7 Behaviors That Are Destroying Your Compliance Training

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This is part two in a four part blog series on the psychology behind bad behavior. In this blog I will cover reasons 8-14 that good people do bad things and how we can use this information to modify compliance training. Stay tuned for posts three and four for the remaining 13 mechanisms people use to justify bad behavior. Miss the first post? Check it out here.

Do you consider yourself a good person? I think most of us do, but we still aren’t perfect. There are both internal and external circumstances that might change our behavior. Hopefully our “bad” behavior is minor – moodiness, slacking off on our household chores because we just don’t feel like doing them, etc. But what if a plethora of circumstances all converge at the same time that drive us to do something worse, something we wouldn’t normally do?

I think compliance professionals have an interesting job. Not only are you responsible for ensuring that your organization’s mission and goals are clearly communicated, policies written, maintained and distributed to your workforce, compliance training is implemented and taken and incident reports are responded to, but you’re also kind of like parents and therapists to each of your organization’s employees as well. Talk about a huge responsibility!

Why do I say this? Well, in addition to writing your Code of Conduct, managing your policies, providing compliance training, etc. you ideally want to be proactive and anticipate and respond to employee issues before they occur (or fly around the earth a few times like superman to undo any unfavorable, illegal behavior). To my knowledge, none of us have that power, but we do have research on human behavior that can help us anticipate and mitigate situations that could influence good people to do bad things.

In my last post I covered Tunnel Vision, The Power of Names, Social Bond Theory, The Galatea Effect, Time Pressure, Acceptance of Small Theft and Self-Serving Bias. Let’s jump into the next seven psychological reasons good people do bad things.

8. Conspicuous Consumption

Have you ever heard the phrase “follow the money?” Why? Conspicuous consumption. Conspicuous consumption is the idea that environments that foster extreme wealth can lead to equally extreme unethical behavior. In December of 2013, the SEC released enforcement results for that fiscal year (this included broker/dealer non-compliance, delinquent filings, FCPA violations, financial fraud, insider trading, investment adviser non-compliance, market manipulation and securities offerings.) Notice a pattern?

Takeaways:

This is a tough one because our culture is built on exchanging currency for goods and services – the more money you have the more you can buy. But Dr. Muel Kaptein, Professor of Business Ethics and Integrity Management at the Rotterdam School of Management, believes you can mitigate the effects of money on individuals by providing alternative means of measuring success. I’m currently pursuing my MBA at Georgia Tech and this is something we discussed in my Organizational Behavior class, as well. Money is essential to survive, so there has to be money involved, but our goal should be to pay our employees enough that it takes money off the table for them so that it is no longer a concern (i.e. they don’t think about it and are more productive).

Now I’m not suggesting that we pay all of our employees up the “wazoo” so that they don’t commit financial crimes; that isn’t a solution at all – everyone would just start walking around expecting the moon. Instead, provide a frame of reference for employees. Explain how their compensation has been determined and allow them a chance for a rebuttal and to negotiate for more if they think a higher salary is merited. Even if you don’t give them more, talking through your thought process and explaining what they can do to command a higher salary should make achieving more money seem more attainable and dissuade them from taking extreme, criminal measures to increase their wealth.

9. The Pygmalion Effect

The Pygmalion effect is similar to the Galatea effect, however, slightly different. The Galatea effect that I discussed last week, is based on the theory that self image determines behavior. The Pygmalion effect states that the way people are seen and treated affects the way they act.

Takeaways:

Growing up my parents always expected a lot of me. My dad would say things like, “your mother and I are smart, and we all know the apple doesn’t fall far from the tree (wink).” Both of my parents were math majors in college and my dad went on to be VP of Finance within the oil industry. What did that mean for me? I couldn’t let them down, I needed to prove that the apple really didn’t fall far from the tree. This meant I had to get A’s in school and I had to get into a good college.

The thing is, I know now (especially pursuing an MBA Georgia Tech surrounded by engineers) that I’m smart, but there are a whole lot of people smarter than me. However, because I grew up with parents telling me I was smart, I worked harder and pursued opportunities that I might not have otherwise pursued. Let your employees know that you believe in them, that you know they are ethical and want to do the right thing. If they believe that people see them as ethical, they will want to maintain that self-image.

