Risky Business

Psychological, Physical and Financial Costs of High Risk Behavior in Organizations

Cary L. Cooper, Ronald J. Burke, Ronald J. Burke

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317062646
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

What are the financial and psychological costs of risky behavior in business to the individuals concerned and their organizations? Risky Business provides a perspective on addictive behaviors such as gambling, drug taking and even addiction to work; criminal behaviors such as theft and corruption; and behaviors such as aggression and violence. The authors then look at their implications to employee and organizational health within the context of the workplace environment; an environment that is often synonymous with psychological demands, stress, long hours, overwork and shortages of staff or other essential resources. An essential guide for occupational psychologists, human resource specialists, risk managers and for researchers in this field.

PART I
Introduction

1

Human Frailties and Toxic Organizations¹

Ronald J. Burke

“The biggest wounds in life are self-inflicted.”

Former US President Bill Clinton

Consider the following questions.

1. What do the following individuals have in common? Bill Clinton, John Profumo, Michael Milken, Silvio Berlusconi, Eric Clapton, Bernard Madoff, Senator John Edwards, Jack Welch, Martha Stewart, Sir Jeffrey Archer.

2. What do the following organizations have in common? Enron, Peanut Corporation of America, Johnson and Johnson, Nike, Arthur Andersen, Parmalat, McCain Foods, Price Waterhouse, Kraft Foods, Wal-Mart, New York Times, US Federal Emergency Management Agency.

3. What do these individuals have in common? Michael Milken, Bill Clinton, Eric Clapton, Jack Welch, Martha Stewart, Sir Jeffrey Archer, Silvio Berlusconi, John Profumo.

4. What do these organizations have in common? Johnson & Johnson, PricewaterhouseCoopers, McCain Foods, Nike, Kraft Foods, Wal-Mart, New York Times.

In Question 1, each individual experienced personal, family, career, ethical and/or legal difficulties because of a personal shortcoming or human frailty. These included sexual affairs, lying to legal bodies, alcoholism, or business wrongdoings.

In Question 2, each organization experienced a failure that incurred significant reputational and financial costs. These included incompetence, gender discrimination, use of child labor, plagiarism, tampered products, fraud and tainted products that caused fatalities.

In Question 3, all the individuals recovered from their transgressions and are now continuing to lead productive lives. Apparently, many Italians are not bothered by Berlusconi’s dalliances with young women!

In Question 4, each organization successfully bounced back from its failures.

Introduction

This volume examines the attitudes and behaviors of individuals working in organizations that expose these individuals, their families, and employing organizations to risk. Several types of potential risk are considered. These include risks to reputation, to psychological and physical health, to one’s family, to other individuals both at work and outside of work, and to the financial well-being of individuals, families, and their employing organizations. Financial costs are both direct and indirect and involve the following:

• for individuals—increased healthcare costs, job loss, loss of personal reputation, and loss of livelihood

• for organizations—loss of reputation, staff turnover, diminished job performance, reduced turnover, and potential legal liabilities

• for society—increased healthcare costs, income support for those losing their jobs, rehabilitation costs for those injured at work, and a lack of trust in institutions.

When these attitudes and behaviors are shared by others in the workplace and become part of the workplace environment the organization can become toxic.

Some of these behaviors and activities take place off-the-job. This raises the important ethical and legal issue of whether organizations should be concerned about employees’ off-the job activities—things they do in their own time. Former Canadian Prime Minister Pierre Trudeau once said, “The state has no business in the bedrooms of the nation.” Organizations may be quite appropriately interested in such behaviors and activities if they interfere with the employee’s or the employee’s co-workers’ performance of their jobs, if they put employees, customers and citizens at risk, and if they reflect badly on the organization, damaging its reputation and performance.

