January 23, 2018

This article by Marcel Schwantes references a statement by Warren Buffet about hiring practices. Mr. Buffet states that you should generally be looking for three things in job candidates: intelligence, energy, and integrity. However, if candidates don’t have integrity, you needn’t bother with the first two qualities.

The concept of integrity also plays a major role in creating a culture of fraud prevention.

In the vernacular used by fraud prevention professionals, integrity translates to tone at the top.  Tone at the top is critical in the hiring function of a business.  The article goes on to point out how a person with strong integrity is trusted by co-workers, earns and commands respect, and naturally gravitates toward leadership roles. Doesn’t this sound like someone you would like to have at your company?

I think having a strong, ethical, integrity-based leader at the top will attract like-minded people to join the organization. Without those attributes within the company and its chief leaders, prime job candidates may not see alignment with their future and choose not to sign on.

I like to look at this question from two distinct vantage points. If a business owner/executive:

  • leads with conviction and integrity,
  • has a “do it right” attitude (and probably more accurately, “do it right the first time”),
  • treats his/her employees, vendors, customers, and regulators with respect, forthrightness, transparency, and honesty;
  • and utilizes a trust but verify management style,

then that attitude will trickle down to other key executives and proliferate throughout the organization.  Hiring practices and retention experience will gravitate toward people with that same attitude and values.

When it comes to fraud or other misconduct, chances are a person who values integrity would have a low likelihood of perpetrating a crime.  However, we “trust but verify” all the same. We trust but verify as a means of prevention and probably as a means of measuring performance because that is also important to business owners.

On the other hand, if you have a leader who is secretive about information, withholds information from key vendors, is not forthcoming and honest with customers, looks to cut corners whenever possible, and talks about employees behind their backs, the company will not be appealing to future leaders. In fact, hiring practices and retention experience will end up gravitating toward people with these same, arguably less ideal, attitude and values.  Moreover, this type of company has a higher chance of employees not coming forward with critical information about misconduct or fraud, turning the other way when they see something they might not think is right, and potentially going down the slippery slope of fraud or misconduct themselves. It becomes very easy for an employee in this environment to rationalize their way into a fraud because they are “not valued enough” by management or because they see management acting unscrupulously and feel it is acceptable practice.

Tone at the top needs to be on display in every facet of a business, including the hiring function. Businesses traditionally have good techniques for measuring and evaluating intelligence and energy in their evaluation of job candidates, but it is vitally important to the current and future state of the business that integrity be measured and evaluated as well.

© Clark Nuber PS and Focus on Fraud, 2018. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Clark Nuber PS and Developing News with appropriate and specific direction to the original content.

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.