How do you know if your organization is at risk of becoming toxic, or even worse, corrupt and abusive? Can you detect the signs and signals of things like sexual harassment, bullying, fraud, and other kinds of power abuse? Why do some organizations have greater instances of harassment, bullying, corruption, and other misuses of power than do others?

When it comes to abuse of power, context is everything. Why? Because we’re influenced by other people and by cultural norms in hard-to-notice ways. One large-scale, thirty-year study of obesity found that a person’s chances of becoming obese increased by 57% if they had a friend who became obese over a shared period of time. Likewise, you’re more likely to quit smoking if you stop hanging out with friends who smoke. Ethical behavior is also influenced by our social group. The more exposure you have to someone else’s unethical activity, the greater the chances are you’ll behave unethically. In other words, when “everyone does it,” then, well, everyone will probably do it, and consider it normal.

So, what are the danger signs? Can it happen to your organization or team? What puts your organization at risk?

These are the factors that increase the chance of abuse of power:


1. Where Rewards are Great and Oversight is Compromised

The possibility for abuse of power is highest where there’s the greatest temptation and oversight is lax, or missing.

Consider the financial services industry. For bankers and financial advisors who work alone most of the time, the temptation for misconduct is enormous, and the culture within the industry has a tendency to “permit” or at least be lax about indiscretions. The overseeing body is often comprised of former banking executives and advisors, i.e., present and former colleagues. Seven of the twelve least ethical multinationals, as quantified by the research firm Covalence, were mining or oil and gas companies.Two were agricultural chemical companies. All industries with enormous profits, powerful lobbies, and a lack of stringent controls.

Fraud is most likely to occur in organizations where performance incentives and bonus schemes are tied to financial metrics, yet not aligned with the organization’s values. If a company’s financial targets are unrealistic, and at the same time, not aligned with ethical behavior or company values, the pressure to meet those performance targets can and will easily lead to fraudulent behavior, as we’ve seen in the case of Wells Fargo bank.


2. Where a Prized Identity Needs Protecting 

Just like a person, an organization has an identity, an ego, to protect. The bigger the organizational ego, the bigger the need to maintain it.

Consider the Catholic Church. There may not be another organization on earth with such an important identity. The Church is a 2000-year-old, global organization with over a billion followers, underpinned by a powerful theology and worldview.

Over the past decades, it’s come to light how church officials around the world went to enormous lengths to cover up and deny the sexual abuse of thousands of children by its clergy. And yet, officials ignored warnings, denied allegations, and knowingly reassigned repeat sexual offenders to different positions, rather than removing them outright, continuing to place children in jeopardy. All to protect the church identity.

A prized identity is not just about size but also success, tradition, and prestige. Schools and universities and historical institutions have a lot at stake. Consider Pennsylvania State University football program, an institution with a venerable reputation to uphold. It was rocked by a child sexual abuse scandal. The former Penn State defensive coordinator Jerry Sandusky was found to have sexually abused 10 boys over a period of at least 15 years. Officials purposefully failed to notify authorities after learning about these incidents, and ignored and attempted to cover up the coach’s sexual assaults.

Just like a person who hides mistakes, covers us their vulnerability, and lies about their accomplishments to boost their ego, so to do organizations. If you are lucky enough to have a prestigious corporate brand, be extra careful that you don’t protect the brand at the expense of your core values.


3. Where Superstars Are Coddled

Looking at some of the biggest sexual harassment scandals in the past several years, one question comes to mind: why don’t organizations fire bad actors? Why do companies put themselves at great risk, spend millions on legal fees and payouts, lose good employees who quit their toxic climate, incur bad publicity, and even lose customers, all to protect a few bad apples?

Fox News Corp paid $13 million dollars in settlements over sexual harassment claims from five women against Bill O’Reilly, Fox’s top-rated news host.  Travis Kalachnik, former CEO of the ride-hailing start-up, created such a toxic, sexist culture that eventually he and almost his entire leadership team had to resign or were fired.

Organizations routinely over-value superstars,  believing that it’s better to keep superstars, regardless of their effect on the team or culture, because their contribution far outweighs the costs associated with their negative behaviors.

Yet is this true? A study by Michael Housman and Dylan Minor for the Harvard Business School found that, “even if a firm could replace an average worker with one who performs in the top 1 percent, it would still be better off … replacing a toxic worker with an average worker by more than two-to-one. That is, avoiding a toxic worker (or converting them to an average worker) provides more benefit than finding and retaining a superstar.”

No company can afford the long-term effects created by a negative, hostile, or toxic environment. Employees who are the targets of incivility, bullying, rudeness, and aggression from co-workers are more likely to quit their jobs, report lower levels of health and well-being, are less committed to their job and less satisfied with their work, and experience higher than average rates of anger and anxiety.


4. Where Systems Are Closed to Feedback

Closed systems pose a greater risk for abuse. A closed system is an organization that has limited or no flow of information exchange with the outer environment. It doesn’t solicit feedback from the outside; it doesn’t subject itself to external review; it doesn’t question its own assumptions. Closed systems are more prone to confirmation bias: to choosing information that confirms what it already thinks and ignores that which doesn’t.

For instance, private schools and universities, religious institutions, sports organizations, and even the military and police operate like closed systems in their insistence on prosecuting offenders and disciplining wrong-doers. However, they frequently fail at it.

Universities have routinely under-reported sexual abuse cases on campus, and mismanaged those that were reported. The Pentagon insists the military should be in charge of investigating and prosecuting sexual assault within the military—through its own chain of command—even though a large percentage of sexual assaults reported are committed by member of the victim’s chain of command.

To know whether an organization is a closed system, look to see how it treats whistle blowers. Those who complain, raise an alarm, or report wrongdoing are punished, reassigned, demoted, or disregarded as troublemakers, poor performers, or those who “couldn’t cut it” or didn’t “fit in.”

Like defending an organizational ego and protecting a toxic superstar, a closed system that refuses to look at itself with a critical eye, take feedback, or question its assumptions is at heightened risk of committing an abuse of power.


5. Where Dark Corners Prevail

Finally, at the heart of many scandals are taboos—things people don’t want to talk about, things like money, sex, and power. The more secretive the topic, the more a society or organization refuses to deal with it, the more it’s ripe for misuse and abuse.

The US and other countries’ Olympic Committees have been rocked by sexual abuse scandals in the past several years. At least 368 Olympic gymnasts in the United States—many of them children, and almost all of them girls—were victims of some form of sexual abuse, perpetrated by coaches and the Olympic team doctor, Larry Nassar. Knowing of the allegations,the USA Gymnastics association didn’t report allegations.

Nancy Hogshead-Makar, an Olympic gold-medal swimmer and CEO of the advocacy group Champion Women blames a “culture of silence” for the scandal:

Sexual abuse thrives on the fact that people are embarrassed about the topic, ashamed to talk about it, and they keep quiet about it. And that’s exactly why molesting coaches keep getting hired at the next place. 

The same charge can be levied at Penn State. Sandusky was a pedophile, but in the macho culture of sports, who was going to talk to him about his sexual interest in young boys? Sex is an incredibly uncomfortable that leads to denial, an unwillingness to address it, and eventually, cover ups.

The lesson here is this: Look at what you or your organization marginalizes. Wherever there is a taboo, there is a domain ripe for abuse.