Ron Carucci
Harvard Business Review
Originally published February 15, 2019
Many of the corporate scandals in the past several years — think Volkswagen or Wells Fargo — have been cases of wide-scale dishonesty. It’s hard to fathom how lying and deceit permeated these organizations. Some researchers point to group decision-making processes or psychological traps that snare leaders into justification of unethical choices. Certainly those factors are at play, but they largely explain dishonest behavior at an individual level and I wondered about systemic factors that might influence whether or not people in organizations distort or withhold the truth from one another.
This is what my team set out to understand through a 15-year longitudinal study. We analyzed 3,200 interviews that were conducted as part of 210 organizational assessments to see whether there were factors that predicted whether or not people inside a company will be honest. Our research yielded four factors — not individual character traits, but organizational issues — that played a role. The good news is that these factors are completely within a corporation’s control and improving them can make your company more honest, and help avert the reputation and financial disasters that dishonesty can lead to.
The stakes here are high. Accenture’s Competitive Agility Index — a 7,000-company, 20-industry analysis, for the first time tangibly quantified how a decline in stakeholder trust impacts a company’s financial performance. The analysis reveals more than half (54%) of companies on the index experienced a material drop in trust — from incidents such as product recalls, fraud, data breaches and c-suite missteps — which equates to a minimum of $180 billion in missed revenues. Worse, following a drop in trust, a company’s index score drops 2 points on average, negatively impacting revenue growth by 6% and EBITDA by 10% on average.
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