A focus on ethics cuts through the “compliance clutter” to help employees understand and do the right thing. The need for compliance programs will never recede, of course; but when a company fosters a strong ethical climate, the compliance obligations it faces become much easier to manage. Still, empowered ethics is easier said than done.
Compliance officers need a keen understanding of how to make it work, how the business benefits, and how to lead executives beyond their comfort zone to make that shift in mindset.
How does a company make such a shift?
Harnessing the ethical power of your workforce requires two shifts:
First is a shift in organizational culture. Senior management must go beyond simply declaring what the company’s ethical values are, and expressly state that ethical behavior is the company’s top priority. Then management needs to prove that point by establishing incentives for ethical behavior.
The truth is that most employees already have a good sense of corporate ethical values. They’re just not certain when to act on those values, especially if acting on ethical concerns might conflict with other business objectives such as closing a sale or meeting a product deadline.
When we talk about management’s role in establishing an ethical corporate culture, the work is more about sending a clear message that employees should put ethics first; and then follow up on that principle with measures that give employees the incentive to act ethically.
To site some examples:
Compensation and promotion policies that include metrics for ethical behavior.
Procurement policies that include due diligence on third parties to identify past misconduct, or clauses requiring a commitment to your Code of Conduct.
The formation of in-house committees to review and discuss the company’s ethical performance at regular intervals.
All those steps, however, only give employees the incentive to act ethically. Companies still need to empower employees to act ethically, in tangible and practical ways.
There is the second shift that needs to happen: a shift in compliance program operations, to give employees the tools and support they need to act ethically. Compliance officers should dwell less on, “How does our program meet our regulatory obligations?” and more on, “How does our program help employees act ethically?”
This is where the practical parts of a compliance program enter the picture, including, but not limited to:
Internal whistleblower hotlines accessible and easy to use.
Clear policy manuals that help employees answer their own questions quickly, about conflicts of interest, harassment, corruption, or other issues that might arise
Third-party due diligence and risk management tools and procedures that automate much of the work, so that employees aren’t overwhelmed with tedious, repetitive searches for data.
Investigation and case management tools that let compliance teams resolve issues promptly, so that employees know their allegations are heard.
In short, connecting ethics and compliance is about alignment.
What benefits arise from empowered ethics and connected compliance?
The benefits are many, but if employees are the most important part of a corporation, we can start there: a more ethically engaged workforce is a better workforce. That can lead to lower costs in recruitment and training, as well as higher revenue from more productive employees. More broadly, when employees “feel heard,” they’re more likely to bring concerns to management’s attention—which is just another way of saying employees have a stronger desire to help the company solve its problems. A company that is more responsive to its problems is better positioned to thrive in the competitive marketplace.
The goal with empowered ethics and connected compliance isn’t specifically to save money for the organization, although that can happen as you experience fewer serious regulatory infractions. Rather, the goal is to assure that acting ethically delivers a real return on investment—and one larger than acting unethically, or only acting in a check-the-box compliance approach.
Conclusion
AS we said at the beginning, compliance officers need a better strategy for meeting expectations today. Organizations need to put ethical behavior at the center of how employees view their jobs and daily routines; and then create a compliance program apparatus that empowers employees to act on their ethical concerns, rather than leaving them wondering what they should do.
Compliance officers will need to build a business case for why the company should make that shift. To do that, they’ll need to show how their compliance program can help employees be better, more productive performers—and how that, in turn, can help the company’s bottom line and its relationship with regulators, customers, investors, and other stakeholders.
I have always been convinced that ethics and compliance will only be successful if management and staff are part of the implementation. I would appreciate feedback. Should you need assistance, let me know; support is available.
You can contact me at hjschumacher59@gmail.com