Sunday Story: The Problem with Pragmatism in Leadership

Welcome back to this week’s Sunday Story!

What do you think of when you think of the word “pragmatic”? It brings up images of leaders who are able to figure out a path forward in difficult circumstances; leaders who find compromise with others, have a sense of what’s achievable, and typically bring some short-term stability to a crisis. “Pragmatic” is a good thing, right?

Yes.

Thanks for reading, we’ll see you next Sunday!

See that’s an example of me being “pragmatic” - you got a little bit of a Sunday story, I knew that simply saying “yes” to the question was achievable, and we compromised on an achievable outcome. But it’s not quite right, is it? It’s not quite what you tuned in to read, it’s not what you expected, and it’s not at all aligned with the values of Authentik, where we publish stories like this one intended to get you thinking about leadership in a different way.

We gave ChatGPT our article and asked it to be inspired and generate an image. It chose to be pragmatic instead of inspirational, I guess.

The reality is that pragmatism absolutely has its place in leadership, but like any leadership tool, what matters is how you use it. Pragmatism that is divorced from core values - or forces a person to compromise on those core values too much - is detrimental to the leader and those the lead. We’re going to take a look at a few examples where a “pragmatic approach” caused long term harm.

1) Leonid Brezhnev

Leonid Brezhnev was a leader that was at the forefront of the Soviet communist party throughout the heyday of the Soviet Union - the mid 60s to the mid early 1980s. He’s largely credited with being the stabilizing force for the Communist party; after Kruschev’s erratic leadership, Brezhnev’s cautious and consensus-driven style was seen as a steady hand on the tiller - a reputation that became so powerful, that Brezhnev was cautious to avoid any dramatic reforms. His approach to turning down the temperature of the Cold War through détente with the Western powers was seen as a pragmatic approach that ultimately helped keep his population content. He was responsible for emphasizing “Developed Socialism” in Soviet propaganda, which gave Soviet citizens the impression that the system had been sorted out, and that there were no problems. This resulted in a sense of calm stability in the 1970s Russia - one that wasn’t going to last.

Brezhnev’s pragmatism was actually cover for avoiding tough decisions, and through the propaganda arm of the state, they massaged the messaging to keep people in the dark about those tough decisions. For example, Brezhnev’s fear of reform meant that the USSR was deeply dependent on oil and gas revenues. In the 1980s when prices collapsed, the impact on the Soviet Union was disproportionately bad. That stability that Brezhnev’s ‘pragmatism’ created gave way to stagnation in the economy and the subsequent impact on society and culture, where towards the end of Brezhnev’s leadership, Soviet citizens were increasingly seeing their government as corrupt, antiquated, and unresponsive. When Gorbachev came into power in the mid 1980s, he was forced to launch some radical reforms - like perestroika and glasnost - which proved to be too much for the USSR’s system to handle, resulting in it’s collapse in 1991.

Now, obviously there were many, many other factors at play here, but it illustrates the point we’re making in this article: Pragmatic leadership that isn’t anchored by core values is a problem, and unfortunately, by using that “p-word” to justify the leader's decisions, we fail to effectively talk about the problem until it’s too late. In the case of Brezhnev, he had a choice - he could have chosen to lead by embracing the values of the communist revolution like equality and class struggle, economic transformation to collective ownership, and the idea of continuous revolution to resist bureaucratization. Instead, he “pragmatically” prioritized stability and predictability - largely to keep the party elite happy with him - and it ultimately resulted in the collapse of the USSR.

2) Volkswagen’s Dieselgate

No doubt most of our readers remember this one. Volkswagen Automotive executives decided to market their “clean diesel” cars. The international automobile market is highly competitive, and in North America especially, the VW’s traditional small diesel motors were generally not very popular - Americans tended to like gasoline cars, which put a lot of pressure on Volkswagen to stay competitive in the United States.Volkswagen’s stated values are integrity, sustainability, and innovation.

So, what did they do to ensure their small diesels would be competitive on the American market?

They lied and cheated on the emissions tests.

