Professors Stephen Dimmock and Will Gerken wrote a fascinating article that was published by Harvard Business Review in 2018, discussing how one bad employee can corrupt a whole team within an organization. It analyzed the power of peer influence as it pertains to negative behaviors. In our view, the most disturbing sentence in their article was:
Among co-workers, it appears easier to learn bad behavior than good.
Professors Stephen Dimmock and William Gerken, Harvard Business Review
The professors focused their research on the behavior of financial advisors and defined misconduct as situations in which fines of more than $10,000 had been levied or employees had lost an arbitration decision. What they concluded was that employees are 37% more likely to commit bad behavior if they are exposed to a new employee who has committed misconduct. Negative influence is powerful.
Professor Simi Kedia of Rutgers identified similar behavior in terms of public companies and material earnings misstatements. During her research in 2016, Professor Kedia found that corporate misconduct shows signs of being contagious and that there was notable ‘clustering’ of earnings misstatements that, in her estimation, were based upon companies seeing others committing infractions and not incurring sufficient penalties.
These findings have a number of ramifications for workplace conduct, ethics & leadership more broadly.
- Leaders set the cultural tone for the entire organization. If employees are more likely to engage in misconduct after witnessing peers doing so, imagine the green light they will perceive if their senior executives are the perpetrators. The viral effect of bad behavior by corporate leaders is profound. Leaders need to send a clear and consistent message that misconduct will not be tolerated under any circumstances.
- Incentive plans need to be entirely consistent with the message sent from the top. The CEO saying the right thing will be critically undermined if the compensation plan says something completely different. Flawed incentive plans can be incredibly damaging.
- The power of peer influence is profound. Training needs to address this point first-hand and, again, be entirely aligned with the message being sent from the most senior leaders of the organization. Steve Wynn skipping his company’s harassment training speaks volumes to people throughout the organization. If senior leaders don’t take important training seriously, no one will take it seriously. Additionally, this is where the quality of training becomes problematic. Almost every organization deals with employee complaints about the ineffectiveness of the training they receive. Again, these behaviors are highly contagious. When one employee snipes about how stupid the video was, others soon follow, and, before you know it, the efficacy of the entire training initiative is in doubt. Companies get what they pay for. If they offer poor training, employees won’t embrace it or will actively reject it. The well-intended training program may do more harm than good.
- It is important to screen employees for ethics during the interview process, as opposed to getting rid of bad apples after they have been hired. Employers screen for technical skills and aptitude and conduct personality tests, but few organizations run their candidates through realistic ethics and conduct-related scenarios during the interview process. We believe this is a critical oversight that creates material risk for the organization.
One bad employee can corrupt a whole team. Bad behavior is highly contagious and bad ethics training will not change a thing. What does this mean? Leaders need to lead when it comes to workplace conduct and ethics. They need to aggressively cull bad actors – whether they are top- performers or bottom-decile – to ensure their behaviors do not infect the overall culture. They also need to recognize the important role that quality training plays in establishing and maintaining a healthy and productive workplace. This is not about meeting minimum legal requirements. It’s about influencing your organization’s culture in a positive way.
