How Unethical Behavior Becomes Habit

By Francesca Gino, Lisa D. Ordóñez and David Welsh, HBR, September 4, 2014

When a former client’s secretary was arrested for embezzlement years before his own crimes were uncovered, Bernie Madoff commented to his own secretary, “Well, you know what happens is, it starts out with you taking a little bit, maybe a few hundred, a few thousand. You get comfortable with that, and before you know it, it snowballs into something big.”

We now know that Madoff’s Ponzi scheme started when he engaged in misreporting to cover relatively small financial losses. Over a 15-year period, the scam grew steadily, eventually ballooning to $65 billion, even as regulators and investors failed to notice the warning signs.

Many of the biggest business scandals of recent years—including the News of the World phone hacking scandal, billions in rogue trading losses at UBS, and the collapse of Enron—have followed a similar pattern: The ethical behavior of those involved eroded over time.

Few of us will ever descend as deeply into crime as Bernard Madoff, yet we all are vulnerable to the same slippery slope. We are likely to begin with small indiscretions such as taking home office supplies, exaggerating mileage statements, or miscategorizing a personal meal in a restaurant as business-related. Nearly three-quarter of the employees who responded to one survey reported that they had observed unethical or illegal behavior by coworkers in the past year.

“The safest road to Hell is the gradual one—the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts,” wrote C. S. Lewis. Our research backs up both Lewis’s intuition and the anecdotal evidence: People often start their misconduct with small transgressions and then slide down a slippery slope.

Two of us (Dave, Lisa, and our team) found that people who are faced with growing opportunities to behave unethically are much more likely to rationalize this conduct than those who are presented with an abrupt change. We predicted that if we could get people to cheat a little in one round, they might be willing to cheat a bit more in another round, and finally cheat “big” in a third round.

This is precisely what we found: When given a series of problem-solving tasks, 50% of our subjects cheated to earn $.25 per problem in the first round, and 60% cheated to earn $2.50 per problem in the final round. However, the people in the abrupt change group who could not cheat during the first two rounds were much less willing to cheat big for $2.50 per problem during the final round (only about 30% did).

This suggests that employees might look at their slightly exaggerated mileage statements as “rounding up.” But rationalizing minor indiscretions inevitably influences how they view progressively worse behaviors and may lead them to commit bigger offenses (e.g., billing their employers for personal travel expenses) that they initially would not have considered.

To make matters worse, people are more likely to overlook the unethical behavior of others when it deteriorates gradually over time. For example, one of us (Francesca) found, with colleague Max Bazerman, that people who played the role of auditors in a simulated auditing task were much less likely to report those who gradually inflated their numbers over time than those who made more abrupt changes all at once, even though the level of inflation was eventually the same.

Unfortunately, the assumption that unethical workplace behavior is the product of a few bad apples has blinded many organizations to the fact that we all can be negatively influenced by situational forces, even when we care a great deal about honesty. Yet approaches to warding off the slippery-slope problem need not to be drastic. In their book Nudge: Improving Decisions about Health, Wealth, and Happiness, Richard Thaler and Cass Sunstein illustrate how a small and unobtrusive nudge in the right direction can lead people to eat better, save more for retirement, and conserve energy.

Our research similarly indicates that ethical nudges can help people avoid the types of indiscretions that might start them down the slippery slope. For example, in a study conducted with a major U.S. insurance company, Francesca and colleagues found that customers who signed the statement “I promise that the information I am providing is true” prior to reporting their annual mileage—that is, at the top of the page—were significantly more honest in their reporting compared to those who reported first and signed at the bottom of the page.

In a different study, Dave and Lisa found that even subconsciously exposing people to ethical content increased their moral awareness and prompted more ethical decisions. Perhaps with this in mind, some organizations have incorporated ethical nudges into images, symbols, stories, and slogans. For example, the University of Arizona’s Eller College of Management recently created posters featuring the image of a fire alarm to call attention to cheating. And at International Paper, employees are given a wallet card with a set of ethics-related questions to consider when making business decisions.

When moral standards are unclear or unenforced, it’s easy for employees to feel emboldened to engage in questionable behaviors that are readily rationalized. Environments that nudge employees in the right direction, and managers who immediately identify and address problems, can stop ethical breaches before they spiral out of control.