Carillion collapse highlights construction sector’s endemic 'corporate deviance', LSBU study claims

The collapse of Carillion in 2018 highlights a pervasive culture of 'corporate deviance' embedded at the heart of the UK construction sector, according a London South Bank University study.

The LSBU study outlines how, following the collapse of a major financial institution like Carillion, individuals and teams in the wider construction sector are prone to explaining away or normalising discrepancies and problems, unintentionally reducing awareness of the potential consequences of that deviant behaviour. This not only stops the company from following codes of practice, but it also prevents it from anticipating and managing reputational issues and structural internal crises, the report warns.

By performing a qualitative analysis on the collapse of construction giant, Carillion, the researchers identified the most common deviant practices and sources of ‘normalisation of deviance’ embedded in the sector. The findings suggest that ‘normalisation of deviance’ lies not only internally, but also externally, in the wider industry environment in which construction organisations operate.

The report’s authors say the results of their study should sound an alarm bell and call for structural reform of the construction industry to prevent the negative effects of corporate deviance.

The research project was led by Dr Sara Hajikazemi, senior lecturer in project management at LSBU’s Business School, alongside researchers at the Norwegian University of Science and Technology and Nord University in Norway, and the University of Oulu and Tampere University in Finland.

Dr Hajikazemi said: “Our research shows that ‘normalised deviance’ has always been present in the construction sector. “What is concerning is that, as happened with Carillion, construction companies currently lack an early warning system that could alert them to emerging signs of deviant corporate behaviour and malpractice. This means that the construction industry is still likely to be at risk of falling prey to ‘normalised deviance’ and its damaging consequences in future.’’

The ‘normalisation of deviance’ (Source: LSBU)

The term ‘normalisation of deviance’ was first introduced by American sociologist Dr Diane Vaughan in her 1996 book The Challenger Launch Decision. The concept requires three elements:

a) Human based errors and deviations;
b) The deviation occurs repeatedly over time;
c) The deviation does not cause an immediate, undesired effect.

The research detected three distinct types of ‘normalisation of deviance’ that existed within Carillion before the corporation’s collapse that could also be prevalent in the wider construction sector:

• Late payment to suppliers;
• Aggressive accounting;
• Auditors failing to identify problems.

The researchers categorised these three types of ‘normalisation of deviance’ as internal or external, depending on whether they related to the company under observation or its main stakeholders. They observed that, while in hindsight, these practices could be viewed as unacceptable, their emergence was a gradual process that took place over several years. This pattern of corporate behaviour indicates that ‘normalisation of deviance’ is likely to be embedded in corporate culture and very difficult to detect in the initial stages of its development.

The researchers found that the business characteristics in the construction industry, with its highly competitive and pressurised culture, low profit margins, complex and uncertain undertakings, have all contributed to the emergence of questionable business practices.

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