Cutting Corners on Policy

The most prominent but overlooked sources of unethical behavior involve unrealistic, incentivized, or fear-driven performance goals. Employees endure overwhelming levels of pressure to meet benchmarks. At times, they’ll sacrifice their own morals to get ahead or even just to keep their heads above water. Other times, people engage in unethical conduct because they’re simply following by example.

A sales employee at a large, multinational biotech company once told me: “The expectations were insane and we all ended up working 14- to 16-hour days just to try to keep up. Every day I saw fellow workers packing up their desks. People were getting fired left and right. My coworkers were cutting corners, making promises they knew the company couldn’t keep, exaggerating about the efficacy of our products and fudging sales figures just so their sales numbers could ‘look good’ for this month or this quarter. But it was only a matter of time before it caught up with them. I was walking on eggshells thinking I could be next, especially since I knew that my boss didn’t want to hear any excuses.”

Dealing with their own pressures, leaders may be driving cultures that call on people to cut corners. In fact, a 2017 Ethics and Compliance Initiative (ECI) study revealed that nearly 20% “of employees experienced pressure to compromise standards.”¹

Employees under such duress are in the wrong state of mind to make rational decisions. The Wells Fargo scandal hits the top-10 list in terms of cutting corners on policy and setting people up for failure.

The banking giant baited its employees with handsome reward incentives to open new customer accounts. And between 2011 and 2016 that’s exactly what they did, except many of the accounts were sham accounts. Wells Fargo’s values and commitments, “Serving Customers and Helping Each Other,” proved only half true, unless “Helping Each Other” involves scamming customers and firing 5,300 employees for failing to meet unfeasible account quotas. ² Clearly, employees saw some inviting signals that they could get away with this behavior—it was the norm for five years, after all. Wells Fargo’s corrupt culture was more than an employee problem; it was a symptom of bad leadership and unrealistic performance goals.³

When it comes to cutting corners, leaders should watch out for some key warning signs. If noticed, these likely mean that employees are feeling pressure to perform:

• Increased or high rates of absenteeism due to stress
• Employees with extraordinary numbers in sales and accounts compared to others
• Employees working excessive hours or complaining of burnout
• Decrease in customer service ratings
• Angry customers, repeat repair tickets, or complaints that weren’t effectively resolved the first time

Misleading the Public for Profit

Another surprisingly common practice among companies is deliberately misleading customers to benefit from the results. Whether leaders or employees take advantage by misrepresenting their product or promising outcomes that they’re fully aware they cannot deliver, this is a behavior that typically begins close to the top and permeates an entire culture. It could be as simple as offering a satisfaction guarantee and then not honoring it when a customer tries to return a purchase, or as egregious as falsifying data about a product’s functionality.

VW is perhaps the most notorious case of customer deception in recent decades. Full-scale investigations across multiple countries have revealed that the company purposely misled consumers to make a buck. Instead of playing by the rules when the Environmental Protection Agency mandated tighter regulations on automakers to reduce diesel emissions, VW installed “illegal cheat software”⁴ that masked accurate readings of nitrogen oxide.

VW’s autocratic and inauthentic leadership forged a culture of fear. Some employees reported the cheating to their superiors, but the powerful international automaker turned a blind eye. Most employees were afraid to speak up about the wrongdoings, feeling like they had no choice but to comply. If employees hesitated to act, management would resort to carrot-and-stick tactics and force them into submission.⁵

ECI’s research indicates that culture is the number-one influence on employee conduct.⁶ In the case of   VW, the company’s iron-fisted leadership and forced code of secrecy led to a stifled culture of employee apprehension, perpetuating a 10-year stint of conspiracy and deception.

When it comes to misleading customers and other stakeholders, leaders should watch out for some key warning signs.

