The accounting profession takes pride in its commitment to the high standards of behavior expected of its personnel. Likewise, its investments in guidance, training, and policies across its ranks are considered effective to maintain its public standing.
Yet its leaders are perplexed at the non-trivial volume of violations of its rules, standards, and expectations. Evidence that best practices are not universally effective includes:
- Signing off on engagement steps never actually performed.
- Stuffing a job with extra hours, when the opportunity is there. Or shifting time actually spent to avoid reporting a budget overrun.
- Copying and sharing test answers.
- Fabricating and back-dating work papers ahead of a regulator’s announced inspection.
- Concealing or destroying documents subject to legal demands.
- Not common, but not unknown: stories and media coverage of employer retaliation, promotion denials, transfers and terminations, even the occasional lawsuit for discriminatory firings.
After discussing the research into human behavior in the previous articles, these should be no great surprise. Immediately, “optimism bias” is in play: the assumption that all will be well, provided enough dedication of talent and intelligence. (Noting that “zero defects” is not possible for a bunch of fallible humans. Rather than perfection, the legitimate and more realistic aspiration is to improve.)
In the previous two installments, we discussed how optimism and a host of other sources of bias are frequent sources of error in human life. Still, we have the opportunity to recognize that as heirs of our prehistoric ancestors’ DNA, we have not evolved. We still default to suboptimal decisions made under pressure, whether due to urgency or the pursuit of a short-term benefit over one deferred into the future.
Exceptional personnel: addressing the downsides
Our ancestors’ tribal-survival orientation focused on the “ordinary” while downplaying the level and energy attributed to the exceptional.
That is, most personnel will behave mostly well, most of the time. Just as the ancient tribe would survive if most of its hunters reacted quickly enough under “fight or flight” conditions. The insight for managers and policymakers is that most concerns, and the means to address them, will occur at the margins with the outliers.
In other words, just as some prehistoric hunters would fall victim to predators, some modern humans will fall to non-compliant or deviant behavior–-whether under temptation, persuasion, or malign incentives-–to cheat on an exam or to disregard admonitions about skepticism or integrity.
What follows? The need for training, guidance, and supervision is legitimate and valuable. Personnel already disposed to good behavior will absorb and apply the tools and procedures that frame the expectations they are already oriented to meet.
And while that’s necessary, it remains insufficient. Operating processes could be improved if designed to deter, detect, and prevent the inevitable outliers. Some suggested opening principles:
- Lectures and admonitions can address but will not altogether solve the inevitable deviations. That’s whether under compliance programs, interpersonal actions, or ethical and independence requirements.
- Applying management policies would include attention to the background and reasons for the inevitable shortcomings, and identifying steps to make it easier to detect potential problems and harder to misbehave.
In the behavioral researchers’ terms, outlying instances of employee misbehavior would owe in no small part to “proximity bias.” That is, the unavoidable heightened attention and reaction to influences that are immediate, dramatic, and easily accessible. The bias is seen in such a prosaic example as the influence on grocery shoppers of product placement on high or low shelves, but also at a larger scale in the news media preference for events of color and drama. A mass shooting or airplane crash will be the top news story rather than single-victim instances of fatal domestic arguments or car accidents.
In the real world of practice, that “proximity” takes the form of immediate pressures, such as:
- A manager under a tight budget who cuts out planned procedures or bypasses quality review steps.
- An office under staffing pressure, needing to show high CPE results and ready to circumvent testing integrity and controls.
- Because of the importance of the proximity bias, “tone from the top,” while well-known, has to be expanded to ensure “top down” effect. That is, dilution of messages from senior leaders can come in many ways–-whether a casual attitude toward expenses charged to jobs, client gifts, or inappropriate relationships.
Exceptional personnel: implementing the upsides
Real as is the bias that underweights the exceptional, its effect is not only in the areas of non-compliance noted above. Consider the bias of “representativeness” –- that is, giving preference to that which is familiar, traditional, or close at hand.
The accounting firms’ personnel policies are implicated. The effect of “representativeness” may limit the selection or scope of schools or backgrounds for recruiting. Or to consider only specified degrees or academic majors, excluding a pool of potential talent and value. Rationalizations are based on academic reputations and perceived records of past success, or simply, “that’s what we’ve always done.”
Those approaches are challenged by both the raw demand for ever larger numbers of qualified entry-level personnel, and the increasing scope, diversity, and sophistication of skills required to serve the evolving needs of clients and information users.
Recalling that the behavioral research confirms that one common bias is for overly-simplified solutions and the unwillingness to “do the math,” a new approach is straightforward. Simply expanding the roster of target schools opens the prospects for increased access to quality candidates, at the same time serving the desirable goal of diversity in hiring practices.
