The slippery slope to Grenfell to which all boards should be alert
I haven’t read the whole Grenfell Inquiry Report. But I have listened to the authoritative BBC Radio 4 podcast series Grenfell – Building a Disaster presented by Kate Lamble.
It describes three issues which no company board should ignore
The first is about the difference between honourable and dishonourable compliance; the need to focus not on the letter but the spirit and intent of regulation.
The second is about balance between corporate loyalty and individual conscience. This is the need for leaders to respect – rather than suppress - the conscience of their colleagues.
The third is about the terrible risk of compartmentalisation, both of responsibility and outlook, and the need for a mindset of connectedness permeating the organisation, even though so much of the design of our education and career progress compounds compartmentalisation.
Lethal Compartmentalisation
Studio E, the Grenfell architects, exemplified lethal compartmentalisation. The Inquiry report tell us Studio E
‘treated subcontractors and consultants as solely responsible for their work and assumed, without enquiry, that it met required standards… There was ‘widespread failure among the profession to properly understand the nature of the materials they are using.’
Arconic staff argued that the responsibility did not lie with them but with but with the customer who chose the product. Arconic is still claiming that the type of insulation used was ‘immaterial’ to the tragedy. Yet its own executives had been warned in 2007 that 500-sq metres of its product posed a fire risk equivalent to a truck containing 19000 litres of oil and that lethal toxic smoke could kill in 2 or 3 minutes, and that 60-70 people could die in a building fire. Two years later a senior executive, Claude Wehrle, showed colleagues a picture of a fire with this product in Romania and warned that the product was even more dangerous in its folded ‘cassette’ form as later used at Grenfell. He said this information should be kept ‘VERY CONFIDENTIAL’.
Dishonourable Compliance
Arconic’s concern was to pass the test not to take care of the customer or the end-user. This is dishonourable compliance. Such attitudes represent a slippery slope which leads to manipulation and cheating.
Jonathan Roper, a young product manager, had suggested that Celotex should not use its insulation on high rise buildings because it had proved in tests to be flammable. Instead the company arranged a fresh test, disguising the fact that it had inserted a new non-combustible material. The altered product passed the second test, and Celotex offered this to the market. Roper knew that this was misleading the market:
‘I felt incredibly uncomfortable with what I was asked to do."
He said there was no-one in the firm he could tell about his concerns.
'I went along with a lot of actions at Celotex that, looking back on reflection, were completely unethical and that I probably didn't potentially consider the impact of at the time. I was 22 or 23, first job, I thought this was standard practice, albeit it did sit very uncomfortably with me.’
Suppressed Conscience
The phrases ‘standard practice’ and ‘everyone does it’ are often used to especially in a ‘results at all costs’ culture. Remember Enron.
Former Technical Services Officer Jamie Hayes was asked
‘Was it your view that Celotex was engaged in trying to create a misleading test report?’
‘Yes, that’s exactly what was happening’.
‘Why didn’t you challenge it?’
‘My understanding was and is now that a decision had been made by senior management of Celotex. It was a failure of courage and a failure of character and a failure of moral fibre on my part not to [challenge it]...The drive for profit making and increasing the company’s share price had been systemic in the Celotex culture for some time’.
Under the firm’s former parent private equity firm AAC Capital Partners, ‘the goal of the management at that time was to make the business as profitable as possible in terms of how it would look on a balance sheet, and so to increase its value for somebody who was to buy it afterwards...’ This culture became heightened after the firm was purchased in 2012 by French multi-national Saint Gobain.
At Kingspan technical advisor, Ivor Meredith had been asked to find a way to get insulation approved for use on high rise buildings. He testified:
‘In my earlier years I was criticised for being very negative so I tried to sit on some of my opinions because they weren’t doing any benefit to my career.’
After Kingspan changed the composition of its products, the test had to be stopped because a raging inferno risked setting fire to the laboratory. Meredith suggested a way of deceiving the certification authorities with a rigged test.
‘ I had raised my concerns numerous times. You get to the point where you get embroiled in the culture of a business. It just becomes second nature.’
Kingspan got a certificate with a misleading wording. By 2015 combustible insulation had been installed on over 200 buildings. Dishonourable compliance had combined with suppressed conscience and lethal compartmentalisation.
The agenda after Grenfell
After Grenfell every board should ask itself:
- Are our compliance activities honourable or dishonourable? Are we actively seeking to understand and follow the spirit of regulation, or merely the letter?
- Are we encouraging or suppressing conscience? Do we encourage our people – especially the most junior - to bring their consciences to work, or do we tell them they are being negative when they challenge us?
- Are we thinking and operating in a connected way? Do we encourage our people to be curious about the connection between our activities and human wellbeing, or do we assume someone else is taking care of that?
Mark Goyder is Founder of Tomorrow’s Company and, with Ong Boon Hwee, is the author of Entrusted – Stewardship for Responsible Wealth Creation (published by World Scientific). He is Senior Advisor to the Board Intelligence Think Tank.