Leading to loss

Culture is the key determinant of business survival

July 9 2020 - The pressures brought by COVID-19 are putting organisational culture to the test as a crucial factor on the prospects of the business surviving the economic impact of the global pandemic.

Leaders of businesses are having to now rely on the culture in their organisations and the engagement of their employees, to help them navigate the challenges thrown at them by the pandemic. A culture of trust and pulling together in the same direction may be the heartbeat for survival over many other factors.

Arun Chauhan, founder and director, Tenet Compliance & Litigation, explores the risks and how leaders can adapt their behaviours to mitigate the losses they stand to face.

Pressure-tested

The long-stated reality, is that organisations will lose, on average, 5% of their revenue to fraudi. However, for many, preventing it is not a fundamental priority. In today's situation, that 5% - viewed by some leaders as merely 'the cost of doing business' - could be the crucial difference that either makes or breaks an organisation's bottom line as cashflow tightens.

COVID-19 has diluted the power of 'command and control' leadership. At the time of writing (June 2020), almost every leader must now trust their employees to work on their own initiative thereby pressure-testing the culture of their workplaces.

Some employees will be facing pressure on two fronts - personal, financial pressure and increased pressure from their employers, as business revenues continue to decline.

Culture is the key defence for businesses in combating the risk of a good employee turning to fraud under pressure. A strong culture makes that shift to fraud unthinkable for most.

Some companies are shining - as their teams continue to work towards a clearly-defined vision and mission, in a high-trusting, virtual environment. While others, traditionally governed by 'command and control', may face such pressures that working from home is seen as an opportunity for self-betterment, at the cost of their employer.

The influence of leadership

Tenet's Alternative Fraud Triangle - showing the intrinsic link between leadership, culture and engagement.

Naturally, every leader wants to be their best, achieving targets and successfully driving team performance forward. However, when the ambitions or pressures facing a leader cascade into individual targets for their teams, without an understanding of the various challenges facing those employees, cracks can begin to show.

By increasing workplace pressures - either intentionally or unintentionally - leaders can begin to form a culture which can prompt employees to act in a way which invites risk into the business. As a result, employees can become disconnected and disenchanted with that culture, feeling frustrated and unfairly treated. This disengagement can lead to employees acting in a way which is misaligned with their true morals. Every one of us, particularly when feeling emotionally drained or under intense pressure, is susceptible to poor decision making.

Leaders carry a crucial responsibility to recognise and - where possible - help to reduce the pressures facing their teams. Rather than pushing for targets to be met at any cost, leaders should monitor target systems, ensuring they align with the true capabilities of their teams. If your company tolerates small wrongdoings as a means of hitting unattainable targets, it can lead to much larger losses in the long-term.

Recognising leadership's influence

Leadership's influence on workplace culture is well-proven. Good leaders recognise this. However, it's time for all leaders to acknowledge their influence, and act to move away from the common notion that a positive workplace culture is simply a 'nice to have', rather than a necessity.

As a leader moves up within an organisation, there are more people looking up to and relying on them and their actions. However, some leaders will continue to work within their 'workplace bubble', intent on improving their own performance, and may not fully acknowledge or appreciate the layers of other leaders beneath them, which are cascading their bad behaviours down the chain to their own teams. Yet, it is those teams that are likely to be the most influenced, as they look to learn how a leader should behave, particularly in times of pressure and crisis.

To be successful in the long-term, leaders must be aware of the impact of their decisions' actions on both their teams and every other team of employees within the organisation looking up to them. In both small and large organisations, consistency in leadership approach and style can help to drive positive behaviours for the long-term, reducing fraud risk.

How can leaders adjust their approach?

• Drive higher standards

  A good culture will ultimately go beyond the letter of the law. Don't view compliance as a 'tick box' exercise, go beyond the basic legal regulations and encourage maximum ethical behaviours.

• Encourage conversations

  Be approachable and encourage open discussions - at every level - about the fraud and its risks. Always keep the channels of communication open.

• Prioritise employee engagement

  Ensure your team is on board with your business' goals and its sense of purpose. To motivate your teams further, put reward incentives in place which truly reflect their wants.

• Invest in training and education

  Take the time to educate your whole team on acceptable and ethical behaviours. Encourage them to become your 'eyes and ears'.

Leaders can create a positive workplace culture for their teams. Those businesses that place focus on achieving this are the ones most likely to survive in the long-term.

The above themes are expanded in the results of a round table and captured in Tenet's white paper: Leading to Loss, which is available for download here: www.tenetlaw.co.uk/white-paper.

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