Corrupt Companies: Bad Apples or Bad Barrels?
Fraud and abuse cost U.S. organizations more than $400 billion annually. And 74 percent of employees in a 2007 survey reported they personally observed wrongdoing within their organization during the previous 12 months.
"Unfortunately you don't have to look too far to find lots examples of corruption occurring in organizations," said management professor Janet Dukerich during her Oct. 12 Knowledge To Go webinar on "Organizational Corruption and Control." The webinar was hosted by the McCombs Alumni Network.
Bad behavior at work is nothing new, but the trick is to determine if ethical lapses are the result of a few bad apples in a company, or a bad barrel — the company itself, Dukerich says.
If the problem is bad apples, it will be easy to root them out and clean up organization's ethical act. However, if the problem is bad barrels, the solution will be a harder to find.
According to Dukerich, the number-one cause of employee misconduct is feeling pressure to do "whatever it takes" to hit business targets. Other reported causes include:
- Employees believing they will be rewarded for their results, regardless of the means
- Believing the code of conduct is not taken seriously
- Lack of familiarity with the standards that apply to their job
- Lack of resources to get the job done without cutting corners
- Fear of losing their job if they do not meet targets
- Believing policies or procedures are easy to bypass or override
- Seeking to bend the rules for personal gain
Unethical behavior can often occur in collectives because no one feels individually accountable, Dukerich added. Employees see a division of responsibility and feel bystander apathy. Another common excuse for unethical behavior is people claiming, "I was just doing what I was told." It's an explanation used by everyone from Nazi soldiers to the participants in Stanley Milgram's infamous electric shock study that attemps to shift responsibility to authority figures.
Ethical Behavior Must Start at the Top
In the face of performance pressure, potential personal gain, and deference to authority, how can companies help create an ethical culture?
"If the top officials of the organization aren't living and breathing [ethics] on a daily basis, rules won't matter," Dukerich said, adding that a company should have ethical discussions every day in order to make ethics part of its culture.
Employees are much more likely to report misconduct if the company has an internal compliance department. Staff also need to see fair decision making and treatment of personnel by the company's leaders. Those are all outward signs that signal to staff that the company takes ethics seriously.
Finally, said Dukerich, organizations need to make ethics an explicit part of every employee's job description.
"A lot of times they don't feel like it's their job because no one has ever told them it's their job," she said.
Learn more about organizational corruption research and Dukerich's advice on creating an ethical company by listening to the webinar and vieiwng her presentation slides on the Listen Now! tab of the Knowledge To Go website.