Ethics & Compliance Initiative Fellows Meeting (Day 1)

Yesterday was Day 1 of the ECI Fellows meeting. Here are some of the things I’ve learned:

If your E&C function has a poor relationship with the communication/marketing function of your organization, you are not alone. According to an ECI membership survey, our relationship with the C&M function is the worse among all functions. This is concerning given the importance of communication in changing or improving culture. Some ideas to address this problem (if you have it) include: (1) taking steps to improve the relationship with members of the C&M function; (2) hire C&M talent directly into the E&C function; or (3) make sure your next E&C hire has an affinity for C&M activities.
According to a different membership survey, organizations will soon look to hire more candidates with a certification or a specialized degree in E&C. Indeed, we see more and more professional associations and universities offering E&C certifications/degrees. It’s not clear which trend results from the other. Meanwhile, no one has identified the capabilities and skills that an E&C professional should have.
First there was “speak up”. Then, there was “listen up”. Now, there’s “follow up”. I love this evolution. It recognizes that no one will speak up if we don’t believe that we’ll be listened to and that something will be done.
“Stories put babies to sleep and send soldiers to war.” I had never heard this expression before and it was a great reminder that humans are moved by narrative. If stories can send soldiers to war, then surely they are powerful enough to create the organization culture we need. Are you using stories?
Research has demonstrated that when an organization’s leadership doesn’t walk the talk (i.e. they creates policies and processes that are not aligned with the stated values), employees are less likely to be truthful with the leadership. Employees will tell leadership what they want to hear instead of the truth. Facebook seems to be experiencing this at the moment.
Food for thought: resilience = influence.
Your tactical performance is only as good as your ability to learn from the past. Your adaptive performance is only as good as your ability to learn for the future. Thus, learning is the only way to sustainably improve performance.

I’m ready for Day 2.

Thoughts from the ECI Best Practices Forum

I spent the last two days in Dallas for the Ethics & Compliance Initiative (ECI) Fall Best Practices Forum. The topic was “Building a Respectful Workplace.”

I walked away with many concepts and ideas to explore. Here are a few:

Employees used to protest (strike) only for better wages and benefits. Now, they take to the streets to decry what their employers tolerate in the workplace (e.g. Google, McDonald’s, etc.). How much internal dialog took place before this boiled over? Did the companies listen? Did the companies feel they could just ignore the complaints? How should companies change to address these concerns before they spill into the public realm?
When asked what type of misconduct they observed in the last 12 months, employees consistently place abusive behavior in the top 3 list. So why don’t we ever see this risk on an ERM mitigation plan?
The more powerful the perpetrator of wrongdoing, the more likely s/he is to retaliate against the person reporting the behavior. Do we have a process in place to monitor retaliation by executives?
Incivility in the workplace increases misconduct. Diversity in the workplace increases civility. Can we thus argue that diversity reduces misconduct?
When you strongly disagree with someone, adopt a position of curiosity.
Our fear of conflict leads us to agree with the majority. What can we do to make people feel safe in holding a different opinion? What is the point of diversity if no one is willing to speak up?
Take this test to find out your implicit associations about race, gender, sexual orientation, and other topics: https://implicit.harvard.edu/implicit/
The science shows that the psychopath “top performers” are actually not helping the organization reach its performance goals.
Every company has some leverage over a segment of society. Why not use it for good?
“A solution should not cost more than the problem.” Is this a valid argument only when you put your shareholders at the top of the list?
When having a difficult conversation, separate the people from the problem. Be soft on the people and hard on the problem.
When asking questions, decide if they are in service of the other or of you.

We are in the business of changing behavior

Many E&C professionals struggle to answer the question “How do you measure the effectiveness of your program?”

