Five Keys to Reducing Ethics and Compliance Risk

Your company's good name and the trust of stakeholders are two of its most important assets. You can protect your company's reputation and increase employee engagement by creating a workplace where ethical conduct is the norm. Reduce ethics risk by taking these five key steps:

  1. Honestly assess your needs and resources.
  2. Establish a strong foundation.
  3. Build a culture of integrity -- from the top down.
  4. Keep a "values focus" in moments big and small.
  5. Re-evaluate and revise as needed.

Honestly assess your needs and your resources.

Successful businesses start with a good plan. So do successful ethics and compliance programs. In order to create a relevant and meaningful plan, you have to know the lay of the land. It's important to know:

  • What ethics challenges are common in the work we do? In our workplace?
  • Where are our greatest areas of risk? Which groups of employees, locations, business units, etc. are potential "hot spots"?
  • What values are important to our company and its employees?
  • What values are necessary for our business, our work in particular?
  • What ethics and compliance resources will be most beneficial for employees? What vehicles of support (a phone line, an email, an individual or committee, internal social network, etc.) are likely to be most utilized and helpful?
  • In developing our code and values, which groups' input is necessary? Who would be helpful? (For more information on this, see our resources on writing a code.) 

Your program will only make a difference if you begin by having an accurate picture of existing strengths and areas of vulnerability. Risk assessment should be the starting point of your internal efforts, followed by gap analysis and program assessment. Audit reports are also an essential piece of the puzzle.

You can gather information in a variety of ways. Focus groups allow representative samples of the larger population to share their opinions and experiences; they provide a deep, rich "snapshot" of the state of ethics in your organization. Surveys (internal or conducted by a third party) provide the opportunity to gather information from a much larger group of your employees, to compare results and to analyze data by relevant subgroups (i.e., employee levels, departments, units, etc.).

Establish a strong foundation.

Once you know your needs, you can put in place the resources to address them by establishing a robust ethics and compliance program.

The good news is that such a program makes a difference. As part of the 2011 National Business Ethics Survey®, the Ethics Research Center (ERC), the research arm of ECI, demonstrated that an ethics and compliance program is a powerful tool for reducing pressure to compromise standards and observations of misconduct; increasing employee reporting of observations that occur; and decreasing retaliation against whistleblowers. In essence, when a company commits resources to ethics, it makes a difference. Fewer employees feel pressured to break the rules and fewer misdeeds take place. When bad behavior does happen, employees tell management so the problem can be addressed internally.

This strong foundation consists of several elements key elements:

  1. Written standards of ethical workplace conduct (for more information on this, see our resources on writing a code).
  2. Training on the standards.
  3. Company resources that provide advice about ethics and compliance issues.
  4. A means to report potential violations confidentially or anonymously.
  5. Performance evaluations of ethical conduct.
  6. Systems to discipline violators.

Chapter 8 of the Federal Sentencing Guidelines for Organizations also calls for oversight by the governing authority, high-level personnel with overall responsibility for the program, and individuals with operational responsibility for the program.

But just having these elements is not enough. When it comes to ethical conduct and compliance, it's not enough to "print, post and pray." Implementation and integration matter.

Your ethics and compliance program must be vital, integrated element of your work and the way you do it, ensuring that employees know how to and feel supported in their efforts to uphold ethics and compliance standards in their work. The hallmarks of an effective ethics and compliance program are:

  1. Freedom to question management without fear;
  2. Rewards for following ethics standards;
  3. Not rewarding questionable practices, even if they produce good results for the company;
  4. Positive feedback for ethical conduct;
  5. Employee preparedness to address misconduct; and
  6. Employees' willingness to seek ethics advice.

Build a culture of integrity -- from the top down.

People have an innate desire to get along and (long-past high school) want to fit in and conform to the norms of those around them. It may not be pleasant to admit it, but most people's ethics standards are fairly malleable. Although most people retain a desire to "do the right thing," the definition of right is significantly influenced by the company they keep. Culture matters.

Fortunately, if your company has diligently built an ethics and compliance program and woven it into the daily operations of the organization, a strong ethics culture is far more likely. Research proves that an effective ethics and compliance program helps build a culture of integrity in which everyone "walks the talk." In a strong ethics culture, employees at all levels are committed to doing what is right and upholding values and standards.

Leaders are powerful drivers of corporate culture; they set the tone in any organization. They decide who gets attention, who gets promoted, what merits rewards and recognition. They set the standard. They are the example. There are several things leaders should do to help promote a strong ethics culture:

  • Talk about the importance of ethics.
  • Keep employees adequately informed about issues that impact them.
  • Uphold promises and commitments to employees and stakeholders.
  • Acknowledge and reward ethical conduct.
  • Hold accountable those who violate standards, especially leaders.
  • Model ethical conduct both professionally and personally.

When it comes to ethical leadership, there are two key things to keep in mind:

  1. Character is paramount. Ethical leaders show integrity not only in the way they conduct themselves at work, but in their personal relationships as well. In a world of social media, private behavior often becomes public knowledge, shaping employees' beliefs about what kind of individuals their leaders are.
  2. Leadership happens at all levels. While senior leaders set the tone for the entire organization, supervisors shape the everyday environments in which employees work and make decisions. The actions of supervisor have a profound impact on employees and their workplace conduct.

Keep a "values focus" in moments big and small.

Ethics is about choices-big and small. Organizations with integrity keep their values at the forefront in both mundane and the extraordinary moments. Corporate values should come into play and be reflected in multiple processes that drive the everyday life of the company, including:

  • HR policies and their implementation
  • Reward systems
  • Hiring and retention
  • Performance management and evaluation
  • Promotion decisions

On those occasions when crises occur, leaders should recognize not only the ethical dimension of the moment at hand, but the "teachable moment" it represents. Edgar Schein, the father of the study of organizational culture, noted that moments of crisis are particularly powerful culture-builders because of the intensity of emotion involved. Our research shows that employees learn a great deal about leaders' priorities and character when they show their "true colors." If leaders make values their touchstone in times of crisis, employees learn that ethics matters.

Re-evaluate and revise as needed.

Situations and needs will change. You need to know what is working, what isn't, what new vulnerabilities have emerged, what progress you've made and where there's work yet to be done. Be disciplined about regularly revisiting the state of ethics and compliance in your organization. Risk assessments, follow-up surveys and periodic or ongoing focus groups will allow you to keep your program relevant and minimize risk. As an added bonus, regular assessments will demonstrate internally (and, if ever needed, externally) that the resources you've invested in ethics and compliance have made a difference.