07 November 2017 by Marsha Ershaghi Hames and Joe Kale
Companies that balance profits with purpose will prosper
A trust-centred culture contributes to real business results. When people work in an organisation with an ethical culture of trust at its core, they are 11 times more likely than rivals to innovate, and 32 times more likely to take risks with potential to benefit the company, according to LRN research.
A recent CEB study indicates that employees from strong cultures of integrity are 90% less likely to observe misconduct and are more likely to report that which they do see. Yet only 8% of organisations have cultures where people trust and collaborate with each other, and let purpose and values guide their behaviour.
These findings reveal a disconnect: CEOs and chief ethics and compliance officers (CECOs) know that an ethical culture is good for their people and business, but often struggle to create those cultures.
One way to bridge the gap lies in focusing on three elements of behaviour that can influence a company’s culture and performance. They are: reporting misconduct, listening to concerns and linking performance evaluation to ethics.
Organisations that create barriers to reporting misconduct or raising concerns often create trust deficits.
On the other hand, when organisations enable their workforce to speak out against misconduct and encourage staff to use available platforms, they are more likely to build a culture that rewards ethical behaviour and helps sustain it across the organisation.
According to the 2017 Edelman Trust Barometer, trust across institutions is at its lowest levels in decades, indicating we are experiencing a global crisis in trust.
Many of the organisations we work with are recognising that trust in leadership is declining and are responding by building healthy dialogue and implementing safe platforms for colleagues to report misconduct.
Enabling and encouraging the workforce to raise concerns and report misconduct without fear of retribution can help rebuild part of this trust, which is good for organisational culture and the business.
“Without training and skill development, managers often find themselves ‘paralysed’ when presented with uncomfortable information”
Workforce engagement must be about listening and not just telling, and front line managers play a critical role of influence.
Organisations are required to offer platforms for their workforce to voice concerns and report misconduct, but those platforms are less effective when senior leaders and middle managers are not equipped to listen to people’s concerns and respond to them well.
Without training and skill development, managers often find themselves ‘paralysed’ when presented with uncomfortable information. A lack of response on their part can snowball into even bigger issues down the line and breed distrust amongst their teams.
CECOs can take proactive steps to ensure everyone in their organisation has the right skills to contribute to an ethical culture. We are working with dozens of organisations, building strategies to integrate business culture as part of responsible, accountable leadership.
Leaders also need training and practice around spotting compliance and misconduct risks in a more proactive matter. Developing the skills to effectively manage this relationship hugely contributes to a bond of trust between leadership and staff.
Many companies assess employees and leaders based on KPIs and performance metrics that are tied to profits, and base promotions and other accolades primarily – or only – on those factors.
For example, in a recent LRN survey of over 550 ethics, compliance and legal experts around the world, only 45% say C-level executives consider ethical behaviour a prerequisite for promotion.
One way CECOs and leadership teams can address this issue is to integrate ethical decision-making and components of the organisation’s values to the performance assessment. Thus, the evaluation is not limited to just numbers and financial goals, but includes components of behaviour as part of the assessment process.
Many leading organisations are revisiting their performance evaluation strategies to reflect driving business with purpose to reward values-based decision making. These companies are embracing behaviour as an increasingly important metric to measure employee performance.
A growing number of business leaders understand that strong financial performance without moral leadership and ethical culture is unsustainable. The leaders who can balance their profits with a larger purpose and set of values will be the ones who succeed.