And in the workplace
The effects of the bias of representativeness carry over beyond recruitment and training, particularly into the area of performance evaluation and promotion.
- The stories are well-known of disproportionate effects in youth athletic programs on the likelihood of an individual child achieving elite-level success. The landmark research involved professional hockey players in Canada and the discovery of a long-running bias originating with their young-age promotions to all-star teams based on birthdays early in the calendar year.
- Better known and widely recognizable are the practices of assigning school children to slow, average, or advanced class sections, with the lingering effect that once a student is so categorized, that level tends to persist throughout an academic experience, with limited mobility either up or down.
- In the workplace, recognition of sales personnel toward either inflated rewards or severity of sanctions for performance against targets can be skewed for reasons unrelated to an employee’s actual level of competence. The timing of a major sale with its attendant bonus may be accelerated or delayed, or a bulge or slacking of the economy may change conditions, either for reasons outside the employee’s control.
Promotion policies in accounting firms can suffer the same bias; a challenge to fairness unless an evaluation process covers a sufficient timespan and variety of work to avoid the undue impact of short-term or unusual conditions. For example, if an employee’s performance might have been affected by a temporary personal issue, or a work environment may have been influenced by conditions out of the control of either the firm or its staff.
To generalize the behavioral learning, personnel selection and performance should be based on a record of adequate length to identify and evaluate the bumps and potholes of an individual’s career path.
And to be specific, bias in personnel performance and evaluation reviews can be mitigated by second-person involvement as a check to identify and eliminate the kinds of subtle influences just outlined.
Good practices in internal communications
Discussion to this point has touched on forms of bias that can shape the ethos and culture of a working environment; whether leaders are open to the views of subordinates, whether time and resources are available for reflection and debate, whether issue-handling is open or stifled.
One support for an atmosphere that favors employee engagement and integrity is that of a committed and credible channel for upward communication of concerns and issues.
While “tone from the top” is so familiar as to be a cliché, its importance should not be understated. Smart young staff can amply judge the credibility of their leaders and supervisors, with well-developed ability to detect evasion, euphemism, and hypocrisy. They will judge with acuity the extent to which senior-level messages and actions are aligned or not. And they readily sort and categorize the actual practices of their supervisors:
- Who is fair and forthright.
- Who can be gamed or fooled.
- Who has a personal interest being served,
- Who is abusive and to be tolerated if not avoided altogether.
Above all, they are cognizant whether leaders are open and receptive to upward messages about problems and issues or if they will face an attitude of defense, resistance, and even retaliation.
These concerns implicate both the culture and atmosphere of a workplace and the ability to identify and manage engagement performance risks. That’s because, by the very nature of the profession’s operations, engagement staff have the first-line exposure to job-related problems as they emerge in real time. Whether it’s clues such as client delays in responses or information, an attitude of resistance or disrespect from a CFO, or inconsistencies in sampling and testing that suggest possible irregularities.
At the less-appealing end of the spectrum, as a quality review partner once deplored the attitude he found in a dysfunctional office toward an associate punished for raising unresolved audit issues that threatened delays in issuing an opinion, “If you dare raise a problem, then you’re the problem.”
By contrast, in a more effective environment, supervisors’ receptivity to staff-raised issues opens and supports the opportunity for consultation and well-informed collective judgment. As one of my leaders put it, “Handle it yourself and it’s your problem; considered together, it’s our problem.”
What are the tools? The vocabulary of the scholars applies: simple and routine approaches are necessary but insufficient. The usual or customary techniques–-those that work “well enough, most of the time”–-will not address every case that lurks at the margin.
There may be a case for an official tip line or whistleblower mechanism. Simpler and more necessary, however, could be a credible channel to raise issues around and above the level of the impediments:
- A team of crack young staff may be led by the best-intentioned partner, but may also include a manager who is heavy-handed or ill-tempered, or just poorly skilled, and whose behavior puts successful team performance at risk.
- Or it could be an officious manager, a stubborn or disengaged partner, or even a country-level leader more interested in protecting his fief than in global cooperation.
It sends a powerful and empowering message: “Bring up the issues, as far up as needed. Leadership will listen, respond, and have your back.”
Within the framework of this series, these observations on teamwork and practice environment cannot conclude without the acknowledgment that they will not work to the level of “zero defects.” This is an aspirational goal beyond achievability in the context of the human frailty observed by the behavioral scholars.
Still, it is possible to absorb and learn from those exceptional cases–-indeed, necessary if real learning is to take place. All as examined here, optimism suggests that lessons and take-aways from widely-varying examples and practices can, with study, provide support for better outcomes.