10. Environmental Influence

For a brief stint after college I worked in the hospitality industry. I actually worked at the “#1 hotel in the US and Canada as rated by Forbes Traveler.” And in the beginning, I loved it. I was so proud to work at such a highly reputable property. But then everything started to unwind.

The owner let his girlfriend take over management of the property; when she came on site everyone was on edge. She’d come through like a tornado, firing people just because she didn’t like the way they looked and calling the Hispanic workers (most of whom had worked there for many, many years) derogatory names. Fairly quickly, everyone that worked there stopped caring about the quality of their work, and there were multiple cases of sexual harassment and theft. These were good people, doing bad things, because all of a sudden they found themselves in an unethical environment – and really more than anything I think it was their way of lashing back at management. I just quit.

Takeaways:

Tone from the top is crucial!!! Management must talk the talk AND walk the walk. If employees perceive that management doesn’t care about doing the right thing, why should they?

11. Reactance Theory

Ever notice that it seems to be the preacher’s kids or the Catholic school girls that rebel the most? Or what about Girls Gone Wild? (I know this a compliance blog! I promise I have a point.) Compliance is all about rules, right? We don’t want our employees to break the rules, because that could mean DOJ and SEC investigations, litigation, costly fees. On the other hand, if our rules are too strict, if our employees see them as unfair, they will violate them.

Takeaways:

One of my friends in the MBA program works for a company that prohibits visiting any online site aside from the company website and intranet. I know this because she has mentioned it several times and how annoying it is. While I know my friend wouldn’t take extreme measures against her company’s very stringent internet policy, someone else might. It might not even be mal intent – maybe an employee needs to access their online bank account during lunch to pay bills. They have a background in computer engineering and work around the company firewalls and violate the internet policy. Nothing bad might come of it, but there may be less eyes on internet security because the perceived need is low – no one accesses foreign sites, right? This reduced security could lead to security breaches from the employees seemingly innocent policy violation. What is better in this situation? I would argue a little leniency on internet policies could help mitigate the risk of security breaches due to low perceived need for attention to internet security.

12. Obedience to Authority

I started rewatching Game of Thrones about a month ago because I wanted a refresher before watching the new season. Do you know what just happened? A handful of Rob Stark’s bannermen killed the two young Lannister boys. Rob’s response? He sentenced each bannerman involved to death. On the way out you could hear one of them screaming, “But, I didn’t kill them, I was just the watcher!” Obedience to authority is ingrained in our culture. If we aren’t the leader, but are instead following someone else’s wishes we feel less responsible for what happens.

Takeaways:

As compliance professionals you probably don’t have control over who makes up your executive team, it’s possible a bad apple could sneak in. If that executive asks a subordinate to do something unethical the employee might find it hard to say no to their boss. So what can you do? Communicate a speak up culture to employees – make them aware of anonymous ways to report misconduct, so they feel comfortable doing so even if they are reporting misconduct by someone above their pay grade.

13. The Blinding Effect of Power

“Do what I say, not as I do.” Why are there so many circumstances where we hear about corrupt politicians? According to the Blinding Effect of Power, individuals in a position of power place higher ethical standards on others than they do on themselves. When people have the power to set rules, they start to see themselves as above the law.

Takeaways:

I would make executives aware of this theory. As far as I can tell we will always have hierarchies in business, which means we will always have individuals with more power than others. We know the Blinding Effect of Power exists, so why not be upfront about it? Let’s take the bull by the horns and tell executives in their compliance training and awareness materials that we know that this happens. You might also want to add on that you know they wouldn’t do it (drawing on the Pygmalion effect.)

14. Broken Window Theory

I first heard about the Broken Window Theory when I read Malcom Gladwell’s “The Tipping Point”. Rudy Giuliani, the former NY mayor cleaned up the city by cracking down on small crime. One of the crimes he targeted was tagging. Each time a building was tagged he would immediately have it painted over, and eventually the taggers stopped, because they realized that all of their hard work was for nothing. That wasn’t the only crime that diminished; according to a study of New York crime, both petty and serious crime declined for ten years following the implementation of the Broken Window Theory.

Takeaways:

We can do the same thing in compliance. The Broken Window Theory goes hand in hand with “Acceptance of Small Theft.” Instead of letting little things go – i.e. stealing toilet paper from work, boxes, etc. communicate that all theft no matter how small is wrong and there will be consequences.

Topics:  Chief Compliance Officers, Compliance, Training

Published In: General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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