track corporate emotional stability.

WHEN organisational consultant Susan Long thought about the rogue behaviour of companies, the seven deadly sins came to mind. Thus her book, The Perverse Organisation and its Deadly Sins (Karnak Books), and her conviction it is vital to track corporate emotional stability.

"They should take it as seriously as they do their bottom-line stuff," the professor in RMIT's Creative Organisational Systems Group said.

She added, before the mind boggled at the idea of an erotically charged organisation, that the lust she detected was for power, not flesh, but she managed to make a case for the other trangressions without any linguistic twists.

For example, the spectacular failure of US hedge fund Long-Term Capital Management with no equity in 1998 and sent shock waves through Wall Street.

Professor Long attributes it to the perverse "pride" of founders John Meriwether, Myron Scholes and Robert Merton (the last two Nobel laureates), who believed themselves bulletproof.

"Pride made them blind to the risks they were taking," Professor Long said.

"Why could these really intelligent people not see the risks they were taking? (It was) perverse blindness, to have such belief in their own capacity to know everything."

Their attitudes infected the whole company. "Everyone became overly proud and blind to what is going on."

Envy she more often observes in professional associations, where the management structure is flat, which helps breed rivalry.

Australia's biggest corporate collapse, of HIH Insurance in 2001, demonstrated sloth, as the board stood by and let founder Ray Williams hold sway, and she puts the sub-prime crisis in the same category.

"It's not just a turning away but almost a wilful not looking at what the issues are -- often (such) human propensities get in the way."

"This stuff gets into the corporate culture and gets acted out by the players and the players we notice most are the powerful ones."

She said it stems from denial. "If you look at the organisation as a system there is some denial of the reality of what's going on, for example in terms of financial viability, people want to believe will overcome problems, or that if only they can hold on long enough things will change -- a twist in reality occurs, not assessing the risks the organisation is taking properly."

This is exacerbated by an "accomplice" effect, when banks play along with companies out of their depth.

She recommends the creation of a "reflective space" in the organisation, with the help of consultants if necessary, where it can "pause and look at the emotional stability of the organisation, not the individuals".