One with the Lot

McLeod Governance lives near – but may the record show does not frequent – a McDonald’s restaurant.

A year or so ago there was some disturbances caused out the front of the McDonald’s by some local teenagers that had nothing better with their time than to see who could yell the loudest at 2am.

A couple of months later, McLeod Governance noticed that there was a sign in the car park out the front of the McDonald’s that read “reserved for police vehicles”.

In the many times since that we have driven past the McDonald’s never once has there been a police vehicle in the designated spot.

Neither has there been any further trouble at this McDonald’s.

(As an aside – we have never seen anyone dare park in the spot for fear that just at that time there WILL be a police car that will claim what has been allocated for them).

By simply putting up what one would imagine is a $100 sign and allocating a car spot, the McDonald’s has saved itself a portfolio of complaints about unruly customers.

It has exploited the concept of a deterrence.

Deterrence is a theory from behavioral psychology about preventing or controlling actions or behavior through fear of punishment or retribution.

General deterrence manifests itself in policy whereby examples are made of deviants.

The individual person is not the focus of the attempt at behavioral change, but rather receives punishment in public view in order to deter other individuals from deviance in the future.

Specific deterrence focuses on the individual deviant and attempts to correct his or her behavior. Punishment is meant to discourage the individual from recidivating.

Both forms of deterrence assume rationality on the part of deviants and criminals, and that crime can ultimately be prevented through altering the cost benefit ratios of such behavior.

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It is generally accepted wisdom in, say, fraud prevention that the logic in fraud deterrence is that employees who perceive that they will be caught are less likely to commit it.

Therefore internal controls can have a deterrent effect only when employees perceive that such controls exist for the purpose of uncovering fraud.

As rational and self explanatory as that sounds, McLeod Governance looked far and wide and can find no detailed quantitative study that backs up this assertion.

And at this point McLeod Governance tracks back to that parking spot outside McDonald’s.

If it isnt the deterrence factor at work what then is happening?

Answer that question and you not only save yourself the trouble of authoring a detailed academic paper but you also likely unlock the key to a new world of thinking on how to construct a strong internal controls environment.

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