• A majority or significant percentage of employees don’t speak up (in meetings and in other settings).
• Former/current employees anonymously report online that managers don’t care.
• Employees leaving the company report concerns at their exit interviews, saying they didn’t feel comfortable making these reports without having secured another job first.
• Little to no internal reports of unethical conduct.
• High turnover rates under particular managers.
• Increase in leaders taking disciplinary action against employees, especially when the increase involves employees with previously good performance records.

If you notice a pattern of these behaviors, it might mean that employees have lost trust and that someone is trying to cover their tracks.

Unfair Treatment Leads to Theft and Unrest

Corporate America sees its fair share of theft, from embezzlement to expense account fraud to insider trading, among others. The Association of Certified Fraud Examiners’ (ACFE) 2018 Global Study on Occupational Fraud and Abuse found that organizations worldwide lose an average of 5% of annual revenue to fraud, with the median loss for U.S. companies clocking in at $108,000.⁹ Employee theft occurs for numerous reasons, and it can’t all be blamed on the organization—there will always be some bad apples that take advantage of their position by skimming some money off the top or pocketing inventory. But an organization often isn’t completely blameless either.

Following the same pattern that we’ve seen with other types of ethical issues explored in this book, employee theft frequently comes down to the example that company leadership sets and the culture that emerges as a result.

Walmart is an example of a workplace culture that employees perceive as greedy and therefore justify actions that might hurt the corporate giant. While its 38-page credo on values and beliefs includes “Respect for the Individual, Striving for Excellence, and Acting with Integrity,”¹⁰ the big-box giant’s culture is often portrayed, in the media and by current and former employees, as abusive and capable of looking the other way when it comes to legal requirements, thus creating a perception of corporate hypocrisy where employees can justify their own misconduct, including theft.

In one example, six Walmart workers conspired and stole almost $60,000 in merchandise between 2012 and 2013.¹¹ Many Walmart employees also steal money from registers, short-change customers, add cash-back charges to customer credit cards, siphon Walmart money onto prepaid gift cards, and steal money from self-checkout terminals.¹² These employees rationalize their behavior by citing the company’s unethical business practices.

I’ve seen the effects of this reality in my own practice—employees justifying unethical behavior because of their toxic culture or a particularly toxic supervisor. For instance, I’ve worked with a number of companies who have had to deal with the consequence of time card or expense report fraud. In many of those cases, the employees confess to having added hours to their timesheets or charged the company for personal expenses for two reasons. First, they see their actions as a way of making the playing field even—“If the company behaves unethically, why shouldn’t I do so as well,” they ask. Second, these employees see their actions as the most effective way to “stick it to the man”—the “man” who they perceive as always taking advantage of them and who therefore deserves to lose a few bucks.

Leaders can watch for some key warning signs to be clued in on conditions that lead to employee theft and related unethical acts:

• High levels of conflict and accumulated grievances
• Secret meetings, union organizing, walkouts, and strikes
• Low morale, productivity, and job satisfaction
• Employees arriving late and leaving early
• Missing merchandise or unbalanced ledgers

If you notice these signs, they likely mean that staff is disgruntled and senses unfair treatment.

This chapter is by no means exhaustive in terms of corporate misdeeds. If we’ve learned anything from Wells Fargo, Volkswagen, and Walmart’s examples, though, the underlying trend of unethical behavior within organizations is that you reap what you sow.

Adopt Ethics as Part of Corporate Conversation

Adopting ethics as a core corporate value that reaches beyond the Code of Conduct starts by integrating ethics into ongoing conversations. For example, Rockwell Collins, a global aerospace and defense enterprise, goes far beyond the letter of the law, treating its ethics-based values with the same prudence as compliance. Internal and external communications send consistent ethics messages centered on the values of trust and integrity within all aspects of work life.¹³ And Rockwell’s leadership articulates values throughout its employee and stakeholder value chain, even refusing to do business with vendors who don’t agree to these standards. CEO Kelly Ortberg makes ethics part of his daily communication, actively fostering a culture where it’s normal, accepted, and psychologically safe to talk about ethics. A decade-long trend of ethical behavior as reported by Ethisphere¹⁴ and positive employee blog testimonials evince Rockwell’s formal and informal ethical alignment.

