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Mitchell Langbert

Keep Psychopaths out of Your Accounting Firm

Here’s how.

May 21, 2009
by Mitchell Langbert, PhD

Despite recent advances in the stock market, the recession has not yet ended. In times of economic volatility, firms are most susceptible to ethical lapses. This was true in the upswing of the tech bubble early in the decade, and it is equally true now, during the downturn.

Traditional human resource management models do not consider the issue of psychopathy, which may be defined as an employee’s lack of empathy, conscience or guilt with respect to unethical or even criminal acts. For example, in his book, Human Side of Enterprise, Douglas McGregor suggests that managers who believe in theory Y are more open and trusting and therefore preferable to managers who believe in theory X and are mistrustful. But McGregor does not contemplate how a theory Y manager ought to handle a psychopathic employee or even whether there is such an employee. In his sociological study of embezzlement, Other Peoples’ Money, Donald R. Cressey suggests a model of embezzlement according to which an honest employee who never intended to embezzle and who occupies a fiduciary role is motivated to embezzle by a lapse in expected conduct (such as gambling) that cannot be shared with others and results in financial need. Cressey’s model does not contemplate crimes by those who take a job intending to do wrong.

Part of the reason industrial psychologists and human resource managers have not paid attention to psychopathy is the small number of psychopaths. Psychopaths represent about one percent of the general population, but comprise about 3.5 percent of high-potential corporate employees. The percentage of upper management with psychopathic traits is probably higher still. But there may be an intensified Pareto’s law (also known as the 80-20 rule, in which per Vilfredo Pareto research on income and wealth in Italy, 80 percent of Italy's wealth was owned by 20 percent of the population) at work. Although they are responsible for 3.5 percent of high potential employees, they may be responsible for more than four times that percentage of firms’ ethical lapses.

How to Differentiate Your Psychopathic Employees

In recent years, psychologists have begun to study the role of psychopaths in ethical misconduct. One important book is Paul Babiak’s and Robert D. Hare’s Snakes in Suits. The well-known corporate ethical lapses earlier this decade can be interpreted to have been a function of psychopathy that had been unleashed by elimination of traditional bureaucratic and accounting controls, such as mark-to-market accounting at Enron. Enron’s executive team displayed quite a few characteristics of psychopathy that Babiak and Hare discuss in their book. These included a propensity to take risks (such as going on dangerous motorcycle rides); a taste for living on the edge; an indifference to detail; lack of empathy; and lack of remorse.

Not only do many HR departments overlook psychopathy in staffing, performance appraisal and promotion, but some view some psychopathic characteristics as desirable. For example, in an article titled “From Darkness Into the Light: Psychopathy in Industrial and Organizational Psychology,” Paul Babiak notes that psychopathic charm and charisma can often be mistaken for leadership; psychopathic talk of imaginary goals can be mistaken for visionary leadership; and psychopathic lack of emotion can be mistaken for being in control.

Characteristics of Psychopathic Employees

It is true that ordinary impression management, managerial skills and corporate gamesmanship can at times look like psychopathic behavior. The difference is that psychopaths do not feel remorse at lying and will lie unrestrainedly. They take pleasure in manipulating and causing harm to others. They delight in bullying. They do not wince at committing fraud or other crimes. Harming others does not trouble them. They often feel that they are the ones who have been wronged, and are charming enough to convince others of their case.

No one knows the degree to which ethical lapses in business are attributable to psychopaths, but it seems likely that if three to 10 percent of top managers are psychopaths, their firms will be among the worst offenders. Moreover, psychopathic employees cause disruption, conflict and turnover of capable employees. Hence, HR might consider the role it can play in identification of psychopaths before they are hired; and assist the firm in identifying psychopathic behavior when it occurs.

Babiak and Hare argue that psychopaths in the workplace follow a predictable script that involves pawns, patrons and patsies (people who can be manipulated easily). Psychopaths recruit pawns such as lower-ranking employees or peers, whom they can manipulate. The manipulation can involve doing the psychopath’s work or it can involve inducing a peer to engage in conflict with another employee. Much like Max von Sydow’s Leland Gaunt in the Stephen King film, Needful Things, psychopaths may tell one colleague one thing and a second colleague another, setting each against the other.

Patrons are higher-level managers whom the psychopath wins over, convincing them that he, the psychopath, is ethical, enthusiastic, creative and hardworking. The patsies are former pawns and patrons whom the psychopath has betrayed, often at cost to the firm. Frequently, psychopaths are expert at grasping others’ psychological needs. This psychological competence enables the psychopath to engage in manipulation, intimidation and harassment in which they take pleasure. Because the psychopath seems charming to higher ups and to many co-workers, he can undermine accusations that begin to develop. Thus, it is common for psychopaths to be surrounded by conflict. One sign of psychopathy is the inability to work in teams.

How to Weed Out Psychopaths

Unfortunately there is no magic bullet or psychological test that can screen out psychopaths. Hare has developed a clinical instrument to measure psychopathy called the Psychopathy Checklist Revised (PCL-R), but it is difficult to apply in the hiring process. Rather, Babiak and Hare recommend a structured interview process in which résumés are checked against factual evidence, for instance, calling every former employer and college on the résumé before inviting a candidate in for an interview.

A good tool to use in interviewing is the structured behavioral interview in which the interviewer asks the interviewee to describe actual responses to past problems. Every interviewee should be asked the same questions involving either how they actually reacted to past circumstances or, hypothetically, how they would react. The answers can be reviewed for evidence of dishonesty and inconsistency as well as quality. Multiple interviewers from different departments should conduct interviews. Then, they should compare notes. A candidate who says one thing to one interviewer and a very different thing to a different interviewer should be suspect.

Rigorous reference checking is advisable. An outright lie (as opposed to exaggerations about things like salary) on a résumé should be a sufficient tip off to reject a candidate. In addition, work samples are one of the best selection tools.

Conclusion

Firms ought to consider psychopathy awareness training as part of the performance appraisal process. Even a valid psychological instrument like Hare’s PCL-R is not as good as a trained eye in real life. If your human resource department trains every employee in the firm as to the patterns and traits of psychopaths and creates an avenue for feedback, such as a 360-degree appraisal system, then they will be able to keep them out.

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Mitchell Langbert, PhD, is an Associate Professor, Brooklyn College. Widely published on the subject of human resource management, Langbert has consulted and served as an expert witness.