Corporate Culture, Food Safety, and the Grand Jury
By Geoff Schaadt, M.Sc., M.B.A.
Food producers operate in an environment of ever-increasing regulation and complexity, but as a senior manager, you just have to make sure that your company follows the rules and meets the new FSMA standards. Do that and you will have nothing else to worry about.
Except that you can follow rules, you can meet the federal standards, and you can still find yourself in deep trouble.
Just ask Beverly Hall.
Trouble at APS
The Atlanta Public School system was in shambles.
Graduation rates were pathetic, attendance was abysmal, infrastructure was a mess and standardized test scores were a disaster. Then, in July 1999, Beverly Hall took over as superintendent.
As the new leader of this complex and dysfunctional organization, she proceeded to direct a remarkable turnaround of the 102 schools, 3,000 teachers and 50,000 students that make up the system. Graduation rates had improved from 39% to 66%, 77 schools had been built or remodeled and every elementary school within the system met the federal requirements mandated by the ‘No Child Left Behind’ Act.
In February 2009, Hall was named the National Superintendent of the Year by the American Association of School Administrators.
On March 29, 2013, Dr. Beverly Hall and 34 other APS employees were indicted by a grand jury on charges that included racketeering and corruption stemming from the widespread and ongoing cheating that had allowed the school system to meet testing standards.
No Exceptions and No Excuses
For a manager who must attack the deeply embedded issues that persist in a sprawling organization like the Atlanta Public Schools there is, of course, no ‘right answer.’
But Dr. Hall started by making it clear to her employees that excuses for failing to meet expectations—primarily failing to raise test scores—would not be tolerated. Every person within the system would be accountable for delivering success. The rallying cry: “No exceptions and no excuses.”
And to ensure that accountability was tracked, she also adopted the Balanced Scorecard as the primary tool to coordinate the implementation and monitoring of new strategies.
The Balanced Scorecard
Developed by Drs. Robert Kaplan and David Norton in the early 1990s, the Balanced Scorecard has been a remarkably influential concept. It was tagged as ‘one of the most influential management instruments of the 20th century’ by editors of the Harvard Business Review.
Historically ‘performance management’ has meant keeping a close eye on the company’s financial metrics while largely ignoring any other measures.
Kaplan and Norton advocated for a more balanced view of the organization by tracking performance through four lenses rather than one. This approach did not eliminate financial measures, but it did elevate other organizational capacities to equal footing. These four perspectives include:
• Internal Processes
• Learning and Growth
A wider view of the organization, they argued, would allow managers to track short-term results without losing site of the long-term strategies and objectives.
Thousands of organizations have implemented this framework to great success. The key is in selecting clear and appropriate indicators for each of the four perspectives.
APS cascaded the Balanced Scorecard framework down through their system, providing Dr. Hall with the overarching view that she needed to identify where things were working and where they weren’t.
The results achieved were outstanding. The school system met federal requirements, Dr. Hall received national recognition from her peers and the media, and Dr. Kaplan and Dylan Miyake (the consultants who assisted Hall in developing the Balanced Scorecard for APS) published a feature article in The School Administrator.
As with many of these stories, the investigation by legal authorities was initiated after journalists from The Atlanta Journal-Constitution newspaper began investigating reported test scores that were “statistically improbable”, publishing the first warnings in December 2008 and continuing the investigation under the banner, Cheating our Children.
Andy Porter, Dean of the Graduate School of Education at the University of Pennsylvania, was one of many experts who analyzed the test scores produced by APS. Asked what the odds were that the gains were come by legitimately, he responded, “Slightly greater than a snowball’s chance in hell.”
If the scores being reported by APS were fraudulent, where did the system break down? Should companies abandon the Balanced Scorecard?
The Fraud Triangle
Dr. Kaplan’s reaction to this ongoing scandal has been advocating for greater use of internal controls.
The justification for these measures, in Dr. Kaplan’s words, is the ‘Fraud Triangle,’ which is comprised of Opportunity, Rationalization, and Pressure.
By adding another layer of bureaucracy, the organization can create checks and balances, ensure reliable accounting records and information tecnology systems, and create compliance with internal standards and codes of conduct.
