Deviant Organization Culture

The British Petroleum saga continues with the CEO Tony Hayward stepping down and Bob Dudley replacing him. Although senior management claimed to be taking a hard look, Dudley denied culture had in any way contributed to the spill. Those outside of BP hold a different image. Democratic Congressman Ed Murkey stated “A total culture change of this company is necessary.” Analysts and critics viewpoint is that BP’s encourages greater risk taking. With the history of violations in safety and environment norms, one can safely say that BP does consider itself somewhat invulnerable and takes risks which may not be required or necessary.

Going back to the Enron debacle, it was stated that the staff at the corporate office were aware of the unethical practices. They remained silent as Enron had a policy of annually cutting of 10% non-performers and those who did not comply to orders appeared in this list. Kenneth Lay was known to have a charismatic personality and an image of leader was projected which he wished others to believe. His name is now associated with corporate abuse and financial frauds.

The question comes up is how does the organization culture of the corporate play a significant role in adopting unethical practices? Do the risk management teams conducting transaction based auditing fail because the corporate inherently does not believe in following ethical practices.

In this post I am writing about deviant organization culture, what it is, how it is formed and what needs to be done to address the situation. If recognized in the formation stage itself, it would be easier to manage and restrict the growth. Hope this post helps you in recognizing the traits and addressing the issues.

What is a Deviant Organization Culture?

Organization culture is defined as the sum total of the psychology and attitudes which are communicated by the leadership team to the employees and the ethics, values and beliefs which are incorporated for execution of work and obtaining business objectives. A deviant organization culture is where leadership communicates to the employees that participating in criminal and unethical practices is normal. The management and employees rationalize that participating in white-collar crime and illegal behavior to achieve goals and targets is perfectly justified. Effective controls to restrain the management and employees from undertaking immoral, illegal and unethical activities are absent.

What is the cause of it?

Generally this occurs when a charismatic leader takes over the organization. The leader has a dark side, basically a narcissistic personality, characterized with a desire to pursue personal pleasure for self-gratification and ego. The company’s reputation, ethics and goals are completely disregarded to achieve personal needs and self-interest. The leader has little empathy, and uses coercive power to maintain his/her position. The transactional leader, rewards his/her juniors in financial terms for being “yes-men” and prefer the philosophy of no questions asked. There is little effort into building trust or emotional connections with the team. The leader shows blatant disregard for the social norms and tends to develop a corporate cult of blind folded followers. The leader’s success is dependent on the members who have low self-esteem and have a high need to be associated with a group. The members derive their identity and self-esteem from the group, hence are not willing to raise any objections to immoral social behavior or demeaning acts which the leader is subjecting them to.

Why does it continue?

Group think develops where members relinquish responsibility for their own actions and consider group consensus as prime objective of existence. The group members are generally in Kohlberg’s pre-conventional stage of moral development and look towards the leader to satisfy their sense of personal belongingness and security needs. As the group conducts more and more criminal acts the need for conformation to group norms increases. There is safety in doing what group is expecting out of the individual as the person is likely to face a backlash from the group if he/she disagrees. Hence, even when each member may disagree to some aspects they do not voice it, as the attitude is going along for getting along.

Outside influence and information of the external environment which is contrary to the group’s direction and objectives is discouraged. Leaders yes-men spread rumors and do propaganda to brainwash the members to complying to the leaders requirements. Any voices raised against the leader or group norms are severely punished. Coercive power is utilized, the corporate provides a high level immunity from detection and prosecution. The mindset is manipulated by the pleasure-pain theory. If one complies, then member is rewarded and if one desist, then the member is punished. Hence, to avoid pain, the members show complete loyalty to the leader and continue to do demeaning and criminal acts without questioning the moral sanctity of it. As Aristotle said “Evil gets men together.”

Who become members?

According to Tittle “The person must have a predisposition to deviant behavior. A situation must arise in which the individual can exploit the situation to engage in deviant behavior. Third, an opportunity must present itself for the person to engage in the deviant behavior. The fourth condition pertains to constraints. Should an individual engage in deviant behavior, how likely is the environment to constrain that person’s actions.” This very clearly indicates the employees who have less of a self-identity and self-esteem are likely to participate in deviant behavior to obtain recognition amongst peers.

What is the solution?

A form of cognitive therapy is required where the leaders and the group faces up to the issues and takes responsibility for their behavior. A need is there to set up a healthy corporate culture where management is seen as open to ideas, walking the talk and practicing ethical behavior. The culture should be re-established with a vision and mission statement, followed with a code of business ethics, policies and procedures. The bad apples need to be removed from the organization as a signal to the others that their behavior is unacceptable to the organization. A formal training process should be established to deal with abrasive managers, bullying and work place aggression. Last but not the least, multiple channels should be provided to the employees to report such cases and the employees should be protected from retaliation by others.

Re-establishing a culture is a time-consuming task and may take a couple of years. It is worth the effort as rewards are high. The organization is the long run will recover its reputation, have happy employees and loyal customers.

As E. Bruke said “The only thing necessary for evil to triumph is for good men to do nothing.” . To build a healthy culture the power should be with the good men who actively participate in incorporating ethical practices and beliefs.

Welcome feedback on the article. Please share your stories where you had to deal with deviant organization culture and how did you address it.