In addition, times have changed. Organizations and their leaders today are coming under greater scrutiny. Some leaders and some organizations have achieved celebrity status. And celebrities in all walks of life, as evidenced by the events surrounding the recent death of Michael Jackson (June 25, 2009), receive attention and scrutiny. A scandal erupted in the UK in July 2009 when it was revealed that some newspaper reporters may have tapped the phones of politicians and celebrities. Coupled with these factors are the increasing cynicism of the average person and their suspicion of business and government institutions and their leaders. Individuals, groups, and organizations are also becoming more litigious. More people are holding individuals and organizations accountable for discriminatory practices, incompetence, negligence, crime, and corruption. Organizations are facing increasing competitive pressures and challenges and cannot afford the financial and psychological costs associated with high-risk individual and group behavior. As a consequence, they cannot tolerate workplace injuries and accidents, discrimination, abusive supervision, sexual harassment, theft, crime and corruption, among other things. Today, high-risk individual and group behavior carries more consequences for both individuals and organizations

On the academic front, several streams of research and writing have contributed to interest in high-risk behaviors by individuals and groups in organizations. These include: the critical role played by people in making organizations peak performing (Lawler, 2008; Katzenbach, 2000); the war for talent which emphasizes the recruitment and development of talent (Michaels, Handfield-Jones, and Axelrod, 2001); increasing research on the “dark side” of organizational life, such as abusive leaders, bullying, violence, theft and corruption (Langan-Fox, Cooper, and Klimoski, 2007); increasing attention on emotions in the workplace, both positive (e.g., passion, gratitude) and negative (e.g., revenge, distress); and increased understanding of how some work experiences (e.g., sexual harassment, high job demands, bullying) and some work environments (e.g., the presence of toxic substances, unsafe work practices) are associated with distress, diminished physical health, and lower job performance (Barling, Kelloway, and Frone, 2005; Schabracq, Winnubst, and Cooper, 2003).

Over the last 20 years research has been devoted to understanding workplace deviance, organizational dysfunction, the “dark side” of human behavior in the workplace, and employee “bad behavior” (Robinson and Bennett, 1999; Mitchell and Ambrose, 2007; Vardi and Weitz, 2004). Robinson and Bennett (1995, p. 556) define employee bad behavior as “voluntary behavior that violates significant organizational norms and in so doing threatens the well-being of the organization, its members, or both.” Obviously, there is emerging evidence that harmful, destructive, and unethical workplace behaviors occur frequently and cost organizations billions of dollars (Bensimon, 1994; Burroughs, 2001; White, 1996), and, obviously, organizations would prefer that these behaviors did not occur (Griffin, O’Leary-Kelly, and Collins, 1998). But bad employee behavior is not necessarily illegal employee behavior.

Van Fleet and Griffin (2006) developed a model of dysfunctional work behaviors building on both individual and organizational characteristics, with culture and leadership occupying prominent roles. They classify two levels of dysfunctional behavior—low-level and high-level. Low-level dysfunctional behaviors include inappropriate dress, use of alcohol, smoking, loud talking, radio-playing, arriving late and leaving early, lengthy phone conversations with friends, and inappropriate behavior. High-level behaviors include sabotage and violent behavior directed at one or more individuals or the organization.

Individuals and organizations develop reputations. The Cassell Concise Dictionary (1997) defines reputation as follows: “Reputation—noun—the estimation in which one is generally held.”

The reputations of individuals and organizations are based on the perceptions of others. These perceptions are formed from first-hand experience and observations, the opinions of others, and written information. Reputations have important consequences. Individuals who have positive or favorable reputations are highly regarded, respected, and esteemed. A good reputation enhances one’s career prospects in organizations. Organizations with positive or highly favorable reputations are more attractive to job applicants, have more loyal and committed employees, are more productive, and are more attractive to customers and investors.

It takes a while to build a positive reputation, but it can be damaged in an instant. A reputation can, however, be rebuilt (Sonnenfeld and Ward, 2007a, 2007b). Communication is part of the reputation development process, but more important is “walking the talk”—behaving in ways consistent with one’s expressed values.

Although organizations have typically been concerned with product and financial risk, Accenture’s 2009 Global Risk Management Survey of corporate executives found that 85 percent believed their companies needed to re-examine their approaches to managing risk, that 40 percent had already increased their investments in risk management or planned to do so in the next six months, and that 31 percent said their firms were considering further increases in risk investment (Accenture, 2009). Most organizations pay considerably less attention to the risks of employee non-financial behaviors than they do to financial behaviors.

