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I recently reread renowned Stanford University Professor Philip Zimabardo’s brilliant essay “The Psychology of Power”. [1] Using examples from Abu Ghraib to his own famous prison experiments, Professor Zimbardo reminds us that we “are all subject to…underemphasizing situational explanations” while overemphasizing “individual orientations”.[2] One key point of the piece is to elucidate how human beings can go from being perfectly normal to able to inflict serious evil on others. While Professor Zimbardo works through major historic moments of evil (e.g. Nazi Germany), two triggers Professor Zimbardo lists are particularly relevant to business and non-profit organizations’ ethics analysis and today’s related news. First, organizations tend to forget the danger of  “starting the path” of unethical behaviour with a “small, insignificant first step”.[3] Second, organizations then continue very gradually increasing harmful steps “so that they appear no different from prior actions”.[4]

Whilst the article references such horrors as volts of electric shock, we see the toxicity of organizational environments (“situations”) tolerating or even encouraging “small evils” and very gradual escalation with far more mundane examples. A small bribe ($10 this time, $15 the next time, eventually everyone at X country’s airports every time for huge shipments);  a venture fund tolerating a board level conflict of interest at a small private portfolio company that in turn creates a foundation of questionable decisions underlying an initial public offering or sale of the company; a “clerical” error erasing a name to expedite burdensome funds transfer processes…repeated to transfer millions if not billions; a CEO submitting an expense voucher for an inappropriate meal the first time, more expensive entertainment the next, and regular entries thereafter…until dismissal.

The Zimbardo-inspired warning is: don’t forget the small stuff or the unethical big situation will develop. Here’s why:

• “Small” ethics transgressions are rarely viewed with the 20/20 foresight of larger strategic, operational, or governance matters because, well, they are small (in the language of the US Securities and Exchange Commission not “material”). 20/20 foresight, a key theme of all of my blogs, is ignored: if you asked what you would like to be able to say you did today looking back from some future point (even a day later in some cases), you wouldn’t do the small stuff. One rarely stops to think of the full future organization-wide implications of one $15 bribe. (See my post discussing 20/20 foresight in more detail. You may also view all blog posts tagged with the category ’20/20 foresight’).
• “Small” ethics transgressions are especially contagious. It is a lot easier to copy a $15 bribe than a multi-billion euro trading fraud. Small stuff is easier to execute, hide, justify (often by claiming a limited size transgression mitigates the underlying unethical decision), and therefore repeat. A key corollary of contagion is normalization. One small glitch at a time quickly leads to “everyone’s doing it,” so “it” doesn’t seem so unethical or risky. The behaviour of an individual, then the fabric of the organization, and soon industry norms or even publicly acceptable standards, are changed. Even if behavior itself is not normalized, perpetrators normalize retrospectively the defence to minimize the consequences (“everyone was taking donations from X dictator” or “10 major banks were involved in the LIBOR scandal”). The Zimbardo lesson is that the small stuff quickly becomes situational and not just individual disposition.
• Small stuff is often indication of big lack of judgment. A CEO cheating on expense account receipts indicates a bad decision on the small stuff that triggers questions of quality of judgment on everything. Why would a leader with good judgment risk so much for so little? Unethical small stuff  also destroys credibility: how can a CEO cheating on expense account receipts credibly set standards for others on anything, big or small?
• The trajectory of one small glitch or one small increase is unpredictable. It is hard to know which small step or gradual increase will be the one that crosses a regulatory threshold, raises interest among journalists, or triggers an employee to sue the company. Unpredictability increases risk, particularly if there are numerous and varied unpredictable small things happening at once in an organization tolerating unethical small stuff.
• Often the small stuff is disregarded in “larger” strategic, governance, and operations discussions. Small stuff is often considered the responsibility of lower level employees rather than the leaders overseeing strategy, governance, and operations. Sometime it is just considered unimportant because it is small. Lots of small stuff adds up to a serious human resources problem, law suit, CEO dismissal, safety disaster, or governance drama in the headlines.

How should organizations sweat the small stuff?

• Policies should cover the small stuff (explicitly). Policies should be drafted to clarify that size doesn’t matter. Indeed situation doesn’t matter. Monitoring and enforcement processes should be designed to identify small violations (e.g. through internal audit procedures, performance evaluations, safety verification procedures…). Reporting procedures should encourage reporting the small stuff. Risk management should cover the small stuff risks enumerated above.
• Focus on the decision process not just the amount. Decisions to engage in unethical small stuff demonstrate unethical intent. Deciding to steal from the company matters more than how much. The fact that it was $10 for lunch doesn’t mitigate an intent that no organization should tolerate.  (Conversely, occasional truly unintentional one-off mistakes, when responsibility is taken and the issue repaired, should be considered as such – e.g. apparently the Fareed Zakaria case.)
• Establish a culture of responsibility irrespective of actions of others. Make it clear that whether or not “others are doing it too” is irrelevant – to the decision process and to policy enforcement.

Keep the small stuff front and center so the unethical situation – i.e., the unethical organizational culture and consequences – doesn’t arise.

As always, comments are welcome.