The morning after a fraud is discovered is always fraught with concerns as business leaders and the managers on the shop floor try to identify why specific signs weren’t spotted. Often there are attempts to justify how something slipped through the net, unnoticed, and a considerable amount of time is spent convincing stakeholders that everything possible is being done to ensure the same activity doesn’t happen again.
All too often the focus revolves around prevention and, sometimes, finger pointing as people attempt to paint a picture of future fraudsters. Our contention is that this is often a case of bolting the stable door after the horse has bolted. Too much time is spent trying to create a personality profile so that organisations can spot the next opportunist before they take their opportunity.
Yet the reality is that employers should be focusing on the culture within their business. Rather than looking for rogue people, organisations need to identify and stop patterns of rogue behaviours and this is where HR teams have a role to play.
No matter what the sector, there are a number of consistent themes emerging from organisations where rogue behaviour has occurred. The first – and most telling – is the gulf that exists between the top and bottom of a business. Senior leaders might think they have a good grasp of areas such as income and risk from the top level but, due to a lack of escalation from lower layers of management, the information being used is often incomplete. It therefore doesn’t provide genuine insight regarding true business performance.
Why this scenario is allowed to happen is the first question HR teams should be asking. It is, however, not something HR can answer in isolation. While it is frequently argued that HR needs to play a more strategic role around the business, this issue is one that should concern the organisation as a whole. After all, it’s no secret that the tone from the top, strong management and supervision can prevent rogue behaviour. Where HR can come to the fore is working with the organisation to help train managers on their fundamental responsibilities for managing risk and giving them the tools to do so.
Organisations falling foul of rogue behaviour also tend to lack absolute clarity about roles and responsibilities. The smallest level of ambiguity regarding who is responsible for every step of any key process is a recipe for disaster and allows room for things to fall through – or be hidden in – cracks. Additionally, in an age where many transactions or relationships span across borders or where a business has undergone structural changes, effective supervision has become an ever-growing challenge and cannot be ignored.
That’s why HR must play an active role in organisation design – challenging the business on its structure and determining whether, with stretched resources, managers can actually manage.
In practice it means HR should be trying to create a ‘culture of challenge’. In a disciplined business, the managers should be close to the numbers, and where results look unusual or are unexplained, whether they are good or bad, there should be the freedom to ask questions without fear of retribution. Of course, it’s unrealistic to expect things to go well all the time, but unless people feel they can challenge others and address their concerns in an honest, open and timely manner, those at the top will continue to discover problems when it’s too late. HR’s role, therefore, becomes one of supporting the business to create the right environment through effective capability development and performance management.
Finally, the “small things” are often not captured. Long before any breach reaches a formal disciplinary process and long before there are huge financial repercussions, a significant amount of ‘noise’ can suggest patterns of behaviour. Again, it’s HR that is in a prime position to notice. It should be able to spot issues such as untaken holiday time or incomplete compliance training and then feed these into the business so that action can be taken.
Of course, it’s not as simple as spotting and stopping erroneous behaviour. HR needs to be confident enough to challenge the business on the principles around how it operates. How else can those within the profession truly add value and contribute to the development of business strategy? Part of this role means HR should also be working with those at the coalface to foster a culture where people are encouraged to escalate concerns ‘up the line’ and where a zero tolerance approach to inappropriate behaviour is adopted. The test shouldn’t be about who didn’t spot what. Rather, for any strong, business-minded HR function, it should be about how to craft an environment where behaviours – and, ultimately, people – don’t go rogue.
Karen Briggs is a partner and head of risk consulting at KPMG. Klaus Woeste is KPMG’s director of people and change.