Don’t lie, cheat and steal

By D. Keith Denton

Executive Summary
Research reveals that many U.S. employees do not trust their senior leaders. Left unattended, low trust can exact a high financial price. According to the Association of Certified Fraud Examiners, $435 billion is ripped off from businesses by their own workers each year, an amount that is approximately 6 percent of an average firm’s revenues and three times the rate of such fraud in the 1960s. Encouraging ethical behavior in the workplace always was admirable, and now it makes good business sense. 

A Watson Wyatt survey of nearly 13,000 workers in all job levels and industries reveals that fewer than two out of five employees today have trust or confidence in their senior leaders. More than 25 percent of Americans admit to some form of tax cheating that costs $100 billion annually. Fraud in workers’ compensation programs was estimated in the billions. Healthcare fraud amounts to $100 billion a year, including billing for services not rendered and ordering unnecessary medical procedures. And a study in the Journal of Ethics found that 47 percent of top executives and 76 percent of graduate level business students say they would commit fraud by understating their firm’s write-offs against profits, especially if the chance for job promotion was linked to higher profit figures.

It is time for a change. Creating open and honest workplaces is not only the right thing to do; it simply makes business dollars and sense. Without it, expect employee dissatisfaction, turnover and lack of productivity. And thanks to the World Wide Web, businesses face greater media scrutiny than ever before. A traceable record of public communication encourages greater accountability. You can pay up now or pay later.

Ethical behavior pays off

Left unattended, low employee trust can exact a high financial price. According to Watson Wyatt’s WorkUSA 2002 survey, the three-year total return to shareholders is almost three times lower at companies with low trust levels than at companies with high trust levels. A report by Towers Perrin on employee engagement shows similar findings.

In their book, The Stakeholder Corporation, David Wheeler and Maria Sillanpaa note that recent research shows consumers favor ethical firms in monetary ways. More than 60 percent of Americans say they would switch brands or stores to purchase from companies that support particular social causes. Forty-eight percent would support companies that donate money to a cause through a foundation or nonprofit agency. Twenty-nine percent applaud firms that allow employees time off to volunteer for a cause. Assessing your return on investment for good ethical behavior is sometimes difficult to figure out, but another way to look at it is that a lapse in ethics in 2003 cost Boeing an estimated $1 billion. A billion-dollar ethical mistake will get anyone’s attention.

Other research supports the virtuous profit motive concept. A 1999 DePaul University study of 300 large firms found companies that make an explicit commitment to follow an ethics code provided more than twice the value to shareholders than companies that didn’t. Even simply thinking about virtuous behavior seems to make a difference. In 47 companies expressing a more extensive or explicit commitment to ethics, the market value added (MVA) difference was larger – an average of $10.6 billion, or almost three times the MVA of companies without similar commitments.

Jeffrey Pfeifer of Stanford University estimates in his book, The Human Equation, that the returns from managing people in ways that create trust are typically in the 30 percent to 50 percent range.

A business and personal world dominated by the profit motive can be proactive or reactive, but the need to change is almost a certainty.

A model of good behavior

George Franke, a marketing professor at the University of Alabama, notes the impact of work experience on understanding what we find to be appropriate or inappropriate behavior. He says smart companies that stress the importance of ethics and whose executives set good examples for all employees will have fewer problems with unethical behavior.

Research seems to back up his point about modeling good behavior. One survey showed that American workers feel pressure to act unethically or illegally. In the survey, 57 percent felt more pressure than five years ago, and 40 percent believed the pressure had increased in just one year. These unethical behaviors included cutting corners on quality control, covering up incidents, abusing or lying about sick days, and lying to or deceiving customers. Unethical behavior was reported most strongly in the computer and software field and advertising and marketing. Causes of the pressure include poor leadership, workload and poor internal communication.

