Month: April 2018

An obligation and an opportunity

“Strong regulation and supervision cannot substitute for deficiencies in bank culture.”

– William Dudley, President and CEO, New York Federal Reserve

 

We know that we can’t, and shouldn’t, have rules for everything.

We also know that internal controls send the message that we don’t trust our colleagues.

Of course, both are necessary but insufficient to address all organizational risks.

What’s left is an obligation for the ethical leader to create an ethical culture, to fill the gaps between rules and between controls.

It’s an obligation because the necessary power rests with leadership. Yet, too many leaders behave as if creating a good culture is optional.

Regulators don’t think it’s optional. Soon, failures to exercise this power will be seen as neglect. As negligence.

We all know where this is heading. One day, creating a good culture will be an organization’s first priority.

Why not take this obligation seriously now? Those who do it first will have a competitive advantage.

On town hall meetings

Holding a town hall meeting (or open forum, or all-hands, or AMA) is a great activity for ethical leaders to engage in.

It demonstrates openness, a willingness to share, a desire to be transparent. It’s a recognition by the leader that having an open-door policy doesn’t mean that everyone is comfortable coming to see you in the office. It also shows a willingness to be vulnerable, which is actually a sign of strength.

A key feature of a town hall meeting is the Q&A segment. There should be no limit on the questions that can be asked. In addition to questions asked during the meeting, people should be able to submit their questions in advance, anonymously, for all others to see and vote on. Most importantly, answers by leadership should be candid. If a question cannot be answered, the leader should say why. No spin, no evasion.

These meetings should be held regularly, several times each year. There is comfort for employees in knowing that there will be a next opportunity to ask a question.

These sessions allow leaders to know what’s on their colleagues’ minds. They can see what’s bothering them, what is preventing them from doing their best work. Good ideas can also be exposed and myths can be dispelled.

Town hall meetings don’t solve all communication problems. Some employees will never feel comfortable speaking up in these settings. Other avenues must be offered. But they are a great communication tool that too few utilize, or utilize well.

Culture assessment and risk mitigation

In 2007, the Ethics & Compliance Initiative (ECI) demonstrated that there are two drivers reducing risks in organizations: a robust compliance program and an ethical culture.

The ECI research found that you need both drivers to effectively reduce risks; that it is more effective to start with building a compliance program; and that once you have a robust program in place, the effects of an ethical culture on reducing risks are greater than the effects of the compliance program.

These findings, especially the last one, should be considered when creating or deploying employee surveys. Many organizations with robust compliance programs are asking survey questions that focus solely on the program and ignore the state of the culture. These organizations are missing an opportunity to improve their culture and to significantly reduce their risks.

These two drivers (programs and culture) produce four positive outcomes. Good survey questions will measure these outcomes and, at the same time, the culture. The outcomes are:

  • Fewer people observing misconduct
  • More people willing to report observed misconduct
  • Fewer people feeling pressured to commit a misconduct
  • Fewer people perceiving retaliation as a result of reporting misconduct

Every organization should be measuring its program and culture. And for those with robust programs, a focus on culture, in these times, is sorely needed.

A more ethical workplace is possible

Here is a famous meditation from Marcus Aurelius:

“When you first rise in the morning tell yourself: I will encounter busybodies, ingrates, egomaniacs, liars, the jealous and cranks. They  are all stricken with these afflictions because they don’t know the difference between good and evil. Because I have understood the beauty of good and the ugliness of evil, I know that these wrong-doers are still akin to me… and that none can do me harm, or implicate me in ugliness – nor can I be angry at my relatives or hate them. For we are made for cooperation.”

– Meditations, 2.1

The first part of this meditation is most often quoted. Students of stoic philosophy use it to prepare themselves for the usual daily frustrations. Why get upset at someone cutting us off in traffic when we can easily expect it will happen? When it does happen, we can just say: “Of course.” For the E&C professional, we can just as easily prepare ourselves for those in our organization who will cheat, steal and lie.

The second part of the quote is most often neglected – or omitted entirely. The call for cooperation reminds us that our duty is not to disregard the wrongdoers but to respond with kindness. It would be too easy to assume that a wrongdoer cannot change. But haven’t we all been wrongdoers at some point? The ethical leader understands the growth mindset and believes that we all have the ability to become better. This belief, in turn, creates a responsibility.

Today, each day, let us assume this responsibility of making our workplaces more ethical.

Creating an ethical tribe

“You are the average of the five people you spend the most time with.” – Jim Rohn

It is very difficult for an employee to do the right thing when surrounded by colleagues with low standards.

It is equally difficult for an employee to suggest positive changes when no one else does.

The ethical leader knows the importance of listening up, of speaking up, of modeling good behavior.

Today, look for a sign that a colleague wants to speak up and listen. Speak up yourself about something you believe is not quite right. Start in small, non-threatening ways. Perhaps you simply suggest for your group to make a list of obstacles they’d like to remove to make their job more fun. Over time, with practice, you can start discussing compliance issues and even ethical issues.

Start today. If it doesn’t work, try again tomorrow. Before long, an ally will emerge. There will be two of you. Then three. Then four and five. And you’ll become the average for anyone who interacts with you.

What you do defines you

In a recent interview on Chicago Tonight, Kathryn Lofton of Yale University posited the following while discussing her new book Consuming Religion: “If you spend so much time doing something, doesn’t that begin to define who you are?”

The answer, of course, is yes. And when it comes to corporate culture, the key word in that question is doing. More and more organizations are thinking about culture, they are talking about culture, but they are doing very little, if anything.

To shape culture, you have to do things differently, and you have to do those new things consistently over a long period of time. Only then do those activities start defining the organization.

How much time is your organization actually spending on shaping its ethical culture?

Rinse and repeat

We have no choice but to make time for receiving allegations of wrongdoing.

We almost always make time to investigate those allegations.

We usually make time to recommend corrective actions to prevent recurrence.

We don’t always make time to ensure these corrective actions are implemented.

We seldom make time to reflect on the cultural causes and consequences.

Rinse and repeat.

Time and money

These are finite resources in organizations.

When we look at how we spend them, we can better understand the culture that we have.

How much time are we spending on the safety of our employees, on the quality of our products, on the compliance of our operations, on communicating our purpose and values? How much money?

More is not always better. But if we have a cultural problem somewhere, chances are we are not spending enough in that area.

Find a sore spot today and look for its cause. Then commit to spending some time (and perhaps money) there.

How much you spend now will be far less than when the problem becomes urgent.