The remainder of this introductory chapter lays out the objectives of this volume, explains why an interest in high-risk individual, group and organizational behavior is important, gives some recent examples of high-risk behaviors by individuals that have been reported in the media, details the costs of this behavior to individuals, families, organizations, and society at large, and provides a partial review of content that will put the remaining, more focused chapters of the volume into a context. The final section summarizes each of the contributions that constitute this book.

The Objectives of This Volume

Humans have always taken risks, sometimes for personal gain (Bernard Madoff) and sometimes to be noticed by others in one’s organization (Jerome Kerviel). All human behavior probably incurs some degree of risk, but people differ in their risk-taking behavior (Zuckerman, 2007). There is a genetic factor in risk-taking behavior (e.g., levels of dopamine), and men take bigger risks than women. There are also personal, organizational, and societal rewards for risk-taking. Some industrial sectors (such as financial services) seem to attract and select individuals with a propensity for taking risks (people with good sales skills and a natural inclination for risk-taking).

This collection examines the psychological, behavioral, and social dimensions of high-risk or risky behavior by individuals and groups in organizations. High-risk behaviors result from several possible “causes,” including human frailties, greed, ignorance, malice, organizational reward systems, workplace injustices, and a loose organizational culture. One of the purposes of this collection is to first consider areas of high-risk behavior in organizations, why these occur, and their costs. A second purpose is to suggest some initiatives to reduce the incidence of such behaviors.

Interestingly, flawed individuals and failing organizations share some common features. Collins (2009) has identified five stages that organizations go through on their way to failure. These are:

1. hubris—arrogance, based on their previous successes,

2. greed—the undisciplined pursuit of more,

3. “we can do anything”—the denial of risk, threat and peril,

4. grasping for salvation—clutching at straws and

5. resignation to failure—capitulation.

High-risk Individual Behaviors

NARCISSISM

Individuals at work engage in high-risk behaviors for a variety of reasons, including ignorance, sensation-seeking, lack of impulse control, hubris, arrogance, feelings of entitlement, carelessness, human frailties, character flaws, and struggles with their “demons” (Kets de Vries, 2009; Maccoby, 2000, 2007; Maccoby and Conrad, 2003).

Nowadays, more leaders and managers are in the limelight and are well known, almost to the point of being celebrities (consider, for example, Silvio Berlusconi, Steve Jobs, Bill Gates, Jack Welch). Some management writers have reported high levels of narcissism among women and men in high-level management jobs. Narcissists have large egos, are arrogant, exhibit hubris, think in broad visionary terms, believe they are right, are likely to be poor listeners, and are demanding, relentless, and ruthless in reaching their goals. Narcissists can be productive or unproductive. Individuals with huge egos who score highly on narcissism are more likely than others to be involved in corporate fraud and other wrongdoings. Impresario Garth Drabinsky, recently sentenced to seven years in prison for defrauding the Canadian theatre company Livent Inc., had previously written an autobiography titled Closer to the Sun (Drabinsky and De Villiers, 1995)

Narcissism is also reflected in the fact that so many individuals, after being caught in a moral or ethical lapse, offer an immediate apology on the assumption that they can talk their way out of this one as well.

ADDICTIVE BEHAVIORS

Many of the common human frailties resulting in individuals failing because of their high-risk behavior stem from various addictions. There are a variety of addictions that have an impact on the workplace (Browne-Miller, 2009; Ghodse, 2009). These include alcohol, drugs, gambling, sex, pornography, the Internet, and work.

Alcohol addiction

About 25 years ago I did some work with a consultant that involved facilitating off-site meetings with organizational groups wanting to improve their interpersonal and team skills. I will call him Alan. Alan was good at what he did. At the time we worked together, Alan was about 60, had one son who he was not particularly close to, and was in a somewhat unhappy marriage. He was also an alcoho...