When a goal becomes a fixation of a person or company, everything else (including ethical considerations), can fall by the wayside.

When a goal becomes a fixation of a person or company, everything else (including ethical considerations), can fall by the wayside. Photo: Emrah Turudu

The potential costs of unethical behaviour are extremely high. It can badly hurt a company's reputation — and sometimes ends in a lawsuit.

Still, year after year there are cases ranging from minor fraud at a small business to giant accounting scandals that have rocked the business world.

In the new white-paper Why Good People Sometimes Do Bad Things: 52 Reflections On Ethics At Work, Rotterdam School of Management professor Muel Kaptein explores the behavioural and psychological reasons why people step over the line. Here are a few of his key insights on how lapses occur, and what businesses can do to promote a more ethical culture.

1. Organisations and people develop tunnel vision. Setting and achieving goals is an essential part of any successful business. When employees have challenging and measurable goals, they've been shown to work harder, be more persistent and have better self awareness.

When a goal becomes a fixation of a person or company, everything else (including ethical considerations), can fall by the wayside.

When Enron offered large bonuses to employees for bringing in sales, they became so focused on that goal that they forgot to make sure they were profitable or moral. We all know how that ended.

Being conscious of the type of goals being set, the behaviours they encourage, and putting them in a larger context is an important skill.

2. The power of names makes unethical behaviour seem trivial. When bribery becomes "greasing the wheels" or accounting fraud becomes "creative bookkeeping," what's at least wrong and possibly criminal is brought down closer to the level of a joke between friends. Nicknames separate actions from their moral implications, making each subsequent instance seem less important until it becomes a normal practice.

Staying alert to these euphemisms and making ethical divisions crystal clear can arrest such behaviour before it escalates.

3. How good behaviour leads to bad. Counterintuitively, doing the right thing can lead to bad behaviour in the future. One phenomenon Kaptein mentions is the compensation effect. When people have been model employees for a long time, they feel as though they've banked up a kind of "ethical credit". Research from Nina Mazar and Chen-Bo Zhong found that people who have just bought sustainable products tend to lie and steal more afterwards than those who bought standard versions.

Another issue is the "free rider" problem. That refers to situations where the norm is ethical, and the total damage of bad behaviour is limited. Someone might think "If nobody in an area pollutes, they won't notice if I do it just this once."

4. Deadlines can cause moral blindness. Time pressure is inevitable in the workplace. Many people seek it out and do their best work in such situations. However, it can have negative ethical consequences.

In research cited by Kaptein, a group of theology students were told to preach the story of the good Samaritan, then walk to another building where they'd be filmed. Along the way, they encountered a man in visible distress.

When given ample time, almost all helped. When they were deliberately let out late, only 63 per cent helped. When encouraged to go as fast as possible, 90 per cent ignored the man.

Focusing on a deadline blinds people to those around them and to the consequences of their actions. Making time for reflection needs to be a priority for organisations.

Business Insider