Misconduct is costing companies a small fortune. In the last decade twenty banks have been fined a total of $235m. It’s estimated that US companies lose c. $400m a year from undetected internal fraud. It's not just savings. There's money to made from good ethics. Nearly half of us say we consider the ethics of the product when we shop.
But the evidence suggests that all this compliance and conduct activity is not having much of an impact. It could even be making things worse. The behavioural science reveals why.
Every company boss lays claim to integrity. Many have put money behind their words by investing heavily in compliance and conduct to stop people behaving badly.
The evidence suggests it hasn’t had much impact. Trust in companies is unchanged over the last decade and the level of observed misconduct was the same in 2015 as it had been in 2009. Behavioral science reveals why the conventional rule-based, top-down approaches to compliance, conduct and integrity will have only limited effect and may even be doing harm.
Levels of observed misconduct at work have remained relatively unchanged since 2009 at around 14%. Unfortunately, there is little research to suggest companies are either behaving more ethically or becoming more trusted, indeed the opposite.
Activities such as screening for bad apples, publishing a code of conduct, risk assessments and ethics hotlines are worthy endeavors, but they ignore the underlying why good people do bad things.
Everyone else is. It turns out that being wrong but fitting in feels better than being right but standing alone so when we see others behaving badly, we’re more likely to follow suit even if we know it’s wrong.
It’s unfair. If we feel unfairly treated or see others unfairly treated. One landmark study looked at a manufacturing plant where wages were reduced by 15%. Over this period, theft rates rose by 5%.
Over-heating. Emotional self-regulation strongly correlates with success in business. It is also linked to behaving more ethically. For those of us who find it harder to be completely dispassionate in the moment, the advice to ‘sleep on it’ is advice we’d be wise to take.
Slippery slope. In an analogous experiment, people who thought they were wearing fake sunglasses were more likely to condone dishonesty than those who thought they were wearing the real thing. One small transgression is more likely to lead to larger ones.
Loyalty wins. Reciprocity is a powerful driver of behavior. In one study, participants rated works of art higher when they were (erroneously) told that the art was hosted by the gallery that was funding their participation in the study.
Severe consequences. Wells Fargo, Tesco, Volkswagen, Sears, Enron. One common factor in recent examples of corporate malfeasance is that it was the goal that mattered and employees were encouraged to ‘do what it takes’ to achieve it or risk the consequences. Failure, went the mantra, is not an option.
Increasingly we are seeing clever companies focus less on bad apples (or individuals) and more on a healthy barrel (the culture).
Mind Gym’s psychologists have designed a series of bite-size workshops that can be delivered face-to-face or virtually anywhere in the world.
Contact us to learn practical steps to build an ethical culture that means more people will do the right thing every day (and save you a fortune in Compliance)
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