The Tricky Relationship Between Auditing and Ethics

We should all do the right thing. Yet the wrong thing often gets done. Indeed, you can’t always trust everyone to do the right thing.

And so we have evolved enforcement mechanisms – laws, guidelines, agreements, protocols, commandments. Frequently, those mechanisms depend on some form of auditing – pop quizzes, random drug testing, probable cause. And videotaping.

Enforcement is typically put in place to augment trust, or to take over where trust can’t do the job alone. The implicit assumption is that by having some form of auditing in place, the net amount of ethical behavior will increase.

But what if it doesn’t work that way? What if auditing for enforcement destroys trust? Can the medicine be worse than the disease?

The Filmmaker’s Dilemma 

Kevin Breslin is a filmmaker and location scout for commercials in New York. From a New York Times article about him:

I used to be able walk into a building, talk to a guard downstairs and say: “You know, I’m here. I’m scouting a commercial. I need to get to the roof. I need a shot.” He’d say, “Ah, the building is closed.” I’d say, “I need two minutes,” hand the guy a $20 — and you’d be on the roof. You got the shots.

Now with surveillance cameras everywhere, no one can help you in any way even if they want to. Now it’s impossible. You have to call — speak to the building manager, speak to the real estate agent, speak to the public relations department, speak to this one. So, now you’ve got to make 40 calls just to do anything.

The cameras aren’t just auditing, they’re recording full-time. Their data isn’t a sample, it’s a complete survey. Their enforcement power is huge.  Yet so is the destruction of trust.

The results are lower social efficiency – and an atrophying of the trust muscles of a citizenry. Yet another possibility of ethical decision-making is taken away from the level at which the ethical issue arises, and replaced by a cold, bloodless policy. An opportunity to practice trust is lost.

The Convenience Store Manager’s Dilemma

I once did a consulting assignment for a convenience store chain. They had 150% store manager turnover, and wanted a better profile for recruiting. Recruiting, however, turned out not to be the problem.

The problem was that the chain gave every store manager a lie detector test every month. After being tested this way for months, clearly store managers were deciding that many of their peers were getting away with something, and proceeded to pocket store funds. Then they were caught, and terminated.

The lie detector tests were audits, imposed regularly and frequently. Their net effect was like the Heisenberg Principle – the testing for trustworthiness altered the level of trustworthiness itself.

The Leader’s Dilemma

Creating an environment that encourages ethical behavior is desirable – up to a point. Beyond that point, social engineering begins to negatively affect the very thing it was designed to help. So – how can a leader determine the right balance between personally driven trustworthy behavior and auditing for enforcement?

Here are three guidelines:

  1. Be a role model. Role modeling of all desirable behaviors by leaders is a good thing, but when it comes to trust, I think the importance doubles. Hypocrisy kills trust – but exemplifying it creates even  more trust. Live the values yourself.
  2. Use random sampling, not regular surveying. Bernie Madoff might have been caught earlier had spot auditing been practiced rightly. And the convenience store would have had less turnover if they didn’t remove all ethical decision-making power from the managers.
  3. To get trust, give it. One of the best ways to make people trustworthy is to trust them. Don’t engineer trust out of interpersonal situations – leave some room for humans to act humanly.