This is part three in a four part blog series on the psychology behind bad behavior. In this blog I will cover reasons 15-21 that good people do bad things and how we can use this information to modify code of ethics training. Stay tuned: post four will cover the remaining 6 psychological reasons people do bad things. Check out the first and second post.
15. The Free-Rider Problem
The Free-Rider Problem occurs when people perceive their actions to have a limited impact. From an ethics and compliance standpoint this could be something like insider trading. Consider for a minute that you work for a large financial institution. You, along with several thousands of your colleagues, are privy to inside information on a variety of stocks. If you are the only person that shares ONE tip with ONE friend for perceivably insignificant gains, how likely is it that you’ll get caught? You probably assume very unlikely – especially if the tip yields gains that aren’t large enough to pique the SEC or DOJ’s interest.
I’ve said it repeatedly now, and I’ll say it again. I think most people are inherently good. But, sometimes for extraneous reasons good people do bad things, especially if we experience undue monetary stresses. You can save your money for unexpected expenses, but depending on what the expense is, your savings might not be enough. My mother recently got in a car accident, totaled her car and broke her wrist. She doesn’t have health insurance. Fortunately, her car insurance is covering her medical expenses, but if they couldn’t what would she do? The expenses are well over 20K. I wouldn’t be able to help – I wish I could say I have the means, but I don’t.
Now in the example I gave of insider trading, I would like to think that someone working in the financial industry would be making enough money that they wouldn’t be tempted to partake in illegal activity to cover expenses. BUT – we are all human and, in my experience, the more money we make the more expensive our lifestyle becomes. So even the rich might not really be cash rich. So what do you do to discourage the Free-Rider Problem? Leverage your compliance software by addressing it in your code of ethics training. Give examples of insider trading prosecutions – it shouldn’t be too difficult, I feel like I see them in the news all the time. I suggest the same for other types of behavior that violate company policies. Frequent and recent examples woven throughout your compliance training, whether it be in the classroom or via online compliance training courses, will help to reiterate to employees that they cannot count on going unnoticed in their indiscretions, just because no one else is doing it. People will notice.
16. The Foot In The Door
This is where Tone from the Top is critical. Dr. Muel Kaptein‘s Foot in the Door theory states that an individual might be inclined to break the rules if asked to do so by a figure of authority. The psychology behind this is that the individual wants to be perceived as a team player.
This past spring I read Michael Woolford’s book “Exposure: Inside the Olympus Scandal” about his experience as the first “gaijin” (foreigner) to rise to the top of the Japanese company Olympus. Within a year of being promoted Woolford uncovered suspicious financial activity at his company. When he brought the information to the board (all Japanese, save himself), Woolford was told not to worry about it, that everything was fine. But Woolford dug further and everything was not fine. He tried again to discuss the matter with the former President and CEO of Olympus and his right hand man, but was met with threats. Finally, the entire board voted to relieve Woolford of his position at the company.
How is this like the “Foot In The Door” theory? Every single person on the board knew that Woolford was right. They knew that Olympus had been participating in illegal activity, but they chose not to help him right the wrong. Why? They were faithful to their previous President and CEO, and they looked up to him to tell them what to do. His choice was to try and continue to keep the activity covered up.
First, try to make sure your Tone from the Top is sending the right message; but don’t stop there. Provide employees with step-by-step directions in your compliance training and compliance training courses on how they can anonymously report any wrongdoing. This might seem unnecessary, but I assure you it’s not. Before my father retired he worked in finance at one of the largest oil companies in the US. He knew his company had a hotline, but he never knew how to access it.
17. Winner Take-All Competition
When there is a clear winner and a clear loser, people are more likely to cheat.
Consider major sporting events – the Olympics, the World Cup. These are huge events that bring in major revenue for the city that “wins” the event. There is always a clear winner and MANY clear losers. Do you think that is an incentive to cheat? Look at what FIFA is going through right now with Qatar. Qatar “won” the 2022 World Cup, but now is under investigation for allegedly paying bribes to secure the games for their country.
When you can, emphasize teamwork. While competition is unavoidable in sports, we have more leeway to avoid it in corporate America. We don’t have to be in constant competition with our colleagues; in fact, that sounds downright awful. Instead, have your employees compete against themselves by giving them personal goals ((these can even include completing and attesting to compliance training via your compliance software).
