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What is the 10/80/10 Rule and How HOGA Can Prevent Fraud and Unethical Behavior

Writer: Bill Carlson Bill Carlson
Jul 26, 20244 min read

Embrace HOGA to build a life and organization rooted in ethical behavior and prevent the pressures that lead to fraud and unethical actions.


Introduction


Fraud and unethical behavior are significant challenges in both personal and professional environments. The National Association of State Auditors, Comptrollers, and Treasurers (NASACT) highlights the "10/80/10 Rule" to categorize people's likelihood of committing fraud. This rule offers insight into how different individuals respond to pressures and opportunities for unethical behavior. By integrating HOGA (Honesty, Openness, Gratitude, Awareness) into our lives, we can cultivate resilience against these pressures and foster a culture of integrity.


The 10/80/10 Rule Explained


The "10/80/10 Rule" is a concept used to understand and manage fraud risk. It categorizes people into three groups based on their propensity to commit fraud:

  1. 10% Will Never Commit Fraud: This group comprises individuals with high ethical standards and unwavering integrity. Regardless of the pressure or opportunity, they adhere strictly to their moral principles.

  2. 80% Might Commit Fraud: The largest group, these individuals are influenced by external factors. If the right combination of pressure, opportunity, and rationalization exists, they might consider engaging in fraudulent activities.

  3. 10% Are Actively Committing Fraud: This segment consists of individuals who are already engaged in or seeking opportunities to commit fraud. They are consistently involved in unethical behavior.

Understanding this rule helps organizations and individuals recognize potential risks and implement measures to mitigate them. One such measure is adopting the principles of HOGA.


The Power of HOGA in Preventing Fraud


HOGA, which stands for Honesty, Openness, Gratitude, and Awareness, is a framework designed to foster a healthier mindset and ethical behavior. Each component of HOGA plays a crucial role in combating the factors that lead to fraud.


Honesty

Honesty is the foundation of ethical behavior. When individuals commit to being truthful, they build trust and integrity within their personal and professional relationships. By prioritizing honesty:

  • Self-Reflection: Honest individuals regularly assess their actions and motivations, ensuring they align with their values.

  • Transparency: They practice transparency, reducing the likelihood of concealing information or engaging in deceptive practices.

In the context of the 10/80/10 Rule, fostering honesty can shift individuals from the 80% group, who might commit fraud, towards the 10% who never would.


Openness

Openness involves a willingness to communicate transparently and listen to others. It encourages sharing ideas, concerns, and challenges without fear of judgment. Openness helps prevent fraud by:

  • Encouraging Dialogue: Open communication allows for the early detection of issues and collaborative problem-solving.

  • Reducing Isolation: When people feel heard and valued, they are less likely to resort to unethical behavior as a means of coping with pressure.

By promoting openness, we create environments where ethical behavior is the norm, thereby reducing the temptation for the 80% group to commit fraud.


Gratitude

Gratitude shifts focus from what we lack to what we have. It fosters contentment and reduces the desire to engage in unethical behavior to attain more. Practicing gratitude can:

  • Enhance Well-Being: Grateful individuals experience higher levels of satisfaction and lower levels of stress, making them less susceptible to pressure.

  • Strengthen Resilience: Gratitude helps build resilience against challenges, reducing the likelihood of rationalizing unethical actions.

Gratitude can transform the mindset of individuals in the 80% group, making them more resilient to pressures that might lead to fraud.


Awareness

Awareness involves being mindful of our thoughts, emotions, and actions. It includes recognizing the pressures and opportunities that could lead to unethical behavior. By cultivating awareness:

  • Early Detection: Individuals can identify and address pressures before they escalate into rationalizations for fraud.

  • Informed Decisions: Awareness allows for thoughtful decision-making, ensuring actions align with ethical standards.

Awareness empowers individuals to navigate pressures and opportunities ethically, preventing them from slipping into fraudulent behavior.


Practical Steps to Integrate HOGA


To harness the power of HOGA in preventing fraud and unethical behavior, consider the following practical steps:

  1. Self-Assessment: Regularly evaluate your actions and motivations. Are they aligned with your values? Are there areas where you could be more honest?

  2. Foster Communication: Create environments where open dialogue is encouraged. Listen actively and share your thoughts transparently.

  3. Practice Gratitude: Take time each day to reflect on what you are grateful for. This practice can shift your focus and enhance your well-being.

  4. Develop Mindfulness: Engage in mindfulness practices such as meditation or journaling to increase your awareness of thoughts and emotions.

  5. Education and Training: Educate yourself and others on the importance of ethics and the principles of HOGA. Provide training sessions to reinforce these values.

  6. Create Ethical Policies: Implement and enforce policies that promote honesty, openness, gratitude, and awareness within your organization.


Conclusion


The 10/80/10 Rule provides valuable insight into the varying propensities of individuals to commit fraud. By integrating the principles of HOGA—Honesty, Openness, Gratitude, and Awareness—into our lives, we can strengthen our resilience against pressures and foster a culture of integrity. These principles help shift individuals from the 80% who might commit fraud to the 10% who never would, creating a more ethical and trustworthy environment.


 
 
 

Comentarios

What the Professionals Are Saying 

"I teach a course on negotiations, during which I spend a good deal of time talking about honesty and ethics in negotiations. As an ethics researcher, I think it is important that students not only understand strategies for successfully claiming value in negotiations, but also learn about the temptations they will face to engage in unethical bargaining, and unethical behavior more broadly in their professional careers. Bill brought this message to life. Bill explained to my students – with openness, authenticity, and scientific insight – the ethical missteps he took in his career. I am incredibly grateful to have had Bill in my class – I learned from him just as much as my students did. I think he would be a welcome, and much needed, addition to any course related to ethics, well-being, power and influence, or negotiations (and likely many more!)."   

                                                                        Professor Emma Levine/ University of Chicago Booth School of Business 

“Bill Carlson has a reservoir of experience that will resonate with college students and professionals from all walks of life. Seldom do you encounter an individual willing to openly share his foibles and mistakes in an attempt to deviate the life paths of those mutually-inclined to make the same errors. Bill lays his life bare in his presentation and shares the detrimental impact his decision-making had on his personal and professional life; yet he lays the foundation for an inroad to a better future built upon his gratitude for life, learning from his mistakes, and pursuit of his new definition of “life wholeness”.  

                                                                         Dr. William C. McCoy, Director/Rutland Institute for Ethics

                                                                         Visiting Professor, College of Education/Clemson University 

"For over 30 years, I have been teaching full- and part-time. For the past eleven years I have been a member of the accounting faculty at Fordham University. This semester, Fall 2021, Mr. Carlson agreed to speak with my students about his story, and I can say that I have had few guest speakers who delivered such a powerful message about the importance of professional obligations. It was the story of a seemingly nice guy who exhibited a lack of judgment and would pay a heavy price for it. Most importantly, it is a story of a man who reflected upon his moral lapse and has made a solid commitment to helping others."              

                                                                                       Timothy P. Hedley, Ph.D., CPA, CFF, CFE

                                                                            Retired Global Leader of Fraud Risk Management Services, KPMG LLP

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