The research conducted by the Ethics & Compliance Initiative (ECI) offers a simple answer: use employee surveys to measure the following four outcomes of any program:

Whether employees feel pressure to engage in misconduct
Whether employees have observed misconduct by others
Whether employees are willing to report misconduct
Whether employees fear retaliation for reporting misconduct

You can use the same outcomes to measure the effectiveness of one aspect of your program. Say you want to measure the effectiveness of your E&C training. You can measure these outcomes before and after your training. If the scores go up, your training was effective. If the scores don’t change, your employees might be smarter but their behavior hasn’t changed, which means your culture hasn’t changed, which means your training wasn’t effective.

We are in the business of changing behavior, and there is a science to it.

Impact 2018 – ECI Annual Conference – Day 3

The featured speaker for the final day of our conference was Gallup’s Vipula Ghandi.

Gallup has been studying human behavior for decades and Ms. Ghandi’s message was simple: if you want to be fulfilled and successful, bank on your strengths. You will learn faster, excel quicker, and enjoy every minute of it.

An important reality highlighted by Ghandi is that a person’s strengths can make them blind to another person’s strengths. For example, an “achiever” who must absolutely get something tangible done every single day (even while on vacation) may find a “learner” who prefers the process to the results absolutely maddening.

Reflecting on this reality, I can see how such differences in people’s strengths can lead to distrust and pressures in the workplace. Which makes for an interesting link between Ghandi’s message and what Stephen Covey had to say about trust on Day 1 and what Neel Doshi shared about performance drivers on Day 2.

From this, I am reminded of the importance of valuing differences, of seeking first to understand, of designing job roles carefully. And, more than ever, I am reminded of the strong relationship between ethical performance and business excellence.

ECI: well done.

Impact 2018 – ECI Annual Conference – Day 2

The keynote speaker for Day 2 was Neel Doshi, co-author of Primed to Perform.

Based on the review of 100 years of social science studies and their own research, Doshi and McGregor demonstrate that how “why we work determines how well we work.” While it may appear that this book is about business performance, it has a lot to do with ethical performance.

People show up at work for various reasons. A few of us feel like we’ve won the lottery and do a job that we thoroughly enjoy. We simply can’t believe that we’re getting paid for this! Some of us do work because of its noble purpose or for the potential it creates. Meanwhile, many of us go to work under pressure, either emotional or financial. Finally, some of us go to work because… well… we don’t really know. This is the only thing we’ve ever done. What else are we going to do?

The low end of this spectrum (not knowing why we work) is called inertia. From a performance perspective, these employees do the bare minimum. From an E&C perspective, these are folks who, when asked why they do things a certain way, respond “I don’t know. We’ve always done it that way!” They don’t see the risks. They don’t care. They won’t raise their hand when something’s wrong. They are extremely dangerous to the organization.

Moving up on the spectrum are those who work because they are pressured to do so. Their focus is not on the work itself but on relieving the pressure. Thus, their performance suffers. From an E&C perspective, we have long known that these employees are more likely to engage in fraud or other wrongdoing if given the opportunity and a rationale (the three points of the fraud triangle).

As we move closer to the high-end of the spectrum, we find people who care more about the work itself than about external pressures. Those who care tend to perform better. From an E&C perspective, absent significant pressures, they are unlikely to engage in wrongdoing.

The lesson for organizations is this: how responsible are you for creating pressures in the workplace? Are you creating scorecards and weaponizing the data? Are your sales people compensated solely on commissions? In addition, are you creating potential for your employees? Can they see the impact of their work on the end-customer (purpose)? Are the jobs designed to maximize enjoyment of the work itself?

The science shows that getting this right will improve performance and the bottom line. And, as a significant benefit, it will also improve the ethical culture of the organization.

Impact 2018 – ECI Annual Conference – Day 1

Those of us attending Day 1 of the ECI annual conference yesterday had the pleasure of listening to Stephen Covey describing the importance of trust in organizations.

Mr. Covey summarized the findings of his research, which is detailed in his book The Speed of Trust. As I listened to him describe how trust-generating behaviors directly, and dramatically, affect the performance of organizations, I saw a parallel with ECI’s own research showing how an ethical culture – built on trust – significantly reduces organizational risks.

