Survey, Good and Bad, on Compliance

LRN has published a new survey of ethics and compliance professionals that says employees are still fearful to report ethics violations, and that too many senior executives still aren’t promoting ethical behavior in their organizations.

On the flip side, LRN also identified several characteristics of high-performance organizations that echo other industry surveys about training and ethical cultures, so perhaps maybe compliance officers can get these cynical sentiments turned around eventually. 

The report, LRN’s 2019 Ethics and Compliance Effectiveness Report, polled nearly 500 ethics and compliance professionals worldwide. It asked respondents about incentive compensation, employee discipline, policies and procedures — and how much all those things were rooted in ethical behaviors the company wants to encourage, rather than just rote regulatory compliance.

Let’s start with the grim stuff. 

• 60 percent of respondents say their organizations’ employees are uncomfortable speaking out about ethical issues during meetings;
• 51 percent are uncomfortable skipping authority levels to call out ethical issues;
• Only 49 percent say that their companies’ senior leaders take action against compliance failures;
• Only 38 percent say that company leaders support disciplinary action against high- performers who are guilty of misconduct;
• Only 22 percent say that their companies communicate lessons learned and remediation measures taken after an ethical lapse. 

Those numbers are a really big bummer. You can almost excuse the first two bullet points, because they are about employees’ behavior, and it’s human nature to be hesitant about raising difficult conversations in public or to take ethical concerns above your manager’s head. 

The last three bullet points, on the other hand — yikes. Those are issues about how corporate leaders perform, and that crowd is supposed to raise difficult conversations and make difficult choices. They’re leaders. That’s the job. 

So when we see statistics about leaders shirking the tough work of commitment to ethics, we should wince. Those numbers run contrary to that strong tone at the top CEOs and general managers like to say they embrace. We still have a long way to go.

Better News on Ethical Behavior

LRN also explored how much compliance programs are moving toward a focus on values and ethical behavior, rather than rules. Nearly half of respondents said they’ve moved in that direction “to a great degree” over the last five years, and another 39 percent said they’ve moved “somewhat” in that direction. Also, as you can see from Figure 1, below, those numbers are much higher among high-impact compliance programs, and lower among poor performers. 

I don’t doubt these numbers are true, or that focusing on ethical behaviors rather than regulatory rules is the smarter choice. My question is more about what “focusing” looks like in practice at large organizations.

For example, when I read that chart, my mind immediately recalled that best practices study from Ethisphere a few weeks ago, that examined the role middle managers play in supporting an ethical culture. That Ethisphere study found that the single best way for organizations to inculcate a strong ethical culture, where employees speak up about potential misconduct more readily, is just to have managers talk about ethics while working. 

That’s not the same as formal training in a classroom, where someone delivers a lecture on the importance of ethics. It’s managers talking about ethics, easily and informally, as they guide employees on how to go about their daily routines. 

Well, that concept sounds a lot like what LRN says in its report: that high-impact compliance programs weave a focus on ethical behavior throughout the whole organization. “Permeate” is the word LRN uses:

High-impact programs permeate their organizations and stakeholder groups. In these organizations, senior leaders, middle managers, and boards of directors are engaged in the prevention of misconduct. The function is not left primarily to lawyers or E&C staff. 

I’m also reminded of NAVEX Global’s study published last year, where academics found strong links between higher rates of internal reporting and better business outcomes. You don’t get higher rates of internal reporting unless your workforce feels comfortable raising difficult issues that need attention. 

So as compliance professionals ponder what makes for a culture of compliance, we’d do well to remember that all these studies keep hitting the same basic themes, and keep pointing in the same basic direction. Success, especially in training and internal reporting, is less about nailing every clause of every regulation, and more about getting middle managers and lower-level employees to embrace ethics at a nearly intuitive level. 

So how do you engineer your compliance training lessons, incentive programs, disciplinary procedures, executive communications, and more, to bring that about? How do you design those things to bring change the dismal percentage numbers we had in the top half of this post? 

That’s what we need to think about.