King Hammurabi (you know, the guy of “an eye for an eye and a tooth for a tooth” fame) gets a pretty bad rap in the history books. Though harsh by today’s standards (e.g., invoking the death penalty for using sub-par materials in a building project), the management principles he outlined more than 4,000 years ago in Babylon were the basis for one of history’s first codes of conduct.
The sixth king of Babylon (known today as Iraq) compiled over 280 laws that categorize three critical values and concepts that apply to leadership today: accountability, incentive, and reciprocity. The issues that kept Hammurabi up at night are often the same questions that keep you and me from getting a good night’s sleep:
- How can we maintain accountability with our team and those we trust with our business?
- How should we manage risk?
- How can we communicate the standards so that everyone understands what needs to be done and how to make it happen?
Let’s take a closer look at each issue:
Whether or not he coined the phrase “skin in the game,” Hammurabi was certainly a fan of the concept. But unlike our modern interpretation of the saying, the skin he insisted on wasn’t metaphorical. Hammurabi understood that the key to people honoring agreements is holding them accountable. Take, for example, the way his code handled the process of building construction. According to one of his more than 200 laws, if a Babylonian builder constructed a house using sub-par materials and the house collapsed resulting in the death of the homeowner, the builder should be put to death. Harsh, but effective. History suggests that Babylonian structures were built with quality materials and incredible attention to detail because builders knew the consequences of default were severe. When all the parties in an agreement have real skin in the game, they are far more concerned with fairness and favorable outcomes.
Hammurabi understood the dynamics of risk. He realized that life in his kingdom would be difficult and dismal if people were cheating each other without consequence. As a result, his code of rules produced results that benefited the entire society. In the building example referenced above, Hammurabi’s Code encouraged builders to maintain wide margins of safety for the benefit of everyone involved, including the surrounding community. The code regulated the caveat emptor (“buyer beware”) nature of many asymmetric transactions. This protection was essential because of builders, by nature of their
trade, tend to know more about construction than home buyers. Since most building shortcuts or deficits wouldn’t be evident until the builder was long gone, builders were often tempted to cut corners so they could pocket more money. Understanding this risk, Hammurabi put regulations in place to manage the risk effectively.
Communicating the Standards
One of the most progressive features of the Code of Hammurabi was its ability to clearly communicate expectations to every member of society, from priests to craftsman to ordinary citizens. By plainly stating the rules, Hammurabi sought to avoid the legal complexities and arcane language that routinely made it convenient for kings to punish unruly subjects. Instead, he etched the rules on clay tablets and distributed them throughout the kingdom. He understood that unnecessary complexity leads to confusion, so he utilized three principles to ensure everyone understood expectations: simple language, clear expectations, and public accountability.
When it comes to dealing with irresponsible businesspeople in today’s economy, small fines have replaced personal accountability. Think about this: not a single banker was held responsible for the reckless risk-taking that caused the financial crisis of 2008 and ultimately the countless regulations that plague credit unions and small community banks to this day. Too often, participants who bend the rules, swindle their partners, take imprudent risks or extract unearned benefits from unwilling consumers experience zero negative consequences as a result of their harmful actions. The Wells Fargo scandals that involved employees hitting sales goals by opening millions of fake accounts and secretly tacking additional products onto loans would have been less likely (probably non-existent) under the Code of Hammurabi. When it comes to their own skin, people’s sense of risk is finely calibrated.
We understand credit union executives and volunteer leaders count on us to help them achieve bigger and better results. We also realize that members, customers, and community members can gain life-changing benefits from the products and services we’re advertising. Whether we’re assisting with strategic planning, conducting outsourced marketing, or a launching a rebranding project for a client, we take our calling seriously. It’s a big deal when a client puts their trust in us, and we don’t take it lightly. While we may not put our literal skin in the game, we embrace the metaphor and place our good name on the line every time we work with a client. By linking our reputation to our clients’ results, we create a shared commitment to mutual goals. Our success depends on their success, and that is what it means to have “skin in the game.”