The recent incident of bribery at Tata Consultancy Services (TCS), India’s leading IT company, underscores the increasing need for vigilant supervision to maintain integrity within organizations. Amid numerous incidents of corporate misconduct, supervisors and middle managers emerge as the fulcrum of ethical behavior and moral code adherence. This article, drawing upon TCS’s recent scandal, emphasizes the crucial role supervisors play in preventing employee misconduct, often wielding more influence than top-level executives or firm-related factors.
TCS, a stalwart in the IT sector, recently dealt with a case where senior executives accepted bribes from staffing firms in exchange for job placements. The revelation of this scandal underscores the critical role that supervisors, entrusted with decision-making authority and ethics enforcement, play in shaping organizational behavior. Their influence in preventing or enabling such misconduct often outweighs firm-level or executive-related factors, emphasizing the need for their roles to be viewed through a new lens.
Corporate landscapes around the world are undergoing a paradigm shift that underscores the importance of ethical and moral foundations in the workplace. As businesses evolve and become more complex, the need to understand the determinants of employee misconduct is increasingly crucial. Amid numerous studies aimed at investigating the root causes of misconduct, a key group has emerged as the fulcrum of behavioral changes – supervisors. Recent research suggests that supervisors wield a greater influence on curbing employee misconduct than top-level executives or other firm-related factors, thus reshaping our understanding of the roles these professionals play in fostering a strong organizational culture.
Unveiling this previously overlooked aspect of organizational culture, recent research by leading academics, Kowaleski, Sutherland, and Vetter, delves into the realm of Broker-Dealer investment firms. Here, supervisors have been found to act as critical catalysts in influencing either positive or negative behavioral trajectories within their workforce. The scholars conducted an exhaustive analysis of employee misconduct within the financial services sector over a decade, drawing upon the Financial Industry Regulatory Authority’s (FINRA) public database that records customer complaints and disciplinary actions against employees. The results were enlightening: the influence of supervisors far outweighed all other firm and executive-level factors, tipping the scale by over two times in molding employee behavior.
A deep dive into the factors contributing to employee misconduct reveals an interesting determinant – the delegation of authority. Organizations often decide to vest significant decision-making authority to supervisors due to various factors. These can include the geographical distance between branches and the headquarters, which can make oversight challenging, or the complexity of the product mix offered at the branch, which necessitates an empowered supervisor who can make informed decisions swiftly. Additionally, the trustworthiness and experience of supervisors can serve as an impetus for delegating substantial decision authority. The data analysis reveals a compelling correlation: firms that are steered by qualified, experienced, and trustworthy supervisors, free from any records of misconduct, observe significantly lower instances of misconduct.
The research presents a captivating finding: individuals with a history of misconduct are five times more likely to reoffend. This reality underscores the gravity of a supervisor’s role in managing and monitoring these individuals, as their approach can significantly impact the level of misconduct within their branches. The study notes that supervisors who impose additional training, restrict duties, and maintain meticulous oversight over past wrongdoers, tend to run branches with lower instances of misconduct. This clearly underlines the pivotal role of a supervisor’s personnel decisions in shaping the ethical landscape of their respective teams.
Supervisors’ ethics training also emerged as a key factor in reducing employee misconduct. This observation became particularly prominent following the significant reduction in the ethics and rules section of the Series 66 exam in 2010, which was made to accommodate more technical content. The data pointed out that supervisors who received comprehensive ethics training were more successful in maintaining a culture of integrity within their branches. As such, ethics training has surfaced as an indispensable tool in a supervisor’s arsenal to prevent misconduct within firms.
While the research focuses predominantly on the financial services industry, its findings have far-reaching implications for all sectors. Misconduct is not exclusive to financial services and can manifest in numerous forms such as deceptive business practices, bribery, and corruption in any industry. Therefore, the fight against misconduct must necessarily involve supervisors and middle managers. They are the ones who interact with the workforce daily and can make a direct impact on their behavior.
The findings of this research highlight the urgent need to shift our attention to empowering supervisors. Often, these professionals are at the coalface of ethical challenges in a business environment. Providing them with comprehensive training, coupled with appropriate decision-making authority, can lead to a substantial reduction in employee misconduct. While firm-level factors such as compliance systems, compensation, governance, and auditing play a crucial role, the influence of a supervisor on the team’s behavior is paramount.
The role of supervisors, often understated, is indeed the cornerstone of maintaining the moral fabric of organizations. They are the unsung heroes, the unheralded protectors of business integrity. By recognizing their influence, we can equip them better to foster an ethical and legal organizational culture, and in the process, build resilient, trust-worthy businesses that stand the test of time. The fight against misconduct begins with recognizing and empowering these champions of integrity.
Author: Karun Varma, Senior Real Estate Professional.