People like us don’t cheat

Organizations with a strong safety culture never tell their employees that they must comply with safety measures to avoid government penalties. Instead, they speak of the importance of everyone returning to their families every night in good health.

Yet, when it comes to corruption, most organizations wave the latest billion-dollar fine in front of their employees as if avoiding such fines was the driver for honest behavior. Would they not care if the fines were smaller?

Ethical leaders tell their followers “People like us don’t cheat, lie, or steal. We win the right way, on the merit of our products and services. Others can trust us because we perform with integrity, always.”

Lazy managers use scare tactics. Ethical leaders inspire principled performance.

What happens when you hit the red button?

button-308583_1280In today’s post, Seth Godin suggests that everyone should have a red button. When they hit the button, it should instantly alert the CEO or someone who willingly takes responsibility for what happens next. Godin says that people could hit the red button when facing sexual harassment, safety concerns, bribe requests, and the likes.

It’s a great idea. For many large organizations, the red button is a metaphor for their existing ethics & compliance program, staffed with dozens or hundreds of E&C professionals who jump into action when an allegation is made.

Godin’s post was aimed at organizations who don’t have a red button. For those who do, there are two questions to consider:

  1. Will our employees push the button?
  2. What will happen to them after they push the button?

The fear of retaliation is real. Retaliation is real.

The ethical leader will reduce the fear of retaliation by telling her employees that she wants to hear their concerns, by addressing those concerns in a meaningful and visible way, by rewarding those who come forward, and by not tolerating any form of retaliation.

If you face retaliation after hitting the red button, will you push it again to report the retaliation?

The U.S. Department of Justice explains how to promote a compliant and ethical culture

screen-shot-2017-02-23-at-6-55-23-amI found Adam Turteltaub’s post on the Ethics & Compliance Blog yesterday very exciting.

Turteltaub noticed that the Department of Justice, in its new guidance to prosecutors, used the word “process” 29 times and practically ignored the words “law” and “legal”. Effectively, the DOJ is telling its prosecutors that they need to focus on how organizations conduct their business.

This is exciting because it will change corporate culture in America. For years, organizations have been puzzled by the Sentencing Guidelines‘ requirement that companies “promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.” Companies have asked “What is culture? How do you change it?” Research demonstrating that culture is an outcome of our processes remains largely unread by the business community because it is often buried in academic papers.

Whether it was intentional or not, the DOJ has now told business organizations how to change their culture for the better. There has never been a better time for ethical leaders to tackle this issue.

For an introduction to organizational culture and how to shape it, see Culture is not the culprit in HBR. For an in-depth look at the topic, read Primed to Perform by Vega Factor.

Uber culture

If you read a shocking headline about a company with a good reputation, chances are you’ll be surprised and reserve judgment until you have read the details.

The same cannot be said of companies with spotty records. Journalists, enforcement authorities, and the public-at-large are likely to assume the worst. This is the current reality for Uber in the wake of allegations of sexism and sexual harassment.

We don’t know much about what Uber’s CEO intends to do. Yes, he has hired a prominent law firm to investigate and has promised to fire those involved if the allegations are verified. But terminations alone do not change a culture. Other processes will need to be revamped, including the recruiting, hiring, compensating, and promoting processes.

Culture is an outcome of how things are really done in an organization. And it also shapes its reputation.

How we do things is supremely important.

Opportunity cost

There is so much we could be doing in the world of ethics and compliance. More than we could ever accomplish. 

Thus we must be mindful of the opportunity cost and not let the good be the enemy of the best. 

The choices are not only between activities like training and audit and investigations, but also within all these activities. Will we train on conflict of interests or on corruption or on harassment? 

We must draw a list and prioritize it by asking “If i insert this item on the list, what other activities can i push down? Which one can I afford not to do?” It sounds obvious but too many of us get caught in the activity trap. We realize it only when something goes wrong and someone asks why we weren’t able to prevent it. We protest by pointing at our full plate, and that’s usually when we have our first critical look at what’s on it. 

I have found that saying a mental “no” to new activities is helpful. If abstaining doesn’t shock the conscience, then it might be best to do so. 

Are we here to help or to shame?

Dashboards and scorecards can help our business or hurt it.

If the purpose of the dashboard is to highlight pain points and deploy necessary resources to relieve the pain, then employees will gladly share the information we ask for.

If, on the other hand, the scorecard is perceived as a ploy to improve performance by shaming the few who don’t seem to keep up with the rest, then employees argue, cheat, and lie in attempts to withhold incriminating information. And performance won’t get better.

We must ask ourselves: why are we tracking the metrics that we have? And do our employees understand our purpose?

There is no TRIP without trust

A colleague from LRN first introduced me to the T.R.I.P. acronym last year. It stands for Trust → Risk → Innovation → Performance. In succession, each is necessary for the other to happen.

More than ever, the survival of an organization depends on how quickly it can innovate. Thus, leaders have started to openly encourage their employees to take risks.

But what does that mean? That we have permission to try things and explore and that it will be OK if we fail? Or is it that we’re on our own and we’ll need to find another job if we mess up?

Just like we can’t innovate without taking risks, we can’t take risks without feeling safe and trusted. Those who tell us that it’s OK to punch a hole in the boat also need to show us where the waterline is.

Corrective and disciplinary actions

After an internal investigation verifies a breach of law or policy by an employee, the organization must identify and implement corrective and disciplinary actions.

The disciplinary actions should be no more severe than what is required to ensure that the behavior is never repeated. In some cases, such as when an employee simply made a mistake and is now terrified to lose his job, a simple conversation will do the trick. In other cases where the employee breached our trust, termination might be the only option.

When it comes to corrective actions, the ethical leader will ask herself if the breach resulted from weak controls or a bad culture. Employees can steal from the petty cash box because it is unlocked or because they are underpaid and underappreciated. The temptation to place the blame entirely on the employee is strong but often misguided.

We must remember to ask ourselves “What is wrong with our culture that made this employee do what she did?” Our culture is an outcome of how we do things. So changing our culture can be as simple as changing our processes, but formal and informal.

Do our employees feel safe?

I once knew a well-respected financial controller who worked for one of our small operations overseas. One day, he neglected to make a tax payment on time and our organization was fined $50 by the tax authorities. No big deal but, rather than admitting his mistake, he created a fake email to have us believe that he had made the payment on time. When we discovered the truth, we had no choice but to terminate him.

We can only assume that the trust level was extremely low in that local operation. Why else would this colleague choose to cover up such a minor mistake? An admission would have been of no consequence to him. The cover-up cost him his job.

The ethical leader prevents these situations by creating trust in her organization. A good way to create trust is to tell people that it’s OK to punch a hole in the boat as long as it’s above the waterline. We can use real stories to support this claim, stories telling others about our own mistakes and what they taught us.

It’s a sad day when a colleague loses his job because we didn’t make him feel safe.