Managing Your Ethical Culture

Measure, Intervene and Remediate

Companies with a strong culture of ethics have a real competitive edge in the marketplace. Often these organizations outperform the competition in productivity while also enjoying a lower rate of employee misconduct. Culture may be difficult to measure, but CCOs should focus on continually improving the corporate culture – it’s the company’s most important control.

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.

In the wake of ever-constant business scandals (e.g. ZTE, VW, Takata, Odebrecht), chief compliance officers have to refresh their approach and strategy. Everyone agrees, or at least I think they should agree, that a company’s most effective control is its culture.

For CCOs, selling the board and senior executives on this point should not be very hard. Research and common sense often come to the same conclusion: an ethical company is more profitable in the long run. Just start with some basic “facts” (not alternative facts, but research-driven ones): employees who work at ethical companies are more productive and less likely to leave the company, misconduct rates among employees are lower at ethically driven companies and employee reporting rates are higher at companies committed to a culture of ethics.

With these basic building blocks, a company with an ethical culture has a competitive advantage in the marketplace. Consumers, competitors, vendors, their communities and government institutions each have favorable views of the company, its leadership and its overall contribution to the economy and the community.

LRN Research has put out some brilliant research and analysis in this area. Here are links to two important papers released by LRN (here and here). LRN’s analysis reveals the importance of culture and values-based principles as guideposts for corporate compliance programs and overall performance. The organization’s work is a must-read on these important topics.

CCOs have to take a new approach – or at least adjust their existing approach. All too often, I see CCOs who attend to program elements, making sure that each is followed and working properly. Not enough attention is being paid to the most important control: a company’s culture.

Culture is not so tangible or easily defined, but it can be measured, monitored and remediated. CCOs are very familiar with these latter concepts. CCOs and Human Resource professionals know how to survey employees. They typically will coordinate an employee survey every two years to measure employee morale and overall culture. While those efforts are laudable, there needs to be a new approach taken that reflects a greater focus on the importance of culture.

To that end, I have often encouraged CCOs to consider conducting narrowly tailored culture surveys that may be restricted to certain regions, countries or areas where compliance concerns may be on the rise. Alternatively, there is no reason to require surveys of all employees when targeted surveys could be designed to middle managers and their abilities to communicate the company’s cultural message, listen and respond to employee concerns and coordinate their efforts with compliance officers.

I know such an approach requires companies to break out into a new mold where traditional surveys are replaced with a more comprehensive approach including not only targeted surveys, but also focus groups, interviews and other ways to encourage employee communications about company values, culture and overall morale.

Once a company collects more culture data (e.g. surveys, focus groups, interviews), the company has the ability to measure the results over time, monitor the results and design remediation strategies to address weaknesses in its culture. This is not the most exact science, but CCOs have to start somewhere. CCOs have to measure the impact of their current strategies, such as CEO statements, CEO messages, newsletters and other attempts to promote corporate culture. It is not enough to videotape a CEO speaking generally about the company’s culture and commitment to values-based principles – more has to be done to establish and promote a real commitment to a culture of ethics.