By Erica Salmon Byrne
From ethikos
“Culture, more than rule books, determines how an organization behaves.”
– Warren Buffett, Memorandum to Berkshire Hathaway Managers (July 26, 2010)
This is a lesson we have learned, re-learned, and will likely learn again. Regulators around the globe are increasingly calling on organizations to examine their culture. From Enron to Volkswagen, the Challenger to WorldCom – there are multiple examples of organizations with formal systems that say one thing and cultures that promote another. When those kinds of alignment gaps are allowed to persist, you eventually have a failure of one variety or another: ethics, quality, safety, or a combination of all three.
The advantages of a strong ethical culture are manifold. Studies repeatedly show that businesses with strong ethical cultures outperform those without; there are a variety of reasons for that. Companies with stronger cultures tend to have employees who are more engaged and committed. Turnover tends to be lower and productivity higher. Customers and investors increasingly seek companies that they believe behave ethically, as the 2015 Aflac Corporate Social Responsibility Survey showed.[1] Employees at organizations with strong cultures feel less pressure to compromise company standards to achieve company goals. And if they do observe misconduct, they are more likely to feel comfortable reporting it. Bottom line: a company is better protected from the risks of misconduct when its culture is ethically strong.
Yet do we know what our culture is? The best way to know is to measure. There’s a reason that 62% of the 2016 World’s Most Ethical Companies honorees[2] leverage a survey dedicated to measuring employee perceptions of ethical culture and/or the compliance program. And almost all of those report those findings to the board.
Measures work for several reasons. First, they focus attention on what is being measured. Provide employees with metrics that tell them whether they are succeeding, and they will try to move those metrics. Second, they signal the firm’s priorities. What matters to the organization? Metrics (or lack thereof) tell employees – especially newer employees – what the company really cares about. For example, are your managers making employees comfortable with “near misses” or outright failures? As Gretchen Gavett notes, “creating a culture of psychological safety, where individuals are encouraged to acknowledge and learn from failure, can help employees feel less psychological pressure to avoid internal attribution.”[3]. Have your managers actually created an open door environment? A well-constructed culture survey is the best way to find out.
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[1] 2015 Aflac Corporate Social Responsibility Survey available at https://www.aflac.com/about-aflac/corporate-citizenship/default.aspx
[2] Ethisphere 2016 World’s Most Ethical Companies honorees available at http://worldsmostethicalcompanies.ethisphere.com/
[3] Gretchen Gavett: “When We Learn From Failure (And When We Don’t)” Harvard Business Review, May 28, 2014. Available at https://hbr.org/2014/05/when-we-learn-from-failure-and-when-we-dont
Excellent point. Working in Compliance & Governance in an organization with around 42 nationalities working together proved to be a challenge and indeed teaching platform to evolve standards and practices. Example is the preparation of the Code of Business Conduct and the Whistleblowing Policy/ mechanism.
A good article confirming that honesty is the best policy. I like the reference about an environment where one feels it is safe to admit a mistake. That works in both a business setting and your personal life. Our children should feel that safety. Respect for the consequences they will endure is OK, just not fear us.
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