“That would never happen in our organisation” is one of the push back narratives I hear when introducing myself and my services to decision making senior executives in organisations. Actually, it’s not even a narrative, it’s a defensive mantra and you know what happens with those –   they evolve into blind-spots.

I often speak and write about the descending slippery slope that began in LeisureNet with a very small nebulous first step.

Whilst the joint CEOs, who were the founding members of the company were defrauding the listed company via a number of innocuous mechanisms, middle management and junior staff members were too.

Whenever there was pressure to ‘get the month end financials completed’, to ‘sell, sell, sell’, to ‘be available to assist in completing the external audit’, to be ‘on call 24/7’, there was some kind of incentive. These incentives came with an intricate set of internal controls designed to deter or prevent rule breaking. However, there was always someone, either within or outside the organisation, who found a way to circumvent the internal controls.

One of the incentives at financial month end was that if anyone stayed until nine o’clock at night, they could order in their dinner and get a limo to pick them up to go home. Most people stayed late. One person stayed until nine o’clock, then ordered food to take with him. He would be downstairs at 9.01 waiting for his limo. It was incredibly salient to everyone that because he waited one minute he had abided by the rules. What happened  next was that very quickly, everyone was gone by 9.01.

This first rationalisation in being dishonest, breaking a rule, is extremely important, as research has shown that this step has a disparate impact on the brain. Your brain undergoes physical change. Whenever a person lies or rationalises their dishonesty, especially for personal gain, the amygdala produces a signal that helps curb that act. The more often a person lies or rationalises dishonest acts, the more the ‘normal’ negative feeling response fades, leading to a slippery slope that may justify the second step and encourage a descent down the slippery slope.

Many dishonest acts are speculatively traced back to a sequence of smaller transgressions that gradually escalated.

Within LeisureNet, the culture of dishonesty eventually permeated the entire organisation. The marketing department was coerced to exaggerate the truth, the PR department wrote mostly false press releases, the financial department fudged the numbers and salespeople were rewarded for coercing customers. The misconduct was directed internally in addition to externally with some employees stealing from the organisation via travel and expense reports and others cutting side deals with suppliers.

There were certainly a small number of ‘big’ cheaters but the reality was that there were many more ‘little’ cheaters. All of them took a first step, then another step, and another. I believe none were consciously aware of the sequence of events that followed. None of them were awful, bad people, but when looking back at how far down the slope they had slipped, they might have been asking themselves ‘what kind of monster have I become to do that?’

The first step is incredibly dangerous.  It actually has tremendous ramifications, particularly if you think that it is an observable act.  This is the time for individuals to Speak-Listen up, early on.  Training for Courageous Conversations has been designed especially with this in mind.

One of the hardest gaps to account for when assessing controls is the unpredictable human element. One good place to start prevention efforts as they relate to employees is to understand the root causes of dishonesty

First, small ethical lapses are already happening in your organisation. Two-thirds of respondents report regularly witnessing either minor or major ethical infractions. Your safest bet is to conclude that you already have problems.

In the absence of an effective signal that can help curb dishonest, people may engage in more frequent and severe acts.

Often, egregious offenses are the endpoint of a long, unplanned decline.  Compromises become conspiracies and peccadilloes become policies only when early transgressions are met with silence.  Others witness the actions, feel distress, but say nothing.

Just as the most well-prepared house in a storm could suffer damage if one unknown hole in the roof isn’t protected, even organisations with comprehensive fraud prevention plans could fall victim to fraud if they don’t understand the motivation and psychology of fraudsters. Don’t let your organisation be left out in the cold.

If you enjoyed reading my blog please share it.

Get in touch, I’d love to be of help