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When Organizational Fraud and Leadership Come Crashing Together

Nov 24, 2020 | Organizational strategy, Short-form

Reading Time: 3 minutes

Probably one of the most bulletproof laws of organizations is also the hardest to fix. Namely, if you can game the system somewhere, the system has already been gamed.

In all honesty, it’s been remarkable to me how steadfast this law has been. You could be talking about any type of organization, and I’ve seen it. Nonprofit, small business, Fortune 500, political body, financial institution, or board of directors. It honestly doesn’t matter. Indeed, it’s rare not to find it happening, which is something very telling about either our culture or human nature.

And sometimes the stupidity of it is blinding.

For example, one time, I caught a mid-level employee skirting a regulatory process in the dumbest way. Since there was a paper-trail of authenticated files archived but rarely checked, he simply stuffed the ledger with un-stamped, unverified duplicates. It was the most obvious weak point in the system. And therefore, the most trivial to catch.

When I asked him why he didn’t expect to get caught, he said that he did expect it to happen, one day. Obviously, someone would check the archive sooner or later. And the duplicates were overt.

But he assumed his trick were so stupidly obvious, no one would bother looking for it for a long time.

Regardless, we come up with all sorts of names to describe how bad organizational trickery really is. If you’re just taking advantage of the rules but within the letter of the law, you might be gaming the system. Or if you go in for small time swindling, you might simply be grifting. There’s also the “smoke and mirrors” of successful PR campaigns. Or conmen who have made it a profession. Above all, you have fraud.

Probably the most well-known example of business scamming is the Enron scandal. But this isn’t my favorite example of chicanery. And although the story of Juicero, a Google-invested startup that was a laughingstock, comes close, that’s not it either.

Enter stage left: Elizabeth Anne Holmes.

If you aren’t familiar with Holmes, this TED-Talking, manic-eyed, Steve-Jobs-wanna-be woman is something else. But I hesitate to tag her with her title of CEO. Because along with duping the entirely of the corporate media, she got Secretaries of State, Four-star generals, the founders of Walmart, and many more to invest in a company that wasn’t even truly real. Her board of directors reads like a God damn who’s who of high society.

But stop and re-read that. Her company was completely, totally, 100% built on trickery. Yet in 2015, Forbes named her the youngest and wealthiest self-made female billionaire in America. Score one for entrepreneurial women!

Holmes at work

And yes, that’s your favorite politician right there with her, which is partly the topic of our chat today. Not only did this leader say that you could see the innovation oozing from the walls in her facility that wasn’t even working, he was happy to cheer on Holmes. She was a business marvel!

Still, what does this level of bullshitting mean for our institutions and the leaders all around us?

Time and time again, I’ve gone into organizations. And then found fraudulent practices that had a long history of re-occurring. But it’s not because people shared the secret with each other, although that happens. Instead, malevolent people would find the flaw in the system all on their own over and over each year. And they would come and go. Occasionally, a sort of perverse culture would spring up around it too. But the gaming is usually isolated, if but diverse in nature within any one organization.

Back to Elizabeth Holmes.

When I see our system, I see one that elevated a woman like this one to obscenely absurd heights. Nothing she was doing was real, but corporate America didn’t care. They sung her praises to the heavens anyway. She was going to save the world! She was strong and powerful!

Which brings me to our next law of organizations. And the moral of our story.

By the time the scam is all out in the open, you’re probably at terminal velocity. Because either your leaders are too stupid to see the rampant cheating or they’re letting it happen on purpose.

But it doesn’t fucking matter.

Because the result is the same either way. And the system itself has become criminal. Even so, like they say, corruption is the second oldest professional in the world.

You simply have to decide what business you’re in.

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