Check Attitudes towards Fraud and Discipline

An executive once asked me if I had a choice between chaos and military-style discipline, which would I choose?  I later learned that anyone who answered "military" was kicked out of the building. 

It is too simple to conclude that this mindset led to a massive and costly restatement of the firm's financial statements and SEC indictment of three executives for securities fraud, insider trading, and federal securities law violations.  Certainly their attitude did not help.

It is also too simple to choose one extreme over the other.  You want your folks to have the creativity and freedom to do their best job, and you want them to be disciplined enough to handle problems as they arise. 

Properly addressing fraud does not demonstrate to employees that they are not trusted, and does not stifle creativity.  Controls, implemented correctly, actually create the opposite: freedom for ethical folks to perform their jobs in an environment that retains more of its cash and profits than undisciplined organizations.

The essence of discipline: everyone has problems; so would you rather handle your problems on your own terms or on others' terms?  Every organization suffers some loss from fraud.  Would we rather detect it early and handle it professionally, or wait until the media, regulators, or law enforcement find out?

Disciplined leaders are aware of what can go wrong, take responsibility for detecting and addressing symptoms of problems early, dedicate to facts (i.e., rank will not trump evidence), do not claim rewards too early, and balance their discipline with creativity and flow - not too much discipline, but not too little.

Gain executive commitment to creating an environment of stewardship over the organization's assets.  One executive who believes they are entitled to behave recklessly and spend whatever they wish can sink the entire ship regardless of how many ethical folks are along for the ride.  And an uncommitted executive team will undermine your efforts to properly address fraud when your first tough case emerges.

For a comparison of disciplined versus undisciplined attitudes, feel free to start with this list here.

Return to the Library >