Risk Management is Boring: Brain Hacks to Protect Your Business

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One challenge for many new businesses is the wonderfully unsexy world of risk management. Due to the overwhelming optimism of entrepreneurs, stopping the bad things happening can often be overlooked. However, when you let people rip you off, exploit your weaknesses or you just leave a small door open to be manipulated, it can be fatal.

There were a number of interesting experiments conducted by professor Dan Ariely from MIT regarding cheating. The asked people to complete a challenging test, then they give them the answers to self-mark their effort, walk to the front of the room and shred their paper before telling the administrator the number of correct answers they correctly answered. They then receive payment for each correct answer. So, do people cheat?

What was interesting was not that some people cheated, but that all people consistently cheated. Ariely had tampered with the shedder so they could check and indeed, almost all people cheated, not by a lot, but on average they increased the number of correct answers from 3 to 4 or from 6 to 7 out of 10.  Not a lot, but they cheated. There were a small number of people who didn’t cheat and an equally small number who declared 10 correct answers when they were in fact much lower.  But staggeringly, or maybe not so, people thought that cheating a little bit, for a small self-interested reward, was ok.

So how do you stop cheating? They tried many things including using tokens instead of money, what happened? People cheated much more! You see, when we can disassociate with reality, we can lessen our sense of moral obligation, we can feel ok about cheating more. We don’t feel so bad about a decision that benefits ourselves and hurts others if there is some distance between us. This is a challenging finding when you consider the exploding world of e-commerce and gamification.

The same happens in the corporate world. If we sit in front of employees, face-to-face, and tell them we are cutting their bonuses by 5% we feel terrible. When someone in finance sits in head office and effectively fires 5,000 employees so the company can make the quarterly forecast, they feel fine. Why? Because for them there is distance, they are just doing their job and, most importantly, they never look into the eyes of employees, they never feel the impact or see the pain.

So how can we change this? How do we increase morality in businesses and systems? How can we protect our interests, defend our partners and avoid being taken advantage of? The old rule is to build a wall. Not unlike The Donald, we try to keep them out by erecting barriers to the bad things. We build controls, implement complex rules, systems and processes. We employee people to check these controls and then more people to check the checkers. Our fear of people cheating for self-interest has driven whole industries and, while it isn’t always unwarranted, it isn’t always effective and it is almost impossible for small businesses. You only have to look in the news to find people caught defrauding their companies in ways big or small.

The question we need to ask isn’t how we build more ways to make cheating harder, it is how do we stop people from trying to cheat? Dan Ariely’s team found it pretty easy due to an interesting little brain hack. They tested more people, but this time, they asked the subjects to write down as many of the 10 commandments as they could remember before taking the test. The result? No one cheated! Not all of them were Christians, but zero cheated. None of them even got the commandments right, but they didn’t cheat! None, not any. In another round they got students to sign the MIT Honour Code before taking the tests and again they didn’t cheat… that is despite the fact MIT doesn’t even have an honour code!

So why did this work where other interventions failed? How did commandments and fake honour codes stop people cheating for financial gain? Consciousness. They were reminded of the possible guilt they could feel. A deep sense of pride and self-esteem. A challenge, in their minds, that cheating might impact something much more important than money, their own image of themselves.

Helping people reconnect with their morals is a critical intervention. It is not necessarily a specific set of moral codes, on the contrary, the actual codes themselves seem irrelevant! It is about the connection people have with their self-image and critically, how they see themselves fitting into society and the impact their decisions can have on others.

So instead of building a huge set of detailed policies that hide away in a folder or sit 32 lines deep in a terms and conditions document that no one reads, try this hack. Try using simple symbols and quotes that trigger people to reflect on how their behaviour might be seen by others. A great example of this is a famous experiment by Melissa Bateson at Newcastle University, UK. They alternated a picture in the tea room above the honesty box for the tea & coffee. They alternated the picture between flowers and eyes. When there were eyes, the staff paid almost 3 times as much as when there was flowers. The insight, when people felt they were being watched, they acted more honestly.

Look for ways to help your employees and customers engage their moral compasses may be the best way to stop fraud and bad behaviour for the masses. I’m not suggesting this will stop the criminals, it certainly won’t. But for the vast majority of people who will sadly cheat a little, you can help them connect back to being the good folks they really are.

About the Author

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Daniel Murray is an Empathy Expert and Business Strategist for Empathic Consulting. Early on, he forged a career as a Business Strategist for some of Australia’s leading corporations and realised using empathy as a driver for change enables businesses to deliver tangible and profitable outcomes, while also creating a positive social impact that solves real world problems. Daniel regularly speaks at conferences and conducts corporate workshops to teach Australian businesses how to incorporate Empathic Leadership, build an understanding of the rational and emotional needs of others and then provide guidance and support to foster a flexible and high-performing workplace.

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A small test to protect us from evil-doers *