15 July 2014
Our experts discuss how to engage those within your organisation to create a culture of integrity.
Which aspects of policy management are challenging in terms of ethical behaviour?
DK:Making sure all policies and procedures are in one place and that version control is accurate so that employees see the most up to date policy. As well as attestation and certification of employees specific to that policy. Monitoring to keep track of who has done what so that we are ready should an auditor or regulator come in or we are running our own reviews.
PFB: Many companies are struggling with the ethical issues concerning tax. Tax avoidance is not illegal but is it right? Each company has to assess this for themselves and have a policy to explain to their stakeholders their stance on this issue.
How does an organisation encourage employees to report concerns? Which organisations manage this effectively?
PFB:The main reason employees gave in the IBE survey for not reporting their concerns was that it was ‘none of my business’ (20%). Staff may feel cynical about a new initiative when past experience has meant there is little trust.
PH: Good culture needs to be there and senior managers have to be part of it. People don’t raise
concerns if they have fears. I’m not sure I have come across anyone who does this really effectively yet.
JH: The company has to give ‘permission’ to employees and third parties to report concerns. For
example, Drax Power give £50 shopping vouchers to employees raising concerns. This has encouraged a greater degree of openness in the company – not because of the money, which is modest, but because it legitimises the practice of speaking up.
PNL: This is the Holy Grail of good culture. Are people allowed/encouraged to speak without fear
of reprisal? Some organisations do this better than others but the general perception or urban myth is that problem reporting is not well received within many organisations. Best practice in this area requires compete openness. One example is the way the John Lewis Partnership operate with their partner councils and their Gazette, which publishes critical letters from all staff. Observation tells me that there are plenty of examples of incidents which do lead to improvements. Yet all research into major catastrophes indicates that management were warned on many occasions of trouble looming but chose to be ‘wilfully blind’.
PFB: Although most large companies have a formal mechanism for voicing concerns, the message is still not getting through that ethics is everybody’s business. It is imperative that organisations continually raise awareness of their ‘speak up’ programme, beyond merely posting guidance on the company intranet. Organisations that openly report on these matters are demonstrating effectiveness.
DK: Actively talk about it within the business. It is what people see and hear that then becomes reality. A mechanism so people can report anonymously and with confidence is a critical element but it is also the last resort. People need to feel confident to go to their own manager and their manager needs to take it forward.
Are hotlines effective?
PNL: Many organisations have external hotlines to allow anonymous reporting of complaints, violations, bullying etc. Do they work? In as much as they capture information in a way which permits the employee to feel safe – yes, but the reporting back to the company may be the problem. Who receives the hotline information and what is done with it? It is not uncommon for a senior director to bury news if it is deemed unhelpful.
PS: The organisation has got to make it clear that matters reported on that line will be effectively followed up and demonstrate that the whistleblower does not suffer from their actions – unless these are proven to have been malicious. I have heard a lot of anecdotes about companies that have not managed that effectively.
Is the data collected benchmarked against other companies?
PFB: The IBE has found that the number of reports to corporate ‘speak up’ hotlines is generally rising. However, Expolink’s sector analysis of the number of reports to hotlines over the last 24 months shows that not all industries have experienced such an increase, with construction, manufacturing and retail among those reporting fewer calls.
PH: We have done benchmarking – what tends to be difficult is finding good data to benchmark against and so to be able to compare like with like.
DK: Benchmarking is helpful to spot trends and potential problems, but each organisation is unique.
It is more helpful if you run your own analytics. You need to move from reactive to proactive and predictive. For example, if you see a big spike in the Asia Pacific region but your office is not reporting anything then that indicates an area to investigate.
Is hotline data reported to your board?
PFB: It would be good practice to use the data to spot ethical risks and report these to the board.
‘Speak up’ data is one of the ways a board can identify whether the company is living up to its values.
PH: We do report on hotline data to the board, mainly statistics of the wheres and whens but also
some on the nature of reports.
PNL: Risk reporting at board level does seem to vary, as does the role of NEDs, who should pay particular attention to these issues. I think there is considerable room for improvements in the pragmatic use of data. It has to be used in a forward thinking way – risk intelligence, not just a box-ticking exercise.
Is ethical behaviour just about reputation protection? Can businesses really be perceived as a force for good?
PH: It would be nice to think that ethics is more than reputation management – that ought to be a happy side effect. I think it is good business. We have seen some definite positives come from ethical behaviour. There is a chance for business to be a force for good, but there is a long way to go. There is much more belief in and acceptance of the benefits of being ethical and I do think there is some momentum.
DK: Ethical behaviour is about protecting people, reputation and certainly the bottom line. Absolutely, businesses can be perceived as a force for good by the way they are behaving in the world and locally, for example by providing fair employment and supporting the communities in which they operate.
PS: It is very difficult – times have changed. When I first started work at a bank, my employer had the contractual right to manage my life – the part of town in which I could live, how much money I could borrow etc. For others it was even worse – women under 25 had to get their manager’s permission to get married. We can all agree this was a hangover from the days of Captain Mainwaring. Yet a similar approach would have been taken by a branch manager to customer lending, which was intended for the protection of the employee or customer. There was a perceived duty to look after them which overrode the commercial interests of the company. I don’t think that feeling of obligation to look after the customer is felt so strongly now and, indeed, many of us would feel patronised if a supplier tried to do so. However, there must be an opportunity for companies to show a social conscience, beyond simple environmental, social and governance reporting. They can take that opportunity, but it will not be easy for them to identify how