It’s well understood that everyone has the capacity to be dishonest and almost everyone cheats— even if it’s just a little. Sometimes we fill our water cups with soda, we take the pens from the credit union, or we may speed when we’re running late. But what is going on when institutional deception, involving multiple people, occurs?
As most of us are now aware, Wells Fargo recently received a $100 million penalty from the Consumer Financial Bureau of the United States after it was uncovered that its employees were engaging in illegal banking practices. This brought the bank's total bill for these infractions to $185 million and coincided with the firings of about 5,300 Wells Fargo employees. According to reports, the 5,300 employees who were allegedly involved secretly issued credit cards that customers never requested, set up fake bank accounts that resulted in customer fees, created fraudulent email accounts to sign up customers for additional services, and actually transferred customers' money between accounts— without permission.
Such an outrage might remind you of the Volkswagen scandal last year in which the German car manufacturer admitted that it had used sophisticated software to trick emissions regulators. If a car was being tested, the emissions controls would operate as they should, but if the car was not undergoing a test, the emissions controls would switch off, resulting in cars that emitted 40 times the legally sanctioned levels of air pollutants. Volkswagen has since has admitted that 11 million vehicles worldwide were equipped with the program that duped emission testing and had to recall a total of 8.5 million diesel vehicles in Europe alone.
How in the world did that many people get involved with such unscrupulous behavior? How could over 5,000 Wells Fargo employees engage in such obviously deceptive and fraudulent behavior? And how could so many Volkswagen employees, from software technicians to senior management, go along with blatantly circumventing the rules? How does a group of people end up lying together?
Harvard University psychologist Joshua Greene argues in his book Moral Tribes that humans have evolved as communitarians who follow the rules within small groups (Us) but dissent the rules of others (them). We may be born with a crude sense of right and wrong, but our culture refines it. If your tribe downloads pirated music, sells dubious stocks, or…. creates fraudulent bank accounts, you’re likely to go with the flow or cover up for peers.
Dan Ariely, a professor of behavioral ecnomics at Duke University agrees. He wrote in The Wall Street Journal in 2012 that character isn’t the real driver of immoral behavior; situational forces are. Individuals might break the rules under some conditions or mind frames, but not in others.
Imagine you witness a colleague opening up a fake email address for several customers and then using those addresses to request or approve additional banking services. This colleague then gets a bonus for his “knack” at convincing customers they need more while you patiently followed the rules and got nothing. Chances are, you’ll experience a knee-jerk reaction: you’ll want to get even or at least level the field.
To test the hypothesis that fairness is an important goal, Harvard researcher Leslie John, along with two colleagues, asked test volunteers to play a trivia game. They told some of the volunteers that others in the room were making more money than they were for correct answers to the trivia questions. Participants were paid either 5 cents or 25 cents per self-reported point, and half were aware that others were receiving the alternative pay-rate. Guess what happened? Regardless of pay rate, those who were unaware of the discrepancy cheated at low rates. The group that perceived itself as disadvantaged, however, cheated more. The results suggest that low pay-rates are, in and of themselves, unlikely to promote dishonesty, but people are more likely to cheat when they are aware that others are earning more.
Everybody's doing it.
Ariely conducted an experiment in which a group of participants were asked to complete a series of 20 simple math problems in 5 minutes. The participants were told they will receive money for every question they answer correctly. Unbeknownst to the participants, an acting student is hired to take the test along with the others. After 30 seconds, the actor raises his hand and says he's finished. Clearly, there’s no question that the actor is cheating, but the test facilitator paid him nonetheless. The other participants, upon watching this are then more likely to cheat by saying they’ve finished and taking the money and leave. Comparing this study to the events at Wells Fargo, it’s easy to see how if many of Wells Fargo's employees felt they would never get caught or that cheating was implicitly sanctioned, they would feel empowered to cheat.
Creativity has a dark side
Francesca Gino, a professor at Harvard, and Ariely conducted a series of studies to see if intelligence or creativity affected how open to dishonest behavior people would be. They compared how much people cheated after being primed for innovative thinking compared to those who hadn’t. In one of the experiments, they primed players in a gambling game to think more flexibly by exposing them to words like “original”, “novel”, and “imaginative” in a text they read. Players were then told to roll dice once and self-report their results, from one to six. They were given monetary rewards for each roll proportional to the number displayed on the dice: $1 for a one, $2 for a two, $3 for a three, and so on. Those primed for creativity reported an average roll score of five, compared with an average roll score of 3 1/2 reported by neutral subjects. The result? Unsurprisingly, participants who were encouraged to think creatively were consistently more likely to cheat.
The researchers note that this doesn’t mean creative individuals are necessarily more dishonest than other, less creative types, but that the ability to think creatively puts people at a higher risk for behaving unethically because they can more easily find reasons to justify their behavior.
Wells Fargo CEO John Stumpf is "well known in banking circles for leading the bank's efforts to cross-sell, or get customers to sign up for more and more accounts, with Wells Fargo," as reported by CNN. The bank had a popular catchphrase, "Eight is great," to describe how many bank products (or accounts) customers had. Perhaps the enthusiasm of Stumpf and other company leaders encouraged employees to look for "creative" ways to set up more accounts?
How to plan for cheating and prevent it from happening
We are all tempted to cheat at one time or another. Organizations have the power to reflect on their workplace, system and culture to create systems and environments that bring out the best in our people rather than the worst. Take away the ability to easily cheat and add a social pressure to not cheat, and you’ll significantly curb the incidence of cheating in an organization.
To counter the cheating, here are a few approaches that have shown to work:
Crowdsource verification. For certain activities, an outside party can verify the quality or veracity of a behavior. For example, if customer service representatives are rewarded based on the volume of credit cards they issue, they can cheat the system by distributing them without a customer request or lying about the request. However, if employees are only rewarded when a customer ranks their support as “Helpful,” then the quality is filtered through the crowd.
Moderate verification. While this is more expensive than crowd sourcing, you could give an individual or team the responsibility of confirming behaviors, spot-checking oddities and responding to complaints of unfairness. Even with a handful of irregular spot checks, habitual cheaters will be discovered. Take Volkswagen as an example.
Quarantine cheaters. If the cheaters all belong to one team or geographical region, you may choose to manage and monitor them separately, particularly if the cheating is more of a cultural perception or difference in departmental values. This could save you from changing an entire system that performs great throughout other parts of an organization.
Remind people of honesty. In a classic British experiment, a drawing of eyeballs mounted over a collection box at a corporate coffee bar helped enforced the honor system. Similarly, when people sign an ethics pledge at the beginning rather than the end of tax forms or job applications—before there’s an opportunity to cheat—they are significantly less likely to be dishonest.