One need not look too far to recall historical studies warning us of an increasing likelihood of fraud events in government. Common-sense rationale stipulates that in competitive pursuits, companies doing fraud ultimately get caught: they experience diminished economic results, lose reputation, grow weak, and then they go out of business.
With public institutions, if countervailing forces do not exist, fraud and waste continue unabated for extended periods of time. If scandals or bad behavior occur, how can we be surprised? And, borrowing one impactful phrase from the confines of a June 6th Wall Street Journal commentary by Steven Law:
“There’s never just one cockroach.”
Diligence in Fraud Prevention
So, whether an organization houses a few “bad apples” or is in itself a “bad barrel,” we must all be diligent, at all levels of an organization—our company, governmental institution, not-for-profit entity.
Several combinations of characteristics: inertia and complacency; an inability to face-down issues or challenges early in their life-cycle therefore letting avoidable problems fester far beyond any tolerable term; herd mentality and group-think; all of these ultimately cause or promote the wrong behavior within employees…by omission.
Perhaps even more importantly, if we as management do not communicate and exemplify common sensible, key behavioral and ethical principles, then we are perceived as tolerating any resulting behavior.
Let me say that again: Not communicating or not acting rightly sends the clear and quickly-perceived message…that we tolerate the opposite: wrong choices and bad behavior.
Rule #1 through #3: Decide what’s important; Say it; Do it. Rule #4: Repeat rules 1 through 3.
Most importantly, at the base of right behavior throughout an organization must be two things forming its foundation…a sense of right and wrong, and, healthy skepticism…at all levels.
- In M&A efforts, we utilize due diligence on purpose; to confirm what is and is not in place…what the numbers are…what the operations actually produce…what the capabilities and risks and results are or could be.
- In managing operations, we have business processes built over time, done with consistency, by people and through systems. Within those business processes, we have our in-house experts executing transactions and activities…and they know better than anyone when something goes awry, or does not happen according to those processes and intentions.
Our job as managers, or subject matter experts, or conscientious employees, or valued contractors…is (FIRST) to be diligent, observant, add value. If things get out of kilter, or cause our gut to get queasy, we must then act…and we must have trusted people to go to if we cannot fix it ourselves.
Create a Culture of Principle
Skepticism naturally results from: inquisitive people acting knowledgeably, with a principled sense of right and wrong. But, if the culture or management approach is non-committal, or absent, or even worse…toxic…then principle gets shoved aside, or dies, or departs…and the wrong things happen.
So, the choices, messages, and therefore the tone from management all create the “culture.” If management takes no position, communicates nothing substantively, then the wrong choices and behavior are neither prevented nor avoided. “Herd-driven” or “group-think” approaches simply prolong the stupidity.
If action is taken by principled, knowledgeable and experienced people, and consistently communicated and reinforced…successful management teams emerge, along with sustained company success. Let’s face it, everyone jumps the bandwagon of a winner…but winners are established and sustained by principled, communicated messaging…resulting in right action, regularly verified.