The Freeh Report is a chilling indictment of the leadership at Penn State. People at the top build, sustain or change organizational culture, and clearly, Penn State's needed a radical change. It took a tragedy to make people believe it.

Rather than looking upon it like head-shaking witnesses to a horrific train wreck, let's focus on how situations like this evolve. Because, in truth, a failure of leadership could just as easily happen to any of us, if we're not vigilant.

Smart, successful people who see themselves as ethical and moral still cultivate a collection of blind spots. In their book, "Blind Spots: Why We Fail to Do What's Right and What to Do about It," authors Max Bazerman and Ann Tenbrunsel say we overestimate our ability to act ethically. The respected business ethicists say we succumb to "bounded ethicality," which they describe as "systematic constraints on our morality that favor our own self-interest at the expense of the interest of others."

That means we may declare we're all about doing the right thing and believe it. But when doing the right thing has too many negative consequences for us, we may reframe the situation to favor ourselves.  We find a way to justify our self-serving decisions.

Sounds like Penn State's leaders, doesn't it? It's why this statement from the Freeh Report is so haunting:

Although concern to treat the child abuser humanely was expressly stated, no such sentiments were ever expressed by them for Sandusky's victims.

It's why a former dean of student affairs at Penn State -- responsible for administering the school's code of student conduct -- ran afoul of coach Joe Paterno and left the university, discouraged. When athletes got into trouble, Paterno wanted to be the arbiter of their punishment and whether it would be made public, rather than allow the normal university process to prevail.

Leaders define the organization's values in practice. That means even when the mission statement says we stand for what's right -- even when we have a code of ethics (I'm looking at you, Enron) -- we take cues from the actions of the most powerful people in the organization. Their behavior and decisions, along with the operational systems and procedures they develop, influence everyone else.

Again, from "Blind Spots":

..Aspects of everyday work life -- including goals, rewards, compliance systems, and informal pressures -- can contribute to ethical fading, a process by which ethical dimensions are eliminated from a decision.

It can be as simple as how we describe the decision. Is this a "business decision" or an "ethical decision"?  Is this about "avoiding bad publicity" or "reforming bad practices"?

We're all susceptible to blind spots, but because of their power, leaders must be acutely aware of the dangers of bounded ethicality and ethical fading.

Could a Penn State-like leadership meltdown happen to you? It could happen anywhere, under certain conditions. Let me share eight conditions that easily come to mind:

  1. Your organization uses words like "integrity" and "values" in promotional literature, but leaders rarely utter them in the course of daily decisions, much less the toughest ones.
  2. Your organization has decided that Human Resources is a budget luxury and has reduced its function to record-keeping.
  3. Your employee handbook encourages people to confide in the HR department. But yours has developed a reputation as a black hole for employee complaints, existing only to protect management. People believe life will get worse for them if they raise questions or concerns about powerful people. If it's a myth, no one has dispelled it.
  4. Training is reduced to only those things that show an immediate return on investment, not "touchy-feely" stuff like ethics and values. We all know the rules around here and just use common sense, right?
  5. Managers identify more closely with colleagues under scrutiny rather than their potential victims. It sounds something like this: "Heck, if every boss who made a pass at an intern got fired, you couldn't run the business. Besides have you seen how some of those kids dress?"
  6. Managers' hands are just a little bit dirty, not a lot. ("Sure, I've taken a few modest gifts, but it's not enough to be a conflict of interest. Not me.") When someone with much muddier mitts is uncovered, concern about being tarred with the same brush causes people to downplay the seriousness of the situation.
  7. Managers have made "No Whining" such a pervasive mantra that people hear it as "No Whistleblowing." They fear bringing bad news to bosses who don't want to hear it.
  8. Employees are evaluated on metrics alone, not on how they achieved them. Rainmakers and stars are protected, insulated, forgiven -- so long as they perform.

I feel so strongly about the obligation of leaders to develop and foster a culture of integrity that it's a bell I ring throughout my own book, "Work Happy: What Great Bosses Know."  Here's my reminder, from the book's final chapter:

I've told you throughout this book that you shouldn't treat everyone alike -- and that you can play favorites.  But let me be clear: That philosophy applies to communication, motivation, assignments, rewards -- but never to values. No one is exempt from doing the right thing, legally, ethically, or morally.

...Everyone, including (and especially) the boss, should play by the same rules.

But to make that happen, you have to do what the leaders at Penn State failed to do: Take off your blinders.

I elaborate on leaders and blind spots in the companion podcast to this column:

What are other danger signs have you witnessed in an organization's culture -- or fear you might?