Research shows how leaders can prevent white collar crime

A study of inmates at a US prison has revealed what drives white collar criminals to commit professional misconduct, and the practical steps organisations can take to prevent it happening in their workplace.

Engaging in professional misconduct is something we want to believe we are incapable of. It is more comfortable to believe those individuals who commit white collar crime are driven by their own greed.

However, in his paper published in California Management Review, Professor of Leadership Will Harvey, found that no individual or organisation is immune to the traps of professional misconduct.

In a study involving 70 inmates at a US Federal Prison serving time for professional misconduct, Professor Harvey found that failures at an organisational and industry level had a significant role to play in driving these individuals to act illegally.

“For many of these people, the crimes were not just influenced by their own moral compass. It was the intersection of failures at a personal, organisational and industry level that resulted in misconduct,” Professor Harvey said.

“It’s not just a case of ‘the bad apple’ but often ‘the bad barrel’, and sometimes even ‘the bad cellar’.”

Professor Harvey and his colleagues found that a systems-level approach is required to prevent professional misconduct, laying out the steps leaders should consider to safeguard their employees and minimise the risk of internal corruption.

Ego is one part of the puzzle

While the research showed all three elements of personal, organisational and industry level factors intersecting, even when only viewing the personal element alone, the explanation extends beyond greed.

“There were definitely some elements of ego – but in the form of denial,” Professor Harvey said. “People had a very strong sense of what they felt they should do but weren’t coming to terms with the reality of their situation.”

That reality often being the organisational and environmental pressures they faced. “A lot of people felt overwhelmed because there were so many regulatory and compliance expectations they felt it was unmanageable for them to do everything correctly,” he said.

One example involved a doctor who was dealing with the changing laws around opioids.

“This individual had support at a state level, and from the highest level – the Attorney- General,” he said. “But at the same time, the Federal laws changed, and they ended up being indicted by the Federal Government.” 

A fear of failure was another factor, where people were worried about letting things slip, or others down.

This was often compounded by poor organisational culture, perverse incentives or grey areas between business outcomes and ethical conduct.

“It might be a burden of custodianship, where an employee felt like they needed to meet the needs of lots of different groups, however often there would be tensions between industry standards and organisational targets,” Professor Harvey said.

“There was a sense that they were in the middle and were trying to keep everyone happy.

“For instance, there was a tax lawyer we spoke to who had been winning awards for helping the company’s clients avoid excessive taxation.

“But suddenly they found themselves indicted because they actually assisted with tax evasion.”

A systems approach

Professor Harvey believes the solution to reducing white-collar crime needs to lie across all three levels to be effective.

1. Personal

At a personal level, organisations need to focus on individual employees starting with recruitment.

“One way is to think carefully about how you recruit, what you incentivise and how you develop individuals,” Professor Harvey said.

“Do they have the ability to cope? Do they present with ego? Are they afraid of failure?” All of these personality traits were factors in misconduct.”

It’s important to also see whether it is a consistent pattern of behaviour.

And if it isn’t you need to act quickly to address it at an organisational level. 

2. Organisational

One of the ways to address issues organisationally is to consider at a peer and across a team level what you are incentivizing people to do.

Ensure you aren’t setting unrealistic expectations which will create a burden of custodianship on these individuals.

Encouraging cross-team communities can also help shape desired outcomes.

“Removing silos from an organisation reduces the opportunity for bad behaviour to be normalised under certain departments or leaders,” he said.

“You want to embed lateral accountability.”

There’s also the question of how to communicate expectations at scale and quickly, when they change.

“I think there’s a great opportunity to do that through digital communications.”

3. Environmental or Industrial

“At a macro-level, reflecting on whether excessive regulation is hindering an organisation’s ability to operate,” Professor Harvey said.

Is keeping up with regulatory expectations making it too complex, expensive and ultimately resulting in individuals coming up with workarounds that lead them to break the law?

Ultimately, he explained, reducing poor decisions and professional misconduct requires considered intervention at the personal, organiational and environmental levels.

To read the full research paper visit Why Individuals Commit Professional Misconduct and What Leaders Can Do to Prevent It.

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