Advertisements

30 comments on “Deviant Organization Culture

  1. Pingback: Deviant Organization Culture (via Sonia Jaspal’s Blog) « Pilant's Business Ethics Blog

  2. A very interesting article. Enron immediately came to mind. Depending on how entrenched the toxic culture exists, it’s difficult to change the culture with the same leaders at the helm. Many of them are narcisistic by nature and believe that they are entitled since they are smarter than everyone else. They also tend to be socio-paths which makes them poor candidates for therapy.

    • Thank you for the compliment. I agree with you, even the psychatrists claim that there is no cure for people suffering from narcissim and sociopathy. Sam Vatkin’s book Malignant Self Love on narcissim is a great read.

      Sonia

  3. Great post Sonia…it helps relate to my organizations culture….

    I love the quotes….I am going to for sure use them in my communication

    Thanks,
    Jacob

  4. Sonia: Your analysis of toxic corporate culture and its condoning of unethical/fraudulent conduct is excellent. However, it is important to remember that many people who commit fraud are neither hardened criminals or otherwise psychologically predisposed to “cross the line”. There are many who are fundamentally honest but find themselves in despearate siguations that induce them to commit fraud and rationalize it by convincing themselves that they are just “borrowing” the money or that they “deserve the money” due to mistreatment or other justifications.

    More than 60% of fraud is committed by insiders. Most are NOT senior executives. And many commit crimes despite a favorable corporate culture. The hard-to-answer question is “How do we prevent THESE people from stealing?”

    • Peter,

      Thank you for sharing your insight. I agree with you completely, that in case of numbers, employee or insiders conducting fraud or participating in it, is the highest. These employees are able to rationalize their involvement in the fraud when they see an opportunity and find the reward significant. The rationalization might be from desperation, greed, revenge etc. They generally indulge in it, because they have convinced themselves that they will not be caught.

      I have investigated a number of cases of data theft and fraud by employees, specially youngsters. In my interrogations, I have generally asked that how can you conceive that a large organization will not have checks and balances to detect a fraud. There response is we didn’t know about that the organization had controls in place. So I think once an awareness is built that the organization has controls, checks and balances, the fear of getting caught and punished, removes thier rationalization.

      We need to come up with an internal communication that those indulging in such activities will have to face legal repurcussions and an example should be made of a few. Senior managers should make a few tough choices, and the lesson will be automatically learnt by the rest.

      See, narcissists and sociopaths, account for less than 10% of the population. Since they are naturally inclined to crime, we might not be able to cure them. So these should be identified and removed from the organization. The balance will be forced to clean up their act once the sheperds are not leading.

      Sonia

  5. Pingback: Happy 2011 « Sonia Jaspal's RiskBoard

  6. Pingback: Fraud Symptom 5- Insufficient focus on organization culture and processes « Sonia Jaspal's RiskBoard

  7. Pingback: The Problem with Questionnaires on GRC Departments Functioning « Sonia Jaspal's RiskBoard

  8. Pingback: The Negative Impact of CEO Pay & Power on Corporate Culture and Governance « Sonia Jaspal's RiskBoard

  9. I recently completed a major paper on the BP oil spill during my MBA studies and found that the lack of organizational risk management was surprising. The activities that BP undertakes demand that a top-down risk management and risk assessment philosophy be embedded throughout the entire organization, starting at the executive level.

    Cheers!

  10. Pingback: Strong Risk Culture Benefits Strategic Risk Management « Sonia Jaspal's RiskBoard

  11. Pingback: organizational theory

  12. Pingback: Risk Reporting – The Double Edged Sword « Sonia Jaspal's RiskBoard

  13. Pingback: 10 Best Practices for Governance, Risk Management & Compliance « Sonia Jaspal's RiskBoard

  14. Pingback: Fraud Symptom 7- Ineffective Human Resources Function « Sonia Jaspal's RiskBoard

  15. Pingback: Fraud Symptom 11 – Deviant Fraud Risk Management Function « Sonia Jaspal's RiskBoard

  16. Pingback: Moral Disengagement in Organizations « Sonia Jaspal's RiskBoard

  17. Pingback: business

  18. Pingback: Derailment of Leaders- Profiling Steve Jobs « Sonia Jaspal's RiskBoard

  19. Pingback: 1 Jan 2012 – A New Begining « Sonia Jaspal's RiskBoard

  20. Pingback: e réputation

  21. Pingback: Comments on COSO revised framework Internal Control – Integrated Framework « Sonia Jaspal's RiskBoard

  22. Pingback: Achieving Excellence by Becoming a Learning Organization « Sonia Jaspal's RiskBoard

  23. Pingback: Strategy to Execution – A Risky Path « Sonia Jaspal's RiskBoard

  24. Pingback: Lessons from Rahul Gandhi’s Failure in Uttar Pradesh Elections « Sonia Jaspal's RiskBoard

  25. Pingback: Competition – Cause of Unethical Bahavior « Sonia Jaspal's RiskBoard

  26. Pingback: Recruitment in Dysfunctional Organizations « Sonia Jaspal's RiskBoard

  27. Pingback: Rational versus Rationalized Risk Taking « Sonia Jaspal's RiskBoard

Comments are closed.