Fraud Prevention Tip #11: Define Acceptable Behavior

Janice is a compliance officer for a large multi-national energy company. During a full day of Fraud Risk Management training for her organization, she asked a great anti-fraud question.

“How far should we go in defining business behavior?”

Answer: far enough to remove any doubt about what’s acceptable and what crosses the line as unacceptable.

Here are a few suggestions for putting action behind defining acceptable and unacceptable behavior.

1. Define who you are.

Anti-fraud efforts are built on a solid, observable, ethical foundation. Step one is defining who you are as an organization in your policies, in your marketing messages and materials, in the words your leaders say publicly and inside to the employees, and in the way you treat your suppliers, contractors, customers and all other stakeholders – including regulators and the public.

2. Set an example.

Every employee including executives must intentionally display positive behavior in how they act while conducting business and even how they carry themselves. Be observant. Ask, “What do others see when they witness our behaviors? Do they see honesty, pride, respect and fairness? What should we adjust individually and collectively to completely integrate our policies and our actions?”

As the business experts they are, professional auditors must have outstanding technical skills. But they must also be expert at communicating their ideas, influencing managers and employees, and driving change – all while demonstrating both real and perceived value. Traditional audit training is heavily focused on technical and audit reporting issues, but what about auditor communication, behavior and interpersonal skills. Things like building rapport and trust, interviewing and presenting confidently, and selling our ideas. While we all agree that sound technical skills are required for auditor effectiveness, the mastery and daily application of communication and interpersonal skills are just as important. This seminar teaches participants how to master critical communication and interpersonal skills needed by all auditors.

Here’s why: when there is any disconnect between words and deeds in setting the tone, deeds always win. Always.

3. Spell out acceptable behaviors in a useful Code of Conduct

You have to define acceptable behaviors – explicitly. In writing. Your Code of Conduct should clearly describe who you are and how you conduct yourselves in everyday activities.

Employees, vendors, contractors and others need to know what’s allowed. They also need clear guidelines on what will be judged as unacceptable. And they should be told to speak up and ask questions about any situation not covered by the Code.

I’m confident that if you’re reading this article, you’ve probably already got a strong Code. But it never hurts to see what others have out there and how you might tweak your Code to make it stronger and more user friendly. There are many examples of outstanding Codes available with a five-minute Internet search.

4. Tell third parties.

It’s not just telling employees about your behavior standards. It’s also about telling all the third parties you allow in as partners for your success. Contractors, vendors, agents, customers, joint venture partners, supplies all need to know how to behave when doing business with you. A great practice it to make your Code of Conduct part of any documents that evidence your relationship with third parties. Say to vendors, “I don’t know what your Code is. Here’s ours, and you’ll have to abide by it to do business with us.

5. Spell out restrictions on gifts and entertainment.

This idea is short and to the point. Make sure your employees and all third parties know the restrictions on gifts and entertainment and any penalties for breaking those rules. Encourage everyone to ask questions before accepting gifts or entertainment that bumps up against or exceeds stated limits. Transparency is the key to success. Say, “When in doubt, talk it out.” That’s good advice!

Five quick suggestions for you to consider. Give your organization (or clients) a rating on all five right now. If you don’t measure up on all of them, decide what could be done differently right away to bring behavior into alignment with expectations.

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.”