They had a special “testing mode” programmed into the cars that would alter their performance to fool the emissions testing regimes, making their cars seem a lot better for the environment than they were. But - the executives were being “pragmatic” in their decision making, because they “needed” to compete in the United States. Lying and cheating certainly seems contrary to their core values. Cheating on emissions testing - which exists in the law to protect the environment - certainly seems contrary to their value of sustainability. I’d like to give them credit for innovation - because let’s be real, altering a computer program in a car to lie when it’s being emissions tested is pretty innovative - but car companies have been lying and cheating in these ways for a long time, so they don’t really get innovation credit for doing more of the same, either.

Volkswagen suffered massive fines, reputational collapse, and even some criminal charges for those involved - but I bet at the time, they felt really good about being “pragmatic’.

3) Wells Fargo Account Scandal

Wells Fargo is a storied American banking brand, going back to the days of the Stagecoach and the Wild West. As a business, they provided frontier banking services to thousands of pioneers, and as a result of that, these pioneers played a significant role in the modern-day makeup of the United States of America. Their core values include things like “trust” and “Customers first” - which makes sense for a bank; trust seems essential if I’m going to be keeping my money there, after all!

Alas, Wells Fargo employees figured out a way to work the system - who needs real customers when you can use fake customers instead, and so employees spun up millions of fake accounts. Why? Because employees were incentivized through bonuses and in some cases job security to do this. The goal was to ensure every customer had at least 8 products from Wells Fargo - they called it “Going for Gr-eight”, and the idea was that when a customer had 8 products it was less likely they would take any one of those products to a different bank. Employees under immense pressure weren’t keeping up with sales targets - so they started faking them, meaning customers would be paying for financial instruments that they didn’t know they had and that they had not authorized.

That’s a big no-no for a company that’s all about “customer’s first” and “trust”. Eventually over 3.5 million fake accounts were opened because of this problem. This means they were charged fees, had hits to their credit scores, and more - all because Wells Fargo focused on a pragmatic high pressure sales strategy instead of a values-focused set of decisions. Of course, once senior leaders found out about this practice, they immediately embraced their core values and put a stop to the practice, as those values would require, right?

You ain’t no sweet summer child - you know full well that’s not where this is going. These leaders weren’t only aware, it appears this behaviour was encouraged. It was seen by senior leaders as a pragmatic way to deliver more shareholder value, and instead of stopping it, leaders made decisions to enable it to continue. Whistleblowers were silenced, customers were harmed - but the Leaders did the “pragmatic” thing, and no doubt felt pretty good about that. Until of course it all came down around them.

In 2016 this all came out and it resulted in $3 billion dollars in fines and settlements. The CEO was forced to resign in shame. Wells Fargo - once America’s “Most Trusted Bank” is more of a punchline to a bad joke these days, and now customers and regulators scrutinize every single move they make. Not to mention you have to have a lot of customers with a lot of $9.99 chequing accounts to make up the $3 billion dollars they lost - the pragmatic approach cost them long-term a lot more then they gained.

Conclusion

That, in essence, is the main thrust of this week’s Sunday Story. Often, leading from a place of core values is hard. It’s messy. It requires us to define what those values are. It requires us to engage in the heavy and hard work of hashing those definitions out with other leaders in your organization to ensure you have stormed-normed-and-formed into a cohesive leadership team. And when a crisis is in front of you, leading from your core values might mean that you have to take the harder, longer, and rougher path to a resolution to that crisis.

But to ignore your organizational values as a leader and simply rely on pragmatism in a crisis is to achieve short-term feel good success at the expense of long-term viability. Cultures, reputations, and communities are made in moments where important decisions are made; important decisions made with only a pragmatic lens on the issue will always come back to destabilize the culture, reputation, or community it’s about.

Every single time.

But if leaders do the hard work of embracing the core values of their organization, and centre those values in their leadership, the short-term might be a bit more tricky, but the long term will tend to flourish. When leaders act in ways that are consistent with their stated values, they build trust. Trust brings safety, and safety brings community.

And people who have community thrive.

Thanks for reading, and we’ll see you next Sunday.