Just Culture

Following my post on Fraud prevention better than cure a number of readers messaged me to ask about the Just Culture Approach that I referred to in my post https://www.dhirubhai.net/feed/update/urn:li:activity:7268155119748186113/ That post referred to fraud / error but the application of the Just Culture Apporach is wider and considers how boards and management must work to prevent, detect and respond appropriately, not just to fraud and error but also to poor culture / bad behaviour.

I advocate the Just Culture approach (which is depicted in the graphic above) because it emphasises fairness, accountability, and learning rather than solely blaming individuals when matters of concern occur - at the same time it focuses on appropriate sanction when this is needed. The aim is to distinguish between honest mistakes, risky behaviour, and intentional misconduct. Adopting a just culture approach means that an organisation?can respond to different root causes in a balanced manner. I have seen that it creates an environment where communication is open and transparent. This reduces the temptation to hide fraudulent activities or bad behaviour. Individuals should feel comfortable reporting suspicious activities without fear of retaliation. This complements a culture that supports and protects whistleblowers thus helping to uncover fraud, bad behaviour, poor culture and or error early.

The aim is to distinguish between honest mistakes, risky behaviour, and intentional misconduct. Adopting a just culture approach means that an organisation can respond to different root causes in a balanced manner.

Just Culture explains that individuals should not be punished for honest mistakes. The approach recognises red lines and requires that individuals should be held accountable for negligent or intentional harmful actions and bad behaviour. Its main principles include:

• Accountability: Recognising that while systems and processes can fail, individuals also have responsibilities.
• Learning over Blaming: Encouraging open reporting of errors and near-misses to learn from mistakes and improve processes.
• Distinguishing Behaviours: Differentiating between human error, at-risk behaviour, and reckless, bad or fraudulent behaviour to respond appropriately: Recognising that while systems and processes can fail, individuals also have responsibilities.

Errors can be unintentional mistakes that can result from various factors such as system failures, poor training, or human fallibility. In this case, the Just Culture approach would:

• Focus on learning: Instead of punishing individuals for honest errors, the organisation seeks to understand what went wrong and how systems can be improved to prevent similar mistakes.
• Address system issues: If the error resulted from a system flaw (e.g., inadequate training or complex procedures), the organization should revise those systems, not blame the individual.
• Encourage reporting: Employees should feel safe to report errors without fear of punishment, allowing the organization to learn from mistakes.

Fraud or intentional bad behaviour, in contrast to error, typically involves crossing a red line often with deliberate deception for personal gain or animosity, which can be categorised under reckless or intentional misconduct in a Just Culture framework. In such cases, the organisation must:

• Hold the individual accountable: Intentional fraud or bad behaviour violates trust and should be addressed with disciplinary actions, legal consequences, or termination.
• Examine contributing factors: Just Culture would prompt the organisation to ask why the fraud / bad behaviour was possible. Were there weaknesses in internal controls, the tone at the top, oversight gaps, or incentive structures that encouraged risky or unethical behaviour?
• Strengthen preventative measures: Beyond punishment, Just Culture encourages learning from the incident to develop stronger policies, better oversight, internal audits, and monitoring systems to prevent future occurrences.

To apply Just Culture effectively, it is important to categorise behaviour into three types:

• Human Error: Unintentional, honest mistakes (e.g., a miscalculation or oversight). The focus here is on retraining and system improvements rather than punishment.
• At-Risk Behaviour: Risky actions that may be unintentional but result from poor judgment, shortcuts, or neglecting standard procedures. This behaviour requires coaching, awareness, and sometimes discipline to prevent recurrence.
• Reckless Bad Behaviour or Fraud: Deliberate and conscious violation of rules or misconduct for personal gain, discrimination or animosity. This behaviour requires severe disciplinary actions, including legal or criminal consequences.

Using? the Just Culture approach will allow the creation of a balanced environment where:

• Errors are treated as learning opportunities, leading to systemic improvements without punishing individuals for unintended actions.
• Fraud or bad behaviour is treated with strict accountability, ensuring that individuals who engage in deliberate harm are held responsible, but also prompting an analysis of system vulnerabilities that allowed the fraud to happen.

It is incumbent on us to speak out and sometimes it is seen as easier for individuals not to call out wrongdoing or unacceptable behaviour particularly if it involves senior people. However, it is important that the right culture and behaviour permeates at all levels and this can need people to be brave and ready to speak up.?

An important question for leaders in all organisations is how incidents of inappropriate behaviour or unacceptable culture are monitored and dealt with. It is often easier to rally behind senior people and to interpret matters in a way that supports what may be seen as the organisation's “interest”. People who are ready to stand up for what they see as right can be seen as disloyal. ?Raising difficult matters can be challenging and sometimes seen as career limiting but shining the spotlight on such behaviours by bringing these concerns into the open is often the best recourse to ensure that important issues are dealt with appropriately.?

I have first hand experience of cases where bad behaviour at senior levels was not addressed appropriately by organisational leadership. There is a misconception that proper accountability / sanction and transparency should be avoided and bad behaviour is brushed under the carpet to avoid unwanted publicity. This approach is not appropriate and can lead to damaging consequences. The concern is that when acts of fraud or bad behaviour are discovered and there is no visible sanction this fosters the wrong culture. Such acts are less likely to occur when individuals are held accountable for their actions. When people know they will be held responsible for their behaviour, they are more careful to avoid unethical conduct and bad behaviour.

Anonymous reporting systems and a non-punitive environment need to be embedded to encourage people to speak up. Too often grievance management and reporting procedures pay lip service to good practice and those that do speak up are not listened to or seem to suffer retaliation. Not listening or not acting on to what you don't want to hear is a a sign of weak leadership.

For the framework to be effective, boards and management must:

• deliver and reinforce an ethical tone at the top???????
• ensure that there are effective controls and oversight
• encourage proper whistle blowing
• prevent reprisals
• ensure that there is required training
• create the proper culture
• demand accountability and sanction where necessary

By fostering an environment of trust, fairness, and accountability, a Just Culture approach will help prevent errors, fraud and bad behaviour while encouraging continuous improvement and transparency.