As a practitioner working to constantly improve ethical culture, I am often overwhelmed by the multiple facets of culture. Where should you start? What levers give you the most leverage? What processes can have the most impact on culture? As it turns out, focusing on trust simplifies the problem. Creating trust might actually be the best way to make quantum leaps in improving any culture.

As Mr. Covey said, whether you are trying to build a performing culture, an ethical culture, an innovative culture, or any other type of positive culture, creating trust is essential to your success. If you are not convinced, consider this: would it be possible to create the culture you desire without trust?

The Speed of Trust identifies 13 behaviors, all very practical, that any leader can learn to increase the trust level in her team. I noticed several behaviors that I’m not very good at and I’m excited to put them into practice. I can’t wait to see how this will improve my effectiveness and the value I bring to my organization.

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.

Reducing risks with brand and culture

“For brands like Zappos and Red Bull, culture is the ultimate talent attraction tool – not only as a point of differentiation against competition, but also as a means of filtering out those unsuited to their organisations.” (emphasis added)

– Perkbox

As ethics & compliance professionals, our goal is to mitigate business risks.

Many of us follow the model developed in 2007 by the Ethics Resource Center (now the Ethics & Compliance Initiative). Essentially, the model shows that a well-implemented compliance program combined with an ethical culture leads to reduced risks.

Most of us think of culture as a force that shapes how people in the organization do their work. An equally important function of culture is to keep certain people out of the organization.

When a strong culture is well known outside the organization (think Starbuck, Trader Joe’s, Zappos, etc.), it can prevent undesirables from even applying for a job. When it is not well known, it can reject any misfits in short order.

From a risk-mitigation perspective, this is important. An ethical culture supported by a robust compliance program is like a force shield. To protect us from external dangers, our culture must be so strong that even those outside our organization are familiar with it.

In other words, our ethical culture must become part of our brand.

ECI Fellows Meeting – Day 2

[If you haven’t done so already, I recommend you read my notes on Day 1 first]

My biggest insight on Day 2 came when a colleague asked “When do you stop looking for the root cause of a problem? Because if you keep asking “why?”, you’ll always end up at the same place: a failure of leadership.”

Perhaps there is one more “why?” after this cause. Why did leadership act this way or failed to act appropriately? The answer will point at the organization’s culture. It will highlight “who they really are”. And since culture is an outcome of processes – of “how things are really done around here” – we can then identify the process that needs to be changed.

In essence, every root cause analysis effort should aim to answer “What is it about our culture that allowed this failure to happen? And what processes are generating this culture?”

If we address these processes, we can start changing the culture.

ECI Fellows Meeting – Day 1

The ECI Fellows are currently meeting to discuss root cause analysis (RCA) and how to apply it in the E&C function. Here are some of my notes from Day 1.

The first question on the most recent FCPA guidelines that the DOJ issued to help its US Attorneys determine if an organization should be prosecuted is whether a RCA was conducted.
Many organizations do not conduct RCA because they suffer from 4 common learning biases:
- Success bias: We prefer success over failure. When we fail, we don’t want to spend time on our failure.
- Action bias: We prefer to do rather than reflect. We are too busy to learn.
- Fitting-in bias: When we join an organization, we believe it’s best if we just fit in, so we don’t challenge how things are done.
- Expert bias: Rather than learn how best to do the work from those at the front lines, we tend to run to senior executives in the ivory tower or to external consultants.

To learn how to overcome these biases, see this HBR article from our presenter.

Effective RCA usually requires an executive champion in the organization.
69% of legal violations resulting in public settlements between 2011 and 2013 can be attributed to cultural issues in the organization. Yet, most RCAs do not look at the cultural or behavioral aspects of the violations.
When defining your problem statement before the RCA exercise, make sure it follows the MECE principle: Mutually Exclusive, Collectively Exhaustive.