In a fast-moving, complex society, you simply can’t master every task. But when you pay people for advice – whether they’re your doctor, your mechanic, or your financial adviser – you need to be able to trust what they’re saying. “As we become more interdependent and more specialized,” says Dan Ariely, author of The (Honest) Truth About Dishonesty, “trust becomes more valuable.”
That’s at the core of his research about dishonesty, which was sparked more than a decade ago by the unraveling of Enron, and intensified after the 2008 financial crisis, when so many prominent banks seemed to have lost their moral compass. How can we prevent such disasters from happening again? A good starting place, says Ariely, is grasping the root cause. “There’s an intuitive theory that there are good people and bad people,” he says, “but that masks the real way dishonesty works. And there are lots of disastrous consequences to not understanding.”
“The good news is most people are not psychopaths,” says Ariely, a professor at Duke University’s Fuqua School of Business (where I also teach). But the bad news is that “everyone has the capacity to behave badly.” It turns out that most people are perfectly willing to cheat a little, but very few will cheat a lot. “It’s what we call the fudge factor – you’ll add two extra receipts to your tax return [for deductions], but you can’t do 20. There’s a point at which it feels wrong.”
The fact that cheating and dishonesty aren’t the province of a few evildoers, but are a threat all of us could fall prey to, shapes Ariely’s policy recommendations. First, he says, “companies need very clear rules about conduct. Clear rules eliminate flexibility.” The idea of a general ‘do the right thing at the right time’ policy may sound appealing, but it melts the moment self-justification comes into play. For instance, he says, “Imagine you charge by the hour. There are a lot of gray zones. You could say, ‘I’ll round up this time, but next time I’ll round down.’ If you round up 55 minutes to an hour, what about if you’ve worked 50 minutes? Details and specific rules are essential.”
Next, you need to eliminate conflicts of interest wherever possible. “Sunshine policies [which simply require disclosure of conflicts] are one step, but not the optimal step,” he says. After all, “a doctor doesn’t need to be a bad person to give you advice that’s good for them and not for you – they just need to be a regular person.” It’s better, he says, to expressly prohibit conflicts of interest.
Finally, organizational culture is key to creating an ethical climate. “Corruption is when you know something is wrong and you don’t care,” he says. “And ‘everybody else is doing it’ is a good method for getting people to not care. That’s why the leadership in a company is so important. If you have senior partners doing X, there’s no way for it not to be transmitted through their actions.”
How do you keep yourself – and your company – honest?
Dorie Clark is a marketing strategist who teaches at Duke University’s Fuqua School of Business. Learn more about her book Reinventing You: Define Your Brand, Imagine Your Future (Harvard Business Review Press) and follow her on Twitter.