I think many of us have been somewhere and heard the phrase, “We have always done it that way; why should we change?” I believe when most of us hear that statement, one of our first thoughts is, “Are you kidding me?” This attitude seems to inhabit many types of organizations and/or businesses. This “belief” could cause major morale as well as financial issues for the organization.
Having experienced this attitude on a personal level in both the law enforcement profession as well as the business world, I have been searching for a better way to explain this attitude as other commonplace activities once considered outside the norm are now commonplace and considered the “new normal.” If you cannot think of something this thought process includes, simply look at some of the now-ubiquitous fashions seen around your workplace, your city, county, state, and country that were once considered to be outlandish. I would imagine each of us can think of at least one example.
I struggled to come up with a term to define this attitude—until I attended a recent presentation by a fraud investigator from the US Department of Defense. During his presentation, the term “normalization of deviance” was mentioned and then discussed at some length. During this discussion, it occurred to me that this term completely explained what I had been witnessing over the course of my career and was a much better illustration of the phenomenon than a quotation attributed to the great Albert Einstein, which states, “Insanity is doing the same thing over and over again and expecting a different result.”
My thoughts were racing on how this concept could assist me with explaining why some preventable fraud-related crimes continue to occur over and over again. Upon returning to my office, the research began. It was time to better understand this term and how it related to the fraud world as well as simple everyday business activities.
According to an article published in the Public Safety Risk Management newsletter for the League of Minnesota Cities, normalization of deviance is defined as “the gradual process through which unacceptable practice or standards become acceptable. As the deviant behavior is repeated without catastrophic results, it becomes the social norm for the organization.”
Let us now take this idea and turn it towards the business world. I have lost count of the number of times I have assisted a business and/or governmental agency with potential issues when I hear something along the lines of, “No worries, that’s just how Doug does things and he is a very trusted employee.”
Just because that is the way it is done does not make it correct, nor is it a best business practice, or even legal in many cases. Although it’s money and not a life, it does matter how people do things. When was the last time you read or heard a news story about an embezzlement where someone told the reporter, “Yeah, I knew Doug was stealing from our company; no one liked him from the day he started.” I can’t think of one instance of such a report during my career. The usual comment or released statement is more in line with, “No one ever thought Doug would steal from us. He is our most liked and trusted employee.” In the forensic accounting world, there is a favorite saying: “Trust is not an internal control.” Unfortunately, not all businesses heed that warning.
According to the Association of Certified Fraud Examiners 2016 ACFE Report to the Nations on Occupational Fraud and Abuse, approximately 75 percent of all businesses are annually affected by occupational fraud. This translates into a business losing an average of 5 percent of their annual revenue to a fraud-related crime. My experience has taught me that once an individual takes that first step over the line into the fraud world, each subsequent step becomes easier to take. In many cases, the amount of money taken continues to climb to a point that the individual is no longer sure how much they may have “borrowed” with every intention of repaying it, or so they believe.
However, once that money leaves the business, it is often impossible to recover. Few fraudsters save or invest the money they have stolen; rather, they convert the cash into something else. It turns into a vacation, a new car, presents for the family, spa treatments to combat stress, a slot machine pull, a hand of blackjack, or a multitude of other things.
In order to make a major impact on the amount of fraud being committed around the world, businesses and organizations need to remember a few simple facts. First of all, the less opportunity someone has to manipulate the system they are working in, the less opportunity that business has of losing assets or cash to a dishonest employee.
The following suggestions are designed to assist any business to protect itself from potential employee theft or embezzlement:
1. Make sure your company has policies and procedures directly related to fraud and employee theft that spells out the disciplinary to be taken should an occurrence take place.
2. Set up a confidential hotline program so that employees can report questionable activity anonymously.
3. Hold regular inventory counts.
4. Make sure your segregation of duties are current and reviewed on a regular basis.
5. In cash-intense businesses, hold surprise cash counts.
6. Require daily or weekly bank deposits depending on the company’s cash flow.
7. Require mandatory vacations for employees working in finance-related areas.
8. Require cross-training of finance-related areas so that no single person has the “keys” to the organization under their control.
9. Set a good tone at the top for ethical behavior.
10. Hold all employees—even long-term “honest” associates—accountable for questionable activity.
Rules and internal controls are set up for a reason, and those rules and controls should never evolve to the point that deviance is somehow considered normal. I would imagine individuals and organizations who have deviated from the norm have had things go bad and wished that there was such a thing as a “do-over.” Don’t be that company wishing for a do-over before the doors are locked and the windows are boarded up.