Ethical Free Riders: An Insidious Disease Inside your Organization

What is an ethical free rider? Working in an ethically healthy firm has enormous benefits: at the internal level of the organization one may for instance have access to more information or enjoy more freedom and larger responsibilities due to an atmosphere of trust. At the level of external relations, the good reputation may attract investors, better clients or social interest.

This ethical environment is not a matter of good intentions and bold declarations: is built on real personal virtues and commitment by the members of the organization. But some members of the organization may not contribute to that high standard, while at the same time faking a decent behavior and even an outstanding technical performance. You cannot convince them to sum to the common transcendent goals that create that sense of community: they understand the necessity of that, but not for them. They can enjoy what others strive to create while focusing on their own interest with no immediate harm to the organization.

Lack of Professionalism and Commitment Without Breaking Rules

In economics a free rider refers to someone who benefits from resources, goods, or services without paying for the cost of the benefit (e.g. a user of public transportation services who does not pay his or her taxes). Ethical free riders are those who benefit from the general moral conditions and ethical reputation of their firm and colleagues, within a certain sector or market; but without contributing to that moral high standard. Ethical free riders are masters on simulating.

By ethical free riders I do not mean those persons that cause direct illegal harm – like stealing or cheating – who are no longer free riders, but felons. I do not mean even unethical professionals with dubious (though strictly legal) behavior. I refer to those who lack the level of professionalism and commitment that may be found around them or within their organizations without breaking any written rule or causing direct economic harm. This has individual advantages because they do not have to be as good as their partners to earn the same rewards, or because they unjustly earn competitive advantages, drawing their professional prestige from others to sign contracts, gain customers, acquire information, etc. – but involves important risks to organizations, as we discuss bellow.

The free rider disease

I find at least three problems caused specifically by ethical free riders:

1. Ethical free riders take advantage of other’s efforts beyond what is formally required and thus do not contribute in a fair measure to the common goals of the firm.
2. There is also a direct harm done by free riders: the bad example is contagious . Although they fly under the organizational radar ethical free riders do influence people with higher ethical standards to lower those standards and thus create a spiral of (moral) mediocrity around them.
3. But the worst of all possible consequences of ethical free riding is the erosion of trust  within organizations and towards organizations. In this regard what some call psychopath and narcissist managers (a form of ethical free riding) are the greatest danger because they create enthusiastic followers and may deliver (or fake) results. But – as some management guru once said – “trust is built in decades but destroyed in the blink of an eye”.

Injustice, mediocrity, distrust. Ethical free riders are presumably a cancer for human cooperation and economic performance within organizations. They are the most insidious enemy of any attempt to build an ethically excellent organization. And -like the biblical tares that grow along the wheat- they are to be found everywhere, due to human nature.

The Hunt for the Ethical free riders

Ethical free riders are not easy to detect and tackle, for a number of reasons. Let’s consider four:

1. Moral virtue is difficult to evaluate: bad consequences of personal moral underperformance are not necessarily reflected in the profit and loss account. The firm may lack the formal instruments to measure and reward (or punish) it.
2. Other informal means of control of moral performance may be illegal or morally dubious (like direct questions on private life and beliefs, or relying on rumors), or at least may have the secondary effect of eroding a general sense of trust.
3. The harm done to trust and reputation by free riders – even when measurable – is not always incremental.  Problems of trust typically explode in form of crisis and scandals.
4. The common experience is that the effect of good example is weaker than bad models of conduct .

Treatment of a chronic disease

Having these difficulties in mind I suggest some ways to face the problems discussed above, knowing that we cannot eradicate them directly:

1. Tolerance and patience. This may sound contradictory, but in front of a problem that is not going to be completely solved, it is important to avoid maximalist approaches that exasperate people and lead to imprudent decisions. This does not mean inaction, but the centrality of the following suggestions (and not try to use a sledgehammer to crack nuts).
2. Foster commitment and benevolence. If a member of an organization works only for extrinsic and untransferable rewards, it becomes impossible to tolerate free riding behaviors. This should be tested during the hiring process for all workers, moreover for the intermediate and top leaders of the organization. Salaries should not be too low neither too high (see number 4). Leading by example is crucial.
3. Building a strong organizational culture. The commitment with the transcendent goals of the organization (given that they exist) grows not only with formal rules and incentives, but also with a consistent and open narrative of how the organization pursues its goals.
4. Being just and professional in leading and rewarding or punishing what is measurable. The emphasis put on the informal and cultural dimension of the firm has the risk of making us forget that basic justice and a minimum of efficiency is required for any organization. Otherwise the appeal to higher values will sound (and become) void.
5. What seems weird is weird. You cannot wait until the problems are explicit. Moral and  mental illness may not be immediately detectable by ordinary means in terms of economic results or professional performance but there are signs that can be interpreted as an implicit problem. Keep an eye on that, to take timely, legal and discrete measures. Don’t exclude surgery.