Anchor Values to Expectations

Effective leaders of ethically strong organizations anchor ethics to expectations by communicating the company values, prescribed behaviors, and vision on an individual level. If the ideology is about trust, leaders should define trust and tie it to the employee’s specific role. Next, they can pinpoint the ethical dilemmas an individual in a specific position might encounter and provide a decision-making process to help them critically think through the conundrum. This approach requires leaders across divisions to be on the same page, offering a similar level of concrete guidance to their teams when it comes to expectations of ethical, value-based behavior.

Lead by Example

You’ve heard the phrase, “Don’t just talk the talk; walk the walk.” But what does “walking the walk,” or leading by example, actually look like when it comes to ethical behavior?

First and foremost, managers must be aware that they are the example. What managers say and do must match the company’s mission, values, and practices. Any perceived incongruence smacks of disingenuousness, which elicits distrust. According to a 2017 Society for Human Resource Management survey, 61% of employees state that trust in senior management is extremely important for their job satisfaction.¹⁵ Quite simply, employees who stop believing in their manager will either leave or hop on the bandwagon and imitate the behaviors they see.

Even-handed enforcement is equally important. It’s difficult for employees to believe that policy really matters when managers don’t face the same consequences for violating policy or when they bend that policy for certain employees. Malleable values and uneven enforcement not only create a sense of unfairness that elicits bad attitudes, they blur the line between right and wrong, sending a signal that ethical conduct is merely window dressing. (See Chapter 11 for more on implementing fair and even-handed remedial measures when misconduct is found.)

I once investigated claims against a fundraising manager who doled out compensatory days to employees who worked overtime. His decisions were not based on policy but on personal discretion. The employees who didn’t receive time off sensed unfairness and not only slacked in their efforts but also arrived late and left early. Perceived and practiced unfairness compromises ethics.

Hire for Values First, Then Skills

The old management style was centered on hard skills aimed solely at driving maximum performance, but that ship has sailed. Today’s workplace demands leaders with ethics and people skills. People skills, otherwise known as soft skills, involve integrity, emotional intelligence, empathy, active listening, ethical stewardship, participative feedback, and goal setting. These competencies are the values at the forefront of this era of democratization of ideas and innovation.

The question is, how can we hire leaders who embrace ethics and possess soft skills?

First, redefine the criteria for the hiring process and prioritize innate soft skills over teachable hard skills. Second, train people on ethical conduct and soft skills. But how do you actually make it stick?

Link Performance to Soft Skills

You make it stick by holding all employees accountable for soft skills in their performance reviews. This requires redesigning performance appraisal systems. For some reason, companies can’t see the forest for the trees. How on earth can they profit when tying hard-skill performance goals to rewards leads to unethical behavior, which ultimately costs more in personnel turnover, lawsuits, and legal penalties?

Instead, performance metrics should be based on 360-degree assessments that measure soft skills such as ethics, respectability, approachability, and reliability. Imagine leaders who actually think before they act. Now imagine employees who emulate them.

Companies that fail to hire people with soft skills (and who fail to provide effective education to keep these skills sharp) and tie those skills to performance goals also fail to heighten ethical awareness and ethics-based decision-making.

Establish a System of Checks and Balances

Research shows that when employees are invited into decision-making processes and their ideas are valued and acted upon, they’ll feel like they have a stake in the outcomes and thus take ownership of the goal.

So how do we bring this to fruition?

We can form committees of leaders and employees that tackle the root causes of employees’ ethical lapses. These committees can also create and endorse new policy or table old policy initiatives through a series of approvals that serve as a system of checks and balances.

While we’ll explore some of these solutions in fuller detail later in this book, I’ll leave you with this: Leaders aren’t just the curious eyes and ears of the company; they represent the touch of company values. Leaders directly influence employee experiences, perceptions, attitudes, and behaviors. If that influence isn’t ethical, employees will likely abandon ethics, too.