What’s the difference between a high performance culture, and a high-pressure one?
The distinction is important, after all. Pressure is one of the three forces that drive employees to commit fraud, along with rationalization and opportunity. We see pressure all the time in Corporate America, manifesting in all sorts of troublesome ways.
Exhibit A would be Wells Fargo, with its scandal of employees creating false accounts that customers never ordered. Why did they do that? Because they were pressured to hit the bank’s sales quota of selling eight new products every day. Eventually that pressure backfired, with regulators fining Wells Fargo $185 million last year and the bank suffering severe reputation damage.
We’ve seen other examples across other types of problems: Valeant Pharmaceuticals, and its faulty accounting; Abbott Labs and sales executives driven to suicide; even Amazon.com, which has no accounting trouble, but certainly a culture that sounds like a miserable place to work.
High pressure leads employees to behave wrongly. True, sometimes that pressure is no fault of the company—but many times it is. So how can companies avoid creating a high-pressure culture, but not sacrifice excellence or growth along the way? What’s the difference between high performance and high pressure?
That question was on my mind last week as I addressed the Institute of Internal Auditors’ chapter in Philadelphia, speaking at their anti-fraud symposium. My theme was fitting the fraud triangle to your organization’s risks—and as sometimes happens, I stumbled into an insight while speaking that was so useful, I wanted to share here.
First, let’s remember the fraud triangle itself. That’s the device auditors use to help think about how fraud might strike an organization. It has three legs: rationalization, opportunity, and pressure.
My contention is that for each leg of the fraud triangle, an opposite force exists. I call that the anti-fraud triangle, and it looks like this:
For example, you can seal off the opportunity to commit fraud by strengthening controls. Or if your employees can easily rationalize their way to commit fraud, then ponder how to improve the values among your people so they won’t talk themselves into committing a felony.
The most important leg of the triangle, however, is pressure. Likewise, the most important way to prevent fraud is to strengthen your corporate culture.
Performance vs. Pressure
A strong culture can counteract high pressure in two ways.
First, the company needs a culture that doesn’t even embrace high pressure. I’m all for high performance, and I love an aggressive sales goal as much as the next executive. But setting a goal and not giving employees room to fail and still try again—that’s not high performance. That’s high pressure.
Any culture that tells employees you cannot fail is high pressure. It puts the emphasis on delivery of results, not quality of effort. It’s a terrible culture to establish, and we’ve all seen the poor results in news headlines. Many of us have probably seen the results in our own careers: higher employee turnover, lower morale, more misconduct, and perhaps even criminal behavior.
A high performance culture, in contrast, sends the message that you must try. Perhaps the results will not emerge, but not trying is the unacceptable part—rather than not delivering.
The second way a strong culture can prevent high pressure is that it will embolden an employee to speak up when he or she feels pressure.
That’s not the same as having a strong speak-up culture. Yes, we all want companies to have a strong speak-up culture, so employees won’t be afraid to call out misconduct among coworkers or managers. But the most important goal is that the person tempted to commit fraud will speak up—that he or she will ask for help, express frustration, or tell managers that the strategy isn’t working.
Let’s state that point again, because it’s so important. Companies need to foster a culture where employees feel comfortable speaking up before they decide they need to commit fraud. Because once they do decide they need to commit fraud—they’re going to commit fraud. And all the controls and policies in the world won’t stop them.
Values and Rationalization
Likewise, corporate values are the antidote to rationalization, and they play a crucial role in achieving the culture outlined above.
Think about what rationalization actually is: someone talking himself into the false belief that committing fraud isn’t wrong; that somehow, this particular fraudulent ace the employee wants to do doesn’t violate his values.
The answer to that is to ingrain a sense of values so strong that the person cannot rationalize his way out of it. You want values so strong that when an employee does contemplate fraud, he tells himself, “That’s something I just won’t do.”
After all, before a person decides to commit fraud, that’s what the employee is telling himself. And somehow, those values don’t hold. We need to make them hold.
As to controls preventing the opportunity for fraud: well, I will always love a good set of anti-fraud controls. But show me an organization where you have great controls, but terrible values and culture—and still have no fraud. That’s not how it works. If you don’t pay attention to those two sides of the triangle, I don’t care if the controls side is solid iron. It won’t work.