The tea bag test

Some of the stories about unethical behavior include service and sales staff who have intentionally disconnected calls in order to reduce the average time per call. Sales people have added additional items to requests in order to increase the averages per sale. But it is more than external pressures. Many seem to have a cavalier attitude toward honesty and the organization’s predisposition to look the other way. Even though it is credit card fraud, waiters and waitresses have "adjusted" a customer’s handwritten tip to reflect what they consider fair.

So what is the cause of all this lying, cheating and stealing? It depends on who is answering. We are all capable of dishonesty. It depends upon how much hot water we get into. You never know how strong your convictions and ethics are until you are in hot water. That is the tea bag test. But there is a positive aspect of the tea bag test. As organizations and managers come under increasing hot water in terms of litigation and grievances, things are sure to change. The emphasis on greater moral and virtuous leadership also will be spurred on by our cultural expectations.

But from an individual’s standpoint it is probably better to stay out of as much hot water as possible. We always feel pressure to meet our organizational goals. When we believe those goals are unreasonable, then unethical methods of achieving them are likely. Dishonesty has a downward spiral. When our bosses see apparent success in achieving exceedingly high goals, they sometimes assume it is OK to raise the bar even higher. The organization becomes rampant with dishonesty, distrust and unethical behavior.

The tea bag mentality today has created two choices. One choice about lying, cheating and stealing is simply defensive in nature. Managers may try to avoid scandals, embarrassment, corruption or legal problems over allegations of wrongdoing. The other approach is offensive, where you take the moral high ground. Such a high road involves greater awareness, personal openness, communication and accountability. Such a virtuous person has the ability to detect deception within the organization, business and personal relationships.

The winner curse

Keep grounded in reality about your own integrity. Try to keep an accurate perception of your ideas, talents and potential. It is one thing to be self-confident and opportunistic, but another to keep a realistic view of yourself and motives. All too often what we see is unfair and unjust because we are driven by our ego. Be able to admit you do not have all the answers. Be a better person and people will be drawn to you. Be able to accept divergent and conflicting information and incorporate it rather than ignoring or rejecting it. You can hold firm to your beliefs, but be respectful to others, and make sure your suggestions are not simply self-serving.

There really is such a thing as being too optimistic, too positive. We overrate our own importance or ability. If it weren’t for us, everything would fail. The result can be excessive optimism and overconfidence and a false sense of your ability to control events and risk. Of course, optimism is a very good thing, but it can impact your ego. When positive things happen, we believe in our own skill. When negative ones occur, we blame external circumstances.

There is a strong tendency to see what we want to see. It is a survival thing – we are primarily concerned with our self-interest, not necessarily the interests of others. We hate threats to our self-esteem or career – and such behavior is rewarded. Part of the reason for this false security is that optimists are prized hires. Everyone likes positive, can-do people, and research has shown that optimists, on average, tend to be most successful in life. High self-esteem is associated with aggressiveness, perseverance and risk taking. Business, in particular, values decisiveness and aggressiveness. Successful managers have a hard time with humility. It’s that winner curse. Minor failures are seen as evidence of good management because they are not major ones. Confidence and optimism also tend to make people more persuasive and influential.

Groups tend to increase this optimistic bias. Overconfidence in business and public organizations is therefore predictable and frequent. We tend to believe our organization is superior to competitors, thereby underestimating our competitors. This is often called the "winner curse," which comes from the tendency of winners at auctions to realize later they have overpaid.

It is not simply about being overconfident. We also tend to get sidetracked by sunk cost. When people voluntarily commit to an idea or course of action, something strange happens to our thinking. We lock in, become committed. There is strong motivation to resist any evidence that the course of action was ill-chosen. Our self-confidence is threatened by the thought that we may have made a mistake. All people value consistency; we don’t like those who "waffle." Cognitive-dissonance theory predicts that once a commitment is made, attitude and beliefs will tend to be preserved. As a result, we continue to "throw good money after bad." We continue to stay with the present course, even in the face of adversity. It is simply hard for us to change.

