Breaking bad: 6 warning signs that your organisation has taken a wrong turn

In the bigger scheme of things

Misconduct in the workplace is not always underpinned by personal goals – sometimes it is intended to benefit an organisation

Organisational misconduct can have dire consequences for businesses, not-for-profit and government organisations, professions and even entire sectors.

Unlike personal misconduct, which focuses on individual goals, organisational misconduct centres on inappropriate behaviour for the perceived benefit of the wider business. It involves employees violating organisational policies, rules and regulations. 

Shareholders of many banks around the world have felt the consequences of organisational misconduct, after banks have had to pay billions in fines to a variety of regulators. Employees are also likely to feel the effects of organisational misconduct, even if they did not participate in it, and may be regarded as tainted by future employers.

In some industries, certain organisations may be seen to contaminate their competitors, resulting in whole sectors being tarnished with a bad reputation. 

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There are a number of explanations for organisational misconduct, and they revolve around pressure and opportunity.

Pressure may arise from the financial position of the organisation, competitiveness within the sector, change, strategy and so on. Opportunity needs to coexist with pressure for organisational misconduct to flourish, and it emerges when achieving results is more important than following rules and policies.

A number of warning signs can help identify misconduct risk:

  • How is misconduct perceived in the organisation?
  • Is some rule breaking considered normal? 
  • Which rules are believed not to be worth following?
  • What do people consider as the key objective of their role (for example, to serve clients’ needs or hit sales targets)?
  • Is compliance with rules and policies – even when times are hard – considered a waste of time, a valueless hurdle or something significant and valuable? 
  • Do you know of misconduct that is tolerated? Encouraged?

Research suggests that organisations with weak ethical cultures experience 10 times more misconduct. The fallout of this can be widespread. We have seen examples of CEOs and board members who have had to resign because of alleged misconduct in previous roles. The damage to reputation is often long-lasting.

Focusing on compliance systems, policies and controls can help, but only if they are aligned with the organisation’s culture and its values. 

Further to this point, an organisation’s employees need to be able to trust that they will be heard and not punished if they let their employer know about misconduct – and that action will be taken when values and policies are violated.

If you want to understand organisational misconduct, focus more on the characteristics of the organisation rather than the characteristics of individual employees. Pay more attention to what you do to people once you employee them, rather than trying to find the most virtuous employees to employ. Because once they join your organisation, they will be greatly influenced by the role, expectations and ethical climate you have waiting for them.

Dr Eva Tsahuridu is former CPA Australia’s policy adviser, professional standards and governance.

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July 2016
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