Thousands of articles point us in the direction of improving our organizational cultures and with good reason. Organizational culture is what defines and propels our missions, our strategies, and our profitability. It keeps our employees happy and motivated to continue working for us. Having a strong organizational culture, or workplace culture, is important.
Often overlooked, however, is the importance of weaving compliance and ethical conduct into that company culture. Too often, organizations view their ethics and compliance programs as a set of stated guidelines or check-the-box activities designed to catch rogue employees. This almost always proves ineffective. The scandals and organizational crises that continually dominate our headlines should be enough to teach us that lesson. Nearly every organization implicated in acts of malfeasance has formal, established Codes of Conduct, leadership commitments, and well-structured audit capabilities. Yet, persons of influence walk right through those barriers. Why? Because traditional approaches to tackling corruption just don’t work very well on their own. Compliance frameworks aimed at stopping corruption only work if other elements of organizational culture work with them.
That’s because “rogue employees” and “bad apples” who operate outside the system aren’t really what bring down organizations. Rather, it’s the culture itself, how the group thinks and operates, that causes demise. Rarely do employees act alone. Rarely do they check the Code of Conduct to determine what’s appropriate behavior. No, questioning employees look around for clues and take cues from their peers and superiors. Under pressure to reach a sales quota or risk termination, for example, employees will employ whatever tactics are necessary, including the illegal ones, if that’s what others around them are doing and not facing punishment.
Compliance, then, must be part of the culture.From a financial standpoint, cultural integrity is critical, as breaches in compliance are financially devastating. According to the 2017 Ponemon Cost of Data Breach Study, the average cost of a data breach is $3.62 billion, affecting, on average, roughly 24,000 records each breach. That nearly $4 billion is in addition to fines and penalties imposed by country, state, and industry authorities, as well as expensive audit activities and legal settlements.
But the need to instill compliant and ethical behavior extends far beyond the financial. Organizations with robust ethical cultures enjoy greater profitability and performance as they create trusting relationships with stakeholders and employees. Those relationships are reciprocal; that is, employers and stakeholders trust the organization, and they remain loyal.
Long-term investors are then attracted to them. Ultimately, a culture of integrity leads to superior, long-term performance. In this way, any CEO or Board of Directors should make it their mission to create an ethical culture that will drive the company to long-term success.To build an ethical culture, you must start with a positive culture of integrity that includes the following:Shared values that emphasize the organization’s commitment to business ethics and regulatory complianceContinuous encouragement from executive leadership, senior management, and middle management to act ethically and in accordance with stated compliance regulationsContinuous encouragement to report ethics violations and assurance that reporting will be free from retaliationA shared sense of responsibility for complying with the law and organizational policyA commitment to hiring and promoting employees based on character and competenceIncentives and rewards for adherence to ethical valuesSwift and fair handling of internal mattersAll of these components serve to convey a true sense of accountability on the part of the organization, not just a fear of getting caught. Relying solely on external motivation (i.
e. the threat of investigation or penalties) does little to change behavior. High ethical standards sewed into the company culture effects lasting change.Establishing a culture of integrity is no small task, and it seemingly has no clear beginning nor end. It is difficult work, but it is essential work. All the people, processes, and technologies established to mitigate ethics and compliance risks will prove ineffective if the culture of the organization does not support principled performance.More and more organizations are choosing to create additional structure around their ethics programs, and the involvement of compliance professionals at all levels of the organization to conduct internal audits, training, investigations, and so on can prove invaluable.
Ankura has unparalleled experience creating that multi-level compliance structure and can help you implement, manage, and advice on all aspects of compliance and ethics programs. Our solutions are customizable for organizations of any type and leverage the expertise of advanced human capital, analytics and data operation, anti-corruption, anti-money laundering, crisis preparedness and operational resilience, cybersecurity, and more. We believe employees are the company’s greatest asset, and when engaged properly, can be the most potent source of corporate value.Let’s get to work on the steps necessary to embed ethics into the fabric of your organization.