Many directors believe that if a tactic has worked before, it must be smart business. But what if the trusted tactic turns into a crime?
It often starts with a "mistake”. For example, a director submits an incorrect tax return and receives a refund from SARS. Instead of correcting this mistake, he rationalises it. Later, when cash flow is tight, he does it again, this time deliberately intending to receive a refund.
Each time the director deliberately files an incorrect tax return without negative consequences, his confidence grows. Soon, what started as a small misstep becomes a habit, then a business strategy. The director believes he’s outsmarting the system, failing to see that he’s only reinforcing a dangerous cycle. By the time reality sets in, he has committed millions in tax fraud, and everyone asks: “How did he think he’d get away with it?”.
The answer is simple: the Faulty Learning Cycle – a psychological trap where individuals convince themselves they can break the rules without consequences.
People trapped in a Faulty Learning Cycle mistake getting away with something as a skill. They ignore the warning signs and believe past success guarantees future safety. Turnaround Managers often encounter directors so detached from reality that they expect these managers to rescue the business using the same unethical tactics the directors have long considered their “trusted strategy”.
This is where the Turnaround Manager must rely on his or her own ethics and either align with the director’s actions or take a stand and report them.