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Managers and leaders rely on their subordinates to be honest with them so they can make thoughtful decisions. Sometimes, they are faced with team members who lie outright or bend the truth. Fear of punishment is the most common reason for lying, according to a 2023 study by Bright Futures, with 27% of people admitting to it. The least common reason is out of compulsion or habit, with 9% of people doing this. 23% lie to protect others or themselves from harm, 20% - to avoid shame or embarrassment, and 14% - to gain an advantage over someone. 

In more tangible terms, lying results in loss of profit. According to a study, a company can lose up to 7% of its profits due to time theft, of which buddy punching is a prominent example.

Managers can respond most effectively by trying to understand why an employee lies. When that becomes clear, they can take action. 

Concealing inadequacies

Sometimes, employees try to make themselves look more competent than they are. They might be unable to understand why they aren’t successful and then try to conceal their incompetence. Calling them out is not enough because they will remain just as incompetent, and their negative outcomes will be exposed anyway. 

One way to deal with this issue is by making structural changes, if possible. You might change deadlines for results or information so the person is more likely to produce positive results or provide them with coaching and training so they can be more effective and goal-oriented without needing to lie. As of 2024, the revenue of companies with comprehensive training programs in place was 218% higher than organizations without them. 

Fear of conflict or upsetting the manager

Another common reason employees lie is that they are afraid the manager or their coworkers will react negatively to the truth. They don’t want executives to be disappointed in them or fear punishment. 56% of employees admit to lying to their manager or supervisor, and 18% of job candidates have lied on an application.

Lying out of fear of conflict can occur on all levels. A department head might fudge numbers if they don’t meet the targets set by senior executives out of fear of letting people down or making trouble. If you determine an employee is lying because they are afraid of getting into trouble, try to provide a psychological safety net to encourage honesty. They should still face the consequences for lying, but more importantly, they should understand that they’re making the manager’s work much more complicated and riskier when they lie. As their leader, you need to know the truth, even if it’s unpleasant. Communicate to them that you need to have confidence in what they are telling you so you know the options, and encourage them to cooperate with you to find a solution.

Advancing without doing good work 

Some employees believe they can’t achieve professional growth through good work. These employees are the hardest to deal with because they undercut coworkers, often very subtly. When you call them out, they resolve to lie more convincingly next time, and you become responsible for protecting other team members from loss of reputation. In some cases, these employees will also lie to their coworkers. According to a recent survey by Statista, 64% of people have been lied to by a coworker. 

Tell them that damaging coworkers’ reputations is unacceptable and warn them that you will lose trust in them if they keep undercutting others, even if their work is otherwise good. 

Document the lying team member’s behavior and your feedback for your records. This ingrained habit is almost impossible to break if your employee is a compulsive liar. It is a coping mechanism, which they will probably revert to when under pressure, even if they had temporarily stopped lying. 

If their lying disrupts workflow or causes bad decision-making, you’ll need to let them go.