The Slippery Slope to an Eroded Culture of Compliance

“Broken Windows” and Employee Misconduct

The broken windows theory proposed by James Q. Wilson and George Kelling links disorder to subsequent occurrences of serious crime. Michael Volkov suggests it can be applied in a corporate setting as well. Anytime employee misconduct goes unpunished, more bad behavior is likely to spring up.

Criminologists have debated for years the efficacy of the law enforcement strategy of “broken windows.” In simple terms, the theory suggests that minor infractions or petty crimes should be vigorously prosecuted in order to deter more serious crime. In addition, the theory suggests that a deteriorating environment (e.g., where broken windows are not repaired and are allowed to increase) creates an environment where serious misconduct is likely to occur.

Supporters of the “broken windows” strategy often cite New York City as an example of its efficacy.  Through the 1990s, law enforcement aggressively pursued petty and serious crimes with the result of a lower crime rate and improved neighborhood conditions. Whether the broken windows strategy was the reason for this improvement is debatable.

If you assume a corporation is its own community with social trends and influences, the question is whether a “broken windows” disciplinary strategy inside a company would reduce employee misconduct. The “broken windows” theory has never been applied to the white collar context.

There is no question that a company has to adhere to tough disciplinary standards to deter employee misconduct.  Whether a company needs to adopt a “broken windows” strategy is another question.  If a company decides to try such an approach, the company has to recognize that such a strategy requires transparency and communication of disciplinary actions while protecting employee privacy rights.

In order to implement such a strategy, there has to be commitment by leadership, human resources, compliance and legal functions to (1) identify “petty” offenses, (2) develop investigation and enforcement strategies, (3) ensure consistency in handling investigations and discipline and (4) communicate results and promote enforcement strategy.

The determination of “petty” offenses should include a range of minor offenses relating to expense reimbursement, theft, unauthorized use of resources and less serious conflicts of interest. It should not be hard to investigate and punish these types of minor offenses.

The challenge, however, occurs in even-handed justice. We have seen too many cases where a strong performer or important sales representative is given a slap on the wrist rather than the same punishment that a lower-level or less important employee receives for the same offense. Such disparate treatment erodes a company’s culture and undermines any claims of integrity and trust.

It can be argued, however, that ignoring “minor” employee offenses creates a slippery slope where rates of misconduct and seriousness of offenses will increase. Such a trend appears to be well-founded. It is easy to imagine an employee who observes another employee engaging in theft against the company and fails to report the offense when minimal or no punishment against the offending employee occurs.

As this attitude expands, there is a real danger to the company’s culture – if reported misconduct is not punished, the fear of detection and punishment will decline, leading to increased misconduct. Employees who operate in this environment may feel emboldened to commit repeated and more serious offenses.

A company’s culture depends on organizational justice. An effective justice system can deter individual employees from engaging in misconduct and encourage nonoffending employees to report observed misconduct. When these two trends are maximized – deterrence and reporting of misconduct – a company has accomplished an important objective: an organization committed to justice to promote trust and integrity with its employees.

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.