When we hear the term “workplace misconduct,” the first thing that often comes to mind is some form of generally disruptive behavior, such as a grievance between employees that leads to disciplinary measures and a strain on productivity and quality of life in the workplace. And while this is certainly a legitimate example, in reality, some of the most common—and costly—forms of misconduct are those that go entirely unnoticed, or at least until it’s far too late.
In this blog, we’ll provide a definition of workplace misconduct before highlighting the unique pitfalls of one of its most pervasive forms: occupational fraud. Finally, we’ll take a brief look at a few ways businesses can proactively address, minimize, and ideally altogether prevent misconduct in the workplace in 2023.
What is Workplace Misconduct?
Workplace misconduct is a term used to describe any behavior exhibited by an employee or executive that is either illegal, unethical, or in direct violation of established company policies and/or codes of conduct. These behaviors can take a number of different forms that have varying consequences, including (but not limited to):
Occupational fraud or theft
Corruption, including bribery or extortion
Harassment, bullying, and discrimination
Threats and/or physical acts of violence
Illegal/illicit drug use
In the most benign case, workplace misconduct may result in an employee being written up or fired over inappropriate behavior. But in the worst case, it can cost a company millions in misappropriated assets, associated legal fees, as well as the cost to hire and onboard new employees or executives to replace ones that were let go.
Occupational Fraud: A $3 Trillion Global Misconduct Disaster
Of all forms of workplace misconduct, occupational fraud and theft is the most consistent, costly, and difficult for employers to identify or prevent. In fact, according to a 2022 Report to the Nations from the world’s largest anti-fraud organization, the Association of Certified Fraud Examiners (ACFE), it may even be “the costliest and most common form of financial crime in the world.”
On an international scale, occupational fraud and abuse have caused annual losses totaling more than $3 trillion, costing U.S. businesses alone around $50 billion each year. It’s also critical to note that this isn’t a problem exclusively impacting large corporations, as additional data reported by Forbes suggests that more than 80% of theft cases happen in organizations with under 150 employees.
According to the ACFE, around 86% of fraud cases are related specifically to asset misappropriation, or employees stealing or misusing company funds, although instances of corruption and financial statement fraud are also common. But more important than the specific type of theft are the reasons it may be happening so frequently in the first place.
For one thing, the ACFE maintains that fraud schemes tend to unfold over an extended period of time, lasting around 16 months on average before missing funds are finally discovered. Additionally, a Special Eurobarometer Report on Corruption released by the EU found that most instances of corruption continue to go unreported, with 81% of employees saying they’ve never reported their experiences to anyone, much less their employers.
Three Tips for Preventing Fraud & Workplace Misconduct in 2023
Overall, fraud and workplace misconduct pose a clear and serious threat to businesses across industries. And while there’s no way to erase the past, business leaders can still work proactively to prevent these kinds of issues in the future. On that note, here are three quick tips for protecting against workplace misconduct in 2023:
Utilize “whistleblower” hotlines
As we noted earlier, an overwhelming majority of employees simply won’t feel comfortable reporting misconduct to their supervisors. To overcome this hurdle, consider pointing employees toward public “whistleblower” hotlines like AllVoices, which allows workers to report workplace concerns through an entirely anonymous and encrypted platform.
Implement mandatory PTO for employees
Surprisingly, in addition to improving well-being, giving your employees a vacation can actually help uncover fraud or suspicious activity. While this may require some cross-training to ensure an absent employee doesn’t fall behind, the FDIC claims that a mandatory, two-week paid vacation for workers has been shown to improve fraud and embezzlement prevention at banks, as an employee’s time away from the office “can help [employers] suss out things that may be amiss.”
Leverage advanced screening solutions
Lastly, understanding employees and potential new hires on a deeper level is critical to anticipating and preventing misconduct. In addition to running traditional background checks to uncover any history of misconduct, businesses can leverage advanced tools like Fama’s to compliantly screen for red flags that may be hidden in plain sight. Between the ability to screen and continuously monitor activity, you can more easily prevent a poor-quality new hire or preemptively reveal misconduct before it spirals out of control - like these companies recently experienced.