And this is where Dr. Kaplan completely misses the point.
Culture of Fear
Systemic cheating at APS did not take place because of inadequate internal controls. Systemic cheating at APS was a direct result of the culture that Dr. Hall created.
It is important to note that no one has, at this time, been brought to trial or convicted on any of these indictments.
However, it has been well established that:
• Cheating the metrics was widespread within this school system
• There were significant indicators, years before the indictments, that the results being reported were suspect
• Decision-making by the employees of APS was profoundly influenced by a culture of fear
When Dr. Hall arrived in Atlanta and announced ‘No exceptions and no excuses,’ she implied a real and immediate threat to her employees. The subtext was this, ‘If you do not meet the targets that we have set for you, you will not continue your employment in this organization. And we are not interested in hearing why you could not meet this requirement. This is not my problem, this is your problem. Fix it or you will have to find employment elsewhere—and elsewhere probably means not in Atlanta.’
And she followed through on her threat. Many teachers and administrators were sent on their way. Those who remained knew that failure would result in the same treatment, while those who met their targets received public praise and bonus checks.
The institutional commitment to success was so thoroughly embedded that even employees who warned the administration of problems paid the price. Teachers who were reported for cheating were suspended. The teachers who turned them in were fired.
A report issued by State investigators in 2011 included, “In sum, a culture of fear, intimidation and retaliation permeated the APS system from the highest ranks down.”
This is all quite a fascinating story, but as you attempt to improve your food safety initiatives, what does it really have to do with your situation? A production facility is not a school system, and your employees are not teachers.
There are two significant lessons that apply to the food manufacturing sector:
First, the Balanced Scorecard is not broken. It still has great utility as a tool to surface the information that you must identify to track tactical and strategic progress. In fact, there has been well-deserved progress in adding a fifth lens to the scorecard to include measures that report on sustainability and corporate citizenship activities.
What every manager must clearly understand, though, is that the data delivered via the Balanced Scorecard is typically referred to as a ‘dashboard.’ And just as the dashboard of your car delivers important data that allows you to safely and efficiently operate your car, you wouldn’t actually try to drive anywhere without looking out the windows. You exercise your judgement in determining what action to take next. It would be insane to think that you can safely drive to the grocery by staring at your dashboard.
Goodhart’s Law tells us when a measure becomes a target, it ceases to be a good measure.
Measurement provides crucial guidance, but it is not a substitute for judgement and leadership.
As you implement your food safety processes, be careful with metrics. Indicators that become targets can and will be gamed.
As a food safety professional, you should be far more concerned with Lesson 2: Culture drives everything.
If the leaders in your company create a culture that values revenue over food safety, then the actions and decisions of your employees will be dedicated to generating revenue, at the expense of food safety.
If the leaders in your company create a culture of fear and intimidation where accountability is supreme, then the actions and decisions of your employees will be dedicated to meeting their numbers by whatever means necessary. Yes, this includes lying and cheating. A culture of fear will cause your employees to work for their own interests (avoiding blame and repercussions) rather than working for the good of the firm.
If the leaders in your company are dedicated to creating a culture of mutual respect and understanding where employees are empowered, and the pursuit of continuous improvement of food safety measures is established in a blame-free environment where all efforts, regardless of pay grade, are aligned to the mission of producing a safe, quality product… well, that is what you will get.
Internal controls, checks and balances, compliance standards, and codes of conduct will become largely unnecessary.
Beverly Hall claims that she never lied or cheated, and that she never directed any employee to lie, cheat, or misrepresent data. This may well be true. However, Dr. Hall cannot hide from the fact that she was responsible for creating an institutional culture that was so unyielding and intolerant that her employees chose dishonesty as the only way to insulate themselves from the suffering that accompanied any failure.
On the day that she placed the plaque on her desk reading, “No exceptions and no excuses,” she probably never imagined that one day she would find herself in a prison because of those five words. But on April 3rd, accompanied by her legal team, she reported to the Fulton County Jail for booking.
Geoff Schaadt, M.Sc., M.B.A., is a consultant with Delta Partners.
9. Canadian Government Executive Leadership Summit 2013, Ottawa, Ontario.