What Causes People to Commit Fraud?
Employees aren’t born dishonest, yet many find a justification to break the organization’s rules to steal, cheat or otherwise engage in wrongdoing. I’ve always be fascinated by why this change occurs.
Business Insider recently published some research by Dr. Muel Kaptein of the Rotterdam School of Management that investigates some of the common psychological traps that cause people to fall into fraud. Here are a few of them:
• Tunnel vision. When people within a business become so focused on achieving a particular goal, they can often become blinded to the moral implications of their decisions.
• Social bond theory. According to Kaptein, this is the idea that employees in large organizations can begin to feel like “just another number” or “a cog in the machine.” This is a feeling that may resonate with you if you have ever worked for a huge company. For some people, that feeling of detachment can lead to feeling like they can steal from the company without it having any real effect.
• The Galatea Effect. Self-image determines behavior. People who have a strong image of themselves as individuals are less likely to do unethical things. Alternatively, employees who see themselves as determined by their environment or having their choices made for them are more likely to bend the rules as they fell less individually responsible.
• Needle in a haystack. Especially within large companies, it’s so easy for small theft to go unnoticed or to even feel accepted. Pencils, paper and other supplies often go home with employees. Because small thefts are generally ignored, people may begin to feel as though they can push their boundaries. What starts off as taking office supplies may, for some people, lead to claiming slightly more money than they’ve earned for a given period.
• Reactions against strict rules. This is what Kaptein refers to as “reactance theory.” The idea is that when people begin to feel that rules are overly strict or oppressive, they begin to fight back by breaking certain rules as a way to exercise their freedom.
• Moments of weakness. People who are overly worked, overly tired or suffering from depression are more likely to commit fraud out of a moment of weakness and desperation.
These are merely a few reasons why people might consider committing fraud within a business or organization—there are dozens more that could be discussed. What’s important is that you realize that there is no such thing as a “classic” fraud case—anyone is capable of committing the crime, which makes it important to constantly conduct reviews of your business.
John J. Hall, CPA
John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”