18. Cognitive Dissonance and Rationalization
We all have an idea of ourselves in our minds – who we believe ourselves to be. Cognitive dissonance occurs when we do something that contradicts who we believe ourselves to be at our core. To alleviate the cognitive dissonance and restore balance to our world, we rationalize our out-of-character behavior. The more we rationalize the behavior the less it seems to contradict with our morals and we begin to see it as acceptable.
Cognitive dissonance and rationalization reminds me an article I read in CNBC, “I’m not a criminal: Daiwa rogue trader who lost $1 billion.” In the article you are introduced to the rogue trader, Toshihide Iguchi, who repeatedly hid losses of $1.1 billion while working for Daiwa Bank. Despite the fact that he was guilty of criminal activity and even testified that “yes, he did this,” Iguchi states that he is not a criminal. In his mind, he was trying to recover lost funds for his company – the fact that his actions were illegal were inconsequential – because he thought he would eventually recoup any losses and would have saved his company from a great deal of financial stress .
With at least 27 psychological reasons good people do bad things, there is a reasonable chance that one of your employees will do something that conflicts with who they perceive themselves to be. Don’t give them time to rationalize their behavior. I’m not implying that you should beat your employees with a stick or sit them in timeout for anything they do that is out of character, but do communicate to them that you know they are not perfect, they will make mistakes (hopefully not illegal mistakes) and when they do, that you want them to come to you so you can work it out together.
19. Problematic Punishments
Problematic punishments are when we tie monetary fees to immoral activities. When you enforce a fee on someone for bad behavior, the individual will begin to see the activity not as moral or immoral, but instead as something that can be bought. I’m sure you’re shaking your head right now, saying “Ok, but how does this apply to me?” For most of us, you are right, we don’t have to worry about this. Who fines their employees for bad behavior? What about in sports? Unsportsmanlike conduct?
Both coaches and players can be thrown out of a game for unsportsmanlike conduct that could result in future game suspensions. This can mean loss of compensation.
Try to avoid tying monetary connotations to immoral behaviors. If you tie compliance into an employee’s bonus, consider making it a baseline – ie. something that factors into their compensation, but does not move the needle up or down, merely ensures the needle is there.
20. Lack of Sleep and Hypoglycemia
People who are hungry or tired have less control and are more likely to make unethical choices.
Free coffee and snacks for everyone! While I am completely serious about my previous statement, constant food and coffee at the office aren’t the only answer to insufficient sleep and hunger. Try to get at the root of the problem. Ask yourself why your employees are tired in the first place. Do you have a policy that dictates that all employees must work 8am – 5pm? What if you have employees who are coming to work with traffic and getting in at 8am takes an hour, whereas 9am only takes 30 minutes? Would you consider making your policy more flexible or perhaps allow an employee to work from home once a week? See if you can come up with creative ways to solve these problems, update your Code of Conduct and policies accordingly and then communicate the changes to employees via awareness materials.
21. Escalating Commitment
If I say I’m going to do something, I know I will feel guilty if I don’t follow through. The idea of escalating commitment is similar to this. Maybe a better example ties back to the “Foot In The Door” theory. Instead of your boss asking you to partake in any illegal activity, you just witness him or her doing it. Your boss assures you it is a one-time thing (i.e. maybe they used the company card for something that wasn’t business related), that it won’t happen again and asks you not to report it or they could lose their job. You feel bad. You like your boss, he said it wass just a onetime occurrence, so you choose not to report it. Only problem is, it wasn’t a singular incident and you witness it several more times.
By the time you feel like enough is enough, you think, “Wait a minute. I can’t report now. What if they ask me why I’m just coming forward instead of reporting it at the beginning? I’m just as culpable as my boss for covering it up!”
You don’t want your employees to find themselves in this situation. Communicate the importance of a speak up culture. It’s better that they report anything that they think might be suspicious behavior, instead of taking a chance that it might not be and finding themselves caught in the middle of it.
Thanks for checking back in to read my third post on the psychology behind bad behavior. Stay tuned for the fourth and final post next week.