Ethics Survey, Part II: Management Problems

Today I want to return to the 2021 Global Business Ethics Survey, released last week by the Ethics & Compliance Initiative. There’s another theme in the data that we should explore, since it has significant implications for your compliance program’s risk assessment, training, and policies. 

That theme: managers are more pessimistic about compliance and ethics than lower-level employees. 

In our first look at the ECI survey that we posted last week, we noted several mixed signals in the data. The number of workers who said they work at organizations with a strong organizational culture had held steady at 21 percent; and the number who said they were likely to report misconduct they saw in the workplace rose from 69 percent in 2017 to 86 percent in 2020. 

At the same time, this year’s survey also reported a record number of U.S. employees who said they felt pressure at work to cut ethical corners, and also a record number who said they suffered retaliation after reporting misconduct. Both trends were also true to a lesser extent for workers globally.

Now the tricky part: across all sorts of questions about workplace ethics and culture, ECI also found sharp differences between management employees and everyone else. 

For example, managers in the United States were more likely to say their organizations had a strong ethical culture, and almost all of them (95 percent) said they would report misconduct if they observed any. At the same time, managers were also more likely to feel pressure to cut corners and to feel retaliation for internal reporting. See Figure 1, below.

Indeed, the gulf between management and lower employees on that question, “Do you have a strong ethical culture?” has existed for years. As we can see in Figure 2, below, that gulf is narrowing — but not in a good way. Management is growing more cynical about corporate culture, while lower-level employees have been cynical about corporate culture for years. 

Another quirk from this year’s survey, for the first time in at least 12 years, middle and senior managers were more likely to observe misconduct than non-management employees. Historically, lower-level employees observed either the same or more misconduct as managers. 

For example, 38 percent of top management said that they had observed conflicts of interest within the last 12 months, up from 22 percent who observed conflicts three years ago. Meanwhile, only 9 percent of non-management employees said they had observed conflicts — which was lower than the 12 percent who said the same in the 2018 report.

So What’s Going On, Management?

Above all, I’d welcome compliance officers’ thoughts on what might be driving this divergence, because you are part of that middle and senior management who apparently see more problems than employees as a whole. So feel free to drop me a confidential email at [email protected] at any time.

That said, some of these perception gaps do make a certain theoretical sense if you think about them for a moment. 

For example, I could see more top managers believing that their organization has a strong ethical culture, because they have much more responsibility for driving that culture. “I talk about ethics and compliance all the time, so our culture must be great! Right?”

I could also see how managers are more likely to observe misconduct, because looking for it is part of their job; and that managers are more likely to report misconduct, because that’s part of their job too — and they might face legal or professional liability if they don’t. 

Then we get to statistics like that 51 percent in Figure 1, who say they feel pressure to cut ethical corners (compared to only 30 percent of employees overall). Are they shielding the rank-and-file from pressure coming from senior ranks? Are managers themselves more susceptible to pressure because they have greater responsibility for meeting performance targets? Do managers feel like they have more to lose if they’ve been making a good salary, with a career path they’ve been carving out for years? 

We also have that strange inversion where managers now observe more misconduct than non-management employees. Figure 3, below, shows the changing numbers over time. 

Is that because more employees are working from home during the pandemic, so they’re less likely to observe misconduct? Or has all your ethics and compliance training worked, and managers now observe misconduct more often because they’re looking for it more carefully? 

Any and all of those reasons are at least possible. So, again: you tell me what you think is going on. 

Putting the Data to Work

I would say that when management and employees have different perceptions about workplace ethics, compliance, and culture, that’s important to understand. So first, use these findings to develop a more nuanced risk assessment. 

It’s entirely possible that within your specific organization, management and employees have the same perceptions about workplace culture. Or maybe certain operation divisions have one set of perceptions, and others have a very different set. Regardless, the paramount issue for compliance officers is that you understand whether any such discrepancies exist at all. 

So use these ECI findings to tweak any employee surveys you conduct, or to guide any data analytics you might perform on the results. The answers may surprise you.

Second, if divergence between management and non-management does exist, consider how you might need to change training, policies, and procedures to address that gap. For example, you might need the CEO and the board to talk about the importance of ethical business practices more often, to drill that message into the skulls of senior executives pressuring mid-level managers. You might need to re-orient executive pay packages and performance goals, to drive up the reward for ethical conduct and drive down the temptation for unethical conduct in pursuit of a performance goal.

I don’t know whether “closing the gap” is necessarily an end worth pursuing unto itself. If the ultimate goal is simply more ethical conduct, and a compliance program that supports employees’ efforts at ethical conduct — well, you’ll always have uneven progress among different groups in your workforce. The key, as always, is to meet employees where they are and to understand the problems they believe they have. 

Then you can start pushing the numbers in a better direction, whatever those numbers might be.