Unit 05 When Leaders Support Unethical Behavior

Ethics must be at the top of an organization. It is a leadership issue and the chief executive must set the example.Edward Hennessy

Years ago, I had the unenviable task of terminating over 60% of the employees at one of the branch offices I had been given responsibility for when I was employed by a financial institution in Nevada. The dismissals included the branch manager, assistant manager, teller supervisor and two tellers. This action was predicated on the fact that for over nine months this cadre of workers had been falsifying their mileage expense reports. This tight knit group of coworkers, led by the branch manager, had come up with this scheme to supplement their income at the expense of the bank. All expense reports were initially handled and signed off at the branch level. So, when the compensation forms were submitted to the accounting department for payment, no one paid attention to the fact that each report was almost identical month after month. Another red flag that should have clued someone in there was a problem was that three of the employees were not eligible for mileage repayments since their job function did not require travel outside the branch.

Much to the detriment of the bank, the department responsible for the review and disbursement of reimbursement funds had not caught the fraudulent activity in a timely fashion. Another contributing factor in the terminations was that the offending tellers had been supplementing their teller drawers from a kitty to hide outages and when they were not meeting their sales goals they submitted falsified referral reports. All of these ethical infringements were committed by or done with the knowledge and tacit agreement of the branch management staff; therefore all of these employees had to be let go.

An in-depth investigation revealed that this group of co-workers had become overly cohesive; all of the employees expressed a strong emotional attachment towards their colleagues. One person in particular who had not been discharged declared it was due these feelings she had chosen to reserve judgment surrounding their behavior. As time passed, she then decided there was no reason to raise concerns since her manager had been endorsing this questionable conduct and therefore, she concluded their seemingly unethical actions must be permissible. Schminke, Wells, Peyrefitte and Sebora (2002) state there is a “tendency for groups to exhibit ethical conformity, which can change the beliefs and behavior of a group member” (p. 8). Each terminated employee cited insufficient compensation as the primary motivating factor behind the falsified reports and felt justified in seeking an alternate solution to this issue. Furthermore, both the manager and assistant manager stated they and their team regularly drove places on behalf of the bank and had not recorded or sought compensation so, either way the bank owed them money.

Sims and Sauser (2013) identify illusions of group morality as one of several symptoms of groupthink. The researchers explain that illusions of group morality occurs when “group members feel they are moral in their actions and therefore above reproach. This symptom leads the group to ignore the ethical implications of their decisions” (p.7). Two newly hired employees, who had previous banking experience and had been assigned to train in this office explained at their former employer, the formation and use of a kitty to offset a teller drawer outage was considered unethical. However, due to the events at this branch, they were under the impression that it was a norm within this financial institution and had consequently done it themselves.

Both the branch manager and the assistant manager’s behavior demonstrated complete disregard for the culture of the organization, which promoted ethical behavior as one of the institutions’ top values. “Organizational culture determines how an organization operates and how its members frame events both inside and outside the company” (Sims and Sauser, 2013, p.4). The actions of  the leadership team within this office had essentially invalidated the culture the bank worked to endorse. Simha and Cullen (2012) conclude “egoistic climates to be the worst in terms of encouraging employee dysfunctional behaviors” (p.27). As evident in the situation described above, the self-interested mindset of the offending branch employees led them down a destructive path, which ultimately resulted in their termination.

References:

Schminke, M., Wells, D., Peyrefitte, J., & Sebora, T. C. (2002). Leadership and ethics in work groups: A longitudinal assessment. Group & Organization Management, 27(2), 272-293. doi:10.1177/10501102027002006

Simha, A., & Cullen, J. B. (2012). Ethical climates and their effects on organizational outcomes: Implications from the past and prophecies for the future. Academy of Management Perspectives, 26(4), 20-34. doi:10.5465/amp.2011.0156

Sims, R. R., & Sauser, W. I. (2013). Toward a better understanding of the relationships among received wisdom, groupthink, and organizational ethical culture. Journal of Management Policy and Practice, 14(4), 75.

2 Comments

  1. Robert Eugene Ames April 19, 2018 at 1:28 PM #

    As usually happens , leadership sets the tone for the ethical climate and culture within an organization. In your example, it is clear that because the leader had rather questionable ethics, so did the rest of the people in the branch. It would be interesting to know what the ethical standards of these individuals was prior to their involvement with this manager.

    Your story is reminiscent of Wells Fargo. While their scandal is widely reported now, I worked Wells Fargo’s mortgage division about 10 years ago during the buyout of Wachovia Bank by Wells Fargo. When the purchase was complete, there was almost an instantaneous change in the ethics of the once Wachovia bank branches. We were used to dealing with Wachovia since Wells Fargo existed, prior to the purchase, only as mortgage offices on the east coast. What I witnessed were sales goals that were so outrageous that every employee was complaining about them. They were told that if they did not make their quota they would lose their jobs. You can see now where that ended up!

    Ethics and morals in a company flow from the top down. If management doesn’t act properly, nobody else is going to. Cullen, et al and Arnaud both recognized this, and their theories speak volumes about the dynamics of an organization and it’s leadership.

  2. Mario R Barrera April 17, 2018 at 11:43 PM #

    As we have witnessed in some instances, group dynamics can present ethical challenges for organizations. I found this post very interesting. It is alarming to note that this behavior was exhibited by management as well. The cohesive or rather overly cohesive nature of the group resulted in the falsification of expense reports within various levels of the organization. Group conformity and group-think are two of the potential hazards of high group cohesiveness. Group conformity happens when teams members adopt similar behaviors, usually in an attempt to fit in. This set of behaviors becomes the group norm (Frenz, 2011). This form of collusion if you will resulted in the potential justification of this unethical behavior. Frenz (2011) also includes, “Group-think happens when individual group members lose the ability to think for themselves and rely on the group to make their decisions.” It is apparent that each individual succumbed to the will of the group collectively. It was interesting to note the rationalization of the behaviors by some members of the group such as being underpaid or not accounting for traveling expenses in other instances. It is concerning that this unethical behavior became the norm. This once again demonstrates the power of group dynamics and overly cohesive groups.

    There is a concern with leadership in this scenario. One plausible explanation is the notion of destructive leadership which incorporates susceptible followers who have been characterized as conformers or colluders. Conformers go along with destructive leaders to satisfy unmet needs such as need for community (Northouse, 2015, p. 339). Could this be driving the behaviors of the subordinates? Colluders may go along because they identify with the leader’s beliefs and values, which may be unsocialized such as greed and selfishness (Northouse, 2015, p. 340). As you mentioned the ethical climate encompassed and element of self-interest. Ethical egoism is the view that each of us ought to pursue our own self-interest (Westacott, 2016). Management condoned this unethical behavior and subordinates followed suit. It appears all group members were potentially driven by their own interests which resulted in adverse impacts for the individuals involved and the company as well. Once again, it is interesting to note the ethical implications and the profound impacts small groups can have on organizations.

    References

    Frenz, R. (2011, September 22). Advantages & Disadvantages of Group Cohesiveness & Productivity. Retrieved from
    http://smallbusiness.chron.com/advantages-disadvantages-group-cohesiveness-productivity-25046.html

    Northouse, P. G. (2015). Leadership: Theory and practice (7th ed., pp. 339-340). Thousand Oaks, CA: SAGE.

    Westacott, E. (2016, February 6). What Is Ethical Egoism? Retrieved from
    https://www.thoughtco.com/what-is-ethical-egoism-3573630

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