To stay out of hot water, keep in touch with reality and accept information that conflicts with your own world view. Find ways to keep a handle on what is really going on. Seek honest and open feedback. Reality means seeing the whole picture. Would you make the same decisions if you had not already committed to your present course?

Emphasize integrity

You get what you reward. According to one researcher, a recent employee survey revealed that nearly half of respondents admitted unethical behavior in the past year. These "lapses" included forging signatures, lying, and discriminating against colleagues. The researcher believes a poor work environment may trigger unethical behavior and suggested preventive measures.

One way to reduce cheating is to model integrity. There are a number of things you can do for others to help minimize lying, cheating and stealing. For one thing, expect people to be honest and make sure they are crystal clear about the rewards and punishments. Crafting a virtues statement that clearly and simply states what is expected and required is useful. Remember to keep it simple – just clarify what you and the organization expect and clearly define the consequences for violating these virtues. Provide examples of behavior that are unacceptable, such as dishonesty in reporting sales and work times.

Leave no doubt; everyone should know what is important by virtue of what is rewarded. If ethical behavior is rewarded and unethical behavior punished, then honesty and openness is more likely to be a part of your culture. Monitor and track ethical and unethical behavior so everyone knows it is important.

An obvious preventive measure involves hiring the right person. Many organizations favor hiring someone for his or her ability to maintain high ethical standards rather than his or her field expertise. A candidate needs the necessary skills, but more importantly must have the correct behavioral responsibilities. One expert recommends asking behavioral-based questions. These open-ended questions let candidates tell stories about how they previously acted in a particular situation. Peer interviews can also help. Obviously, criminal background and reference checks require time, but are crucial.

Once you hire the right people, provide ethics training so everyone knows what is required and they have an opportunity to practice applying those valued virtues to hypothetical situations and challenges. Then it will be easier for everyone to recognize ethical dilemmas of confronting unreasonable goals and expected behavior.

Our leaders set the tone and define expectations by their examples. If you are trustworthy, your motives are honorable and your expectations clear, then ethical problems are rare. Problems occur when higher-up expectations and day-to-day operations distract you from focusing on ethical behavior.

Each of us is capable of making a difference. Focus on the right values and skills. Do not be overly political or guided only by self-interest. A virtuous person’s concern is: What is the right thing to do? In a perfect world it is the best ideas and most deserving people that should advance. We don’t live in a perfect world, but that does not mean it is right not to act virtuously. Make a point to make a difference. Be proud that you stand for something.

Take a personal stand

Texas Instruments provides another shining example of walking the ethical talk. It has an employee ethics handbook that dates back to 1961. Management provides business card-size pamphlets for employees to put in their wallets for easy access in case an employee has an ethical uncertainty. The advice is pretty good for anyone trying to decide on the right thing to do. Here are the seven thoughts and actions you should focus on:

• Is the proposed action legal?
• Does it comply with our values?
• If you do it, how will you feel?
• How will it look in the newspaper?
• If you know it is wrong, don’t do it.
• If you’re not sure, ask.
• Keep asking until you receive an answer.

A code of ethics should be in every employee policy manual. Post your code of ethics near the time clock or wherever it always can be seen.

A Rutgers University study found that MBA students are the most likely to cheat of all graduate students. At least 56 percent of MBA students surveyed indicated that they had plagiarized or downloaded an essay from the Internet. Heaven help us if we are accepting such behavior from the future leaders of business. If you don’t want them to lie, cheat and steal, then take a stand. Say and prove it stops here. There is a wonderful old quote from the American poet Ralph Waldo Emerson worth tossing in here: "Who you are speaks so loudly I can’t hear what you’re saying."

D. Keith Denton is a professor of management at Missouri State University. He earned his Ph.D. at Southern Illinois University in 1982. Denton has had more than 150 articles and 14 books published. He has been a practicing management consultant and university professor for more than 20 years.