Employee Satisfaction and the Impact on Corporate Fraud

The frequency of insider incidents – namely fraud and internal data breaches – has tripled in the past four years, according to 2020 research. It’s tempting to associate increased incidents to the growing prevalence of cloud technology, and there is some truth to that when we think of external breaches. However, according the Association of Certified Fraud Examiners, several underlying factors generally influence the likelihood of insider corporate fraud: opportunity, pressure and rationalization.

Having access to systems in which fraudulent acts can take place removes barriers to opportunity as does not having controls in place to monitor and manage access, but access alone doesn’t mean a case of intentional fraud will occur. Motivation intersects with the means.

Motives can be anything from financial pressures to a need to falsify numbers and satisfy investors to a desire to acquire more wealth, status or power. Rationalization supports whatever the driver is. It may be the one final element needed to commit the crime. What role, then, does employee satisfaction play in rationalizing criminal fraudulent behavior?

The Connection Between Employee Satisfaction and Fraud

A number of elements contribute to employee satisfaction, including company leadership, job fulfillment, a sense of purpose, culture, level of engagement and transparency. These components are not easy to control, and they are also dependent on individual employee perceptions that vary from person to person. When dissatisfaction with one or any of these sets in, disloyal sentiment can creep in, too, along with a disregard for the company or its assets.

It’s far easier to rationalize stealing money, data or other corporate resources when loyalty and respect wane, so, logically, employee satisfaction can have a causal relationship to fraud. Disgruntled employees especially are more likely to perform nefarious deeds. It’s not that contented employees don’t engage in fraudulent actions; they certainly can and do for various reasons, but discontent and lack of engagement can be significant motivators. With more distributed workers in 2020, engagement is of particular concern.

The Cost

The most recent Gallup State of the American Workforce report estimates that actively disengaged employees cost the U.S. $483 billion to $605 billion each year in lost productivity. Disengaged workers are also more apt to make errors or business system mishaps that can add to that cost. When you combine that with what a case of fraud can mean in lost revenue to a business, there is every reason to make employee satisfaction a priority. The Ponemon Institute’s 2020 Cost of Insider Threats: Global Report estimates that on average criminal and malicious insiders cost an organization $757,000 per incident, which includes the expense of investigation, escalation, containment and remediation. Sixty percent of companies have more than 22 incidents per year.

What to Look For

If unhappy, disengaged or even highly stressed employees can play a role in fraud, what are some indicators to look for? Tom Miller, CEO of a company focused on helping to spot stress and disengagement in the workplace, notes that employees have expectations to become top talent and seem solid and trustworthy when hired, but disengagement develops over time. “You might not physically see the warning signs,” Miller said.

Miller notes that it is possible to aggregate behavior and risk data points in order to reduce threats and help employees get back on track before a costly incident occurs. In the absence of tools to do that, some behavior anomalies may include:

• Inappropriate or noncompliant behavior during work, including bullying and harassment (on-site, via remote video or conference calls)
• Reduced work output or disinterest in achieving personal or team goals
• Increased absences or tardiness
• Low-level criminal activity occurring outside the workplace
• Indications of accelerating financial stress; risks of foreclosure or repossession of a car are real and more common during an economic crisis
• Threats posted on social media (harm to organization, colleagues or self)

Helpful Approaches

However, because it can be challenging to spot behavior changes physically, companies can implement various practices and technologies to assist and lower risk. Although a company may believe it has a trustworthy workforce, it should never rely on trust alone, and, as noted, behavior may be difficult to gauge.

Unequivocally, organizations should make sure they are conducting regular access audits of their systems to ensure no employee has more access than is absolutely necessary to perform their designated job function according to their defined role. The ability to see any vulnerabilities through regular analysis is also a strong preventative measure.

Additionally, some technologies can help spot rising risk behavior, such as stress and decreased engagement, which are key components of employee satisfaction that may lead to an increased propensity for fraudulent acts.

Managers need to be hyper-vigilant in judging employee satisfaction and engagement. They should think of this as more than a means to prevent employee turnover and increased hiring costs. They should consider the broader risk implications. While there are behaviors that point to disengagement, managers can also pay attention to the positive signs of engagement to help determine if employees are still plugged in.

Engaged employees, like satisfied workers, tend to express an eagerness to learn and excitement about the projects they are working on. The Society for Human Resource Management (SHRM) states that engaged workers show more optimism and are team oriented. They also are apt to go beyond the call of duty, be more innovative and focus on solutions rather than problems. When those behaviors shift or start to wane, flags should go up.

Creating and maintaining a culture of happiness and engagement takes a companywide commitment. That effort and the dedication to scrutinizing and evaluating individual job satisfaction should be priorities for not only improving productivity and decreasing costly errors, but also for reducing corporate fraud.