Due to the multi-agency world we live in, we have a transparency problem.
Why do we need transparency?
Here is a video clip from the end of a great old-time film, Some Like It Hot.
It’s about a man, Jack Lemmon, who has been posing as a women, in order to escape the mafia.
It’s all about what you see and what you don’t see.
In the closing scene of Some Like It Hot, Jack tells Joe E. Brown why they can’t get married. Watch here:
Transparency is really needed for good human relations.
It’s needed for good commercial relations as well.
If you don’t tell me what you are really selling me, there is a problem, especially if you are trying to build a brand.
In recent years, transparency has had a particular problem in the modern world. Increasingly we are living in a world that has multi agencies deliver what was once a single integrated service.
Once upon a time you would have gone to a farmer who would have sold you some meat to make a burger.
That would have been a fairly transparent process.
Now you don’t go to a farmer, you go to a supermarket that sells you a ready-made frozen burger patty.
The supermarket gets the patty from a wholesaler. The wholesaler gets it from an abattoir, the abattoir gets it from a meat supplier, the meat supplier gets it from another meat supplier who got the meat from the farmer.
And in all those processes, believe it or not, around two years ago in the UK, there was a massive breakdown in transparency, or honesty, or both.
And it turns out, that those hamburgers supposedly made of beef, were made of horse meat.
The animals that were not fast enough racehorses, were landing up regularly in the food chain.
It was the way the racing industry was dealing with uncompetitive horses.
And the supermarkets were failing to know what they were really selling.
This is the essence of what I am talking about today, it’s the multi agency problem.
It comes when you get so many groups involved in the process of producing a commercial product or service, even if most of the players are quite transparent, this information gets lost, like the panes of glass.
The provenance and quality is harder to ascertain and verify.
This was a massive scandal in the UK and it was all over the press.
It wasn’t confined to a few butchers here and there, it was an issue running through every major supermarket in every beef product you could name.
While everyone was surprised by it, nobody, after the dust had settled, could see how they were in the dark for so long.
My next example is about Alistair Cooke
Alistair Cooke was a famous journalist who in 2004, died at the age of 95. Alistair’s bones were then stolen, sold and used for transplant operations, probably marked as though they came from a 30 year old, and used in two bone grafts.
Bones and marrow tissue have the same issues as in the multi-agency service world.
Money laundering and multi-agency problems have more in common than you might think.
The whole process here is not to be transparent. Money laundering can turn dirty money into clean money through a process of a layering and placements. Its a multi agency system to disguise the origins of the money. Essentially, obliterate transparency and launder money.
And that’s why transparency is so important.
How you get it in a multi agency situation has become harder not easier.
If we look at where this has become critical in sustainability, Deepwater Horizon ultimately was a problem of transparency in a multi agency system.
In 2010, the Deepwater Horizon rig exploded off the gulf of Mexico. The subsequent route cause analysis found a series of agency problems. Here is their statement:
In other words, the are claiming lack of responsibility by their contractor, meant they were not responsible.
In other words, BP tried to use their multi agency system to say there is not enough transparency and that is not their fault.
This is how the multi agency system works today:
And this is how it used to work with BP, once upon a time, doing all parts of the process:
This story is actually everywhere. It’s like any great conspiracy. Its nowhere, until its somewhere and then its everywhere.
For example, the Subprime mortgage scandal which led to the Global Financial Crisis. It was caused by a lack of transparency at bottom end allowed industry at top end to package the product as triple A rated when the assets were junk bond quality.
Or the Nanna’s berry issue, with lack of disclosure around the country of origin of foods.
Or Coles saying bread is baked fresh in store, when it came pre baked from overseas.
The lack of the transparency at the bottom end allowed the top end to do things that were quite inappropriate.
So that is the problem that needs to be solved. I do think though, that it is going to take more than legislation to do it.
Transparency gets lost in more levels. And so even if more legislation for disclosure is put in place, more levels of multi agency can be created to bypass disclosure requirements.
That is the challenge for legislation, and why legislation alone wont do it.
Is this a depressing message I have got for you?
That legislation won’t do it in and of itself? I don’t think so and here’s why.
There is an interesting model here about how transparency gets demanded by the contractual system. With AirBNB, a guest is hooked up with a host in an apartment, which is cleaned by a cleaner. AirBNB doesn’t own the apartments and the hosts don’t work for AirBNB. And although the guest is a long way from the apartment or host when they book, they know via the website what they will be greeted with when they stay.
The nature of their rating system, which is quite nuanced up and down the chain, means you can see what other people’s experiences are. They rate the various agents involved in the supply of a service.
With Uber its much the same. I get in a taxi and I can see how other people have rated their service.
And you can see here how this process can be seen here:
The process of interaction, with smart phones and the internet means that although we have a multi agency world, we have a better understanding of what is going on underneath it.
Now, does this mean we will get better standards with this transparency and disclosure?
Not necessarily, no.
In 2011, a guest at an AirBNB property did a large amount of damage to a host’s property.
The issue of liability became a big, tricky point of contention for AirBNB after a host reported having her home ransacked, and much of her belongings stolen, by a guest in the summer of 2011.
AirBNB’s initial response was ‘not my problem, meaning they weren’t contractually responsible. But there was outrage amongst the AirBNB community and in response to the resulting uproar, AirBNB announced its $1,000,000 Host Guarantee.
So transparency does have its limits. Its interesting that AirBNB chose to pay up. In other words, their brand was worth more to them than what they were contractually or legally required to do.
Similarly, BP’s brand was judged sufficiently large, that Joe public demanded the US government and the courts hold them to account.
The public was demanding that if you have a BP level of brand, you have a long history of owning the entire process, you should be held accountable. And no doubt that was material in the way the judges saw it.
They held BP accountable, even though BP provided some strong arguments that they were not responsible due to their multi agency process.
The courts upheld that BP was responsible and grossly negligent.
This situation represented the ushering in of a new era, a new level of accountability for companies. One where they cant hide behind complex legal framework and offload risk to smaller brands in their multi agency process. Public perception is informing the new legal norms and precedent.
Where the brand goes, the responsibility and the legal will follow.
Done that way, it will be in the companies interests to be responsible, because BP will want the transparency of knowing what it’s sub contractors are doing.
If brands are held responsible for the ultimate problem, just like AirBNB initially resisting the cleanup, they will accept responsibility for it.
If companies are held to account, they will take a keener interest on what is going on in every stage of the process.
What does this mean for BP?
Looking to the future, how this might work, if we make companies responsible? They will likely encourage whistleblowers and formal systems to do what Uber and AirBNB currently do.
It will enable people inside the organization to tweet and blow whistles and know they will get listened to.
So that is my message in the future.
If government holds companies or the big brands responsible, then companies are more likely to seek out transparent processes in their multi agency world.
They are then more likely to put in place whistle blowing facilities, which are the equivalent of internal rating systems to manage their risk.
Without transparency you land up with horsemeat on your plate.
Finally, if you are not going to do disclosure, you need to have one hell of a Chutzpah.
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