One bad apple can spoil the whole bunch

HBR article explains how one unethical employee can corrupt a whole team.

Research from Harvard Business Review (HBR) has shown that it only takes one unethical employee to start sowing seeds of corruption into your organisation. According to the article, it’s more likely that fraudulent employees will influence honest employees to make bad decisions than for honest employees to discourage and prevent unethical behaviour among their dishonest colleagues.

“History — and current events — are littered with outbreaks of misconduct among co-workers: mortgage underwriters leading up to the financial crisis, stock brokers at boiler rooms such as Stratton Oakmont, and cross-selling by salespeople at Wells Fargo,” reads the article.

HBR collected data from regulatory filings available for financial advisors where misconduct had been reported and the respective final advisor had either paid a settlement of at least $10 000 (about R145 000) or lost an arbitration case.

The objective of the study was to understand how peer effects contribute to the spread of misconduct by comparing financial advisors across different
branches of the same firm. This made it possible to control for the effect of the incentive structure faced by all advisors in the firm. They also focused on changes in co-workers caused by mergers as this removed the effect of advisors choosing their co-workers.

Their findings are as follows: “We found that financial advisors are 37 perent more likely to commit misconduct if they encounter a new co-worker with a history of misconduct. This result implies that misconduct has a social multiplier of 1.59 — meaning that, on average, each case of misconduct results in an additional 0.59 cases of misconduct through peer effects.