Why Measure Ethical Effectiveness

2006
Charles Ruthford

 Why measure the effectiveness of an ethics and compliance program?

Two reasons jump immediately to mind.

First and most importantly, it's good business practice. Successful companies become and stay successful because they check to see that the investments they make in themselves achieve the desired and/or predicted results.

Secondly, Section 8B2.1.(b)(5)(B) of the United States Sentencing Commission's Federal Sentencing Guidelines states "The organization shall take reasonable steps - to evaluate periodically the effectiveness of the organization's compliance and ethics program." Should a company be involved in a criminal proceeding, the extent to which the company took steps to ensure that their compliance and ethics program was effective would be considered during the sentencing phase.

Not measuring the effectiveness of a program only increases the risk and exposure for the company. In dealing with an organization, customers, suppliers, employees and communities would be wise to ask questions about the organization's intent and commitment to integrity and proper ethical conduct.

Measurement falls into two categories, process and outcome. Examples of process measures for an ethics and compliance program might include:

• Number of employees attending ethics and compliance training
• Percent of employees who have signed the company code of conduct
• Number of calls or contacts to the ethics help-line
• Compliance escapes
• Number of cases requiring investigation
• Cycle time for answering caller's questions or closing an investigation on a case
• The quality or completeness of the information in the ethics and compliance case database

Process measures are straight-forward and look at events and activities. They are necessary to ensure things happen as planned and provide feedback on the use of resources.

Say all the employees in your organization have attended your annual ethics refresher training. That's a fact. What conclusions could you draw? You can say that they have seen the material and, given the method of the training, estimate the percentage of the employees that likely understood and will remember the material. While this is interesting information, you can't say how the people will behave or act should they encounter a challenging issue.

That's where the outcome measures come into play. You're probably wondering if this is possible and saying, "Measuring people's behavior is soft, squishy and subjective. Our senior leaders want to see hard and objective data. This is hard. Will our leadership accept it?"

When it comes to ethics and compliance programs measuring effectiveness, let's be honest, it is hard and implementation in your organization will be unique. The measures need to fit your needs and requirements.

Here are some possibilities that you could consider. The percentage of anonymous calls to your ethics helpline indicates, in part, how safe people feel about bringing issues forward. The percentage of investigated cases that are found to be substantiated could indicate how issues are being handled by the employees or line management and the level of knowledge in the organization. A dropping substantiation rate might infer that employees are unsure about issues or are reporting certain activities just to be safe. A rising substantiation rate might indicate that employees and line management are dealing with the issues in the workplace and that the cases that get to the ethics help line are the cases that "should" be there. For your company a change in the substantiation rate could indicate something entirely different.

In the recently published, 2005 National Business Ethics Survey, the Ethics Resource Center found these behaviors:

• Talking about or communicating ethics as a priority
• Setting good examples of ethical conduct
•  Keeping commitments
• Supporting others who follow organizational standards

Had a significant effect on:

• Levels of observed misconduct
• Pressure to compromise ethical standards
• Reporting observed misconduct
• Satisfaction with response to reported misconduct

Think about ways that you could observe and measure the behaviors described above. They are predictors or leading indicators of the ethical culture in your organization and effectiveness of your ethics and compliance programs.

Closing thoughts. Measuring the effectiveness of ethics and compliance programs is a developing discipline. There are no easy answers and it will be through experimentation and best-practices sharing that we will bring clarity to this murky area.

Charles Ruthford

Ethics Program Development

The Boeing Company