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Fraud from the factor of fear

Management by Intimidation



September/October 2006

This article by Slemo D. Warigon and Betsy Bowers was adapted from one they wrote that appeared in the summer 2006 issue of the College and University Auditor Journal.   

Managers who use intimidation and fear to run their organizations prevent employees from being their best and encourage fraud, waste and abuse. Here's a framework for combating the tactics of these managers and deterring fraud. 

Mr. Zero, the CEO, wanted his staff to be efficient, quick, and savvy. And he wanted them to make their sales quotas every month. Nothing unusual there. But his tactics didn't follow the classic textbook management style. He told his employee, Sam, that his days could be numbered after one bad sales month, even though he previously had four good ones. He reprimanded Betty when she complained about working conditions. He fired Hilary when she questioned his actions. And he routinely hand-picked the members of the board of directors. His actions lowered morale, stressed the workforce, and laid the foundation for major fraud cases.1

We're familiar with the buzz words "management by objectives" and "management by the seat of your pants." But few of us have studied insidious "management by intimidation" practices.

Here we'll describe the ways management by intimidation can negatively affect employees and expose an organization to fraud, waste, and abuse. We'll also provide a framework for managing employees that can narrow an organization's risks. The characteristics of MBI practices listed here are based on our observations as career internal auditors with at least 15 years in the higher education sector. Our discussions with victims of MBI practices helped refine issues.

Management by Intimidation (MBI) is managing or governing people based on fear. Costs increase, productivity diminishes, and revenue decreases. MBI also has adverse effects on the morale of employees and the ethical climate of an organization. All of us have known (or had) bosses who use MBI practices to get what they want but these practices are inconsistent with W. Edward Deming's eighth point of management.2 Deming says that managers should "drive out fear" to help employees become secure enough to express ideas and ask questions. Deming has steadfastly viewed management by fear as counterproductive to the long-term health of an organization because it prevents employees from acting in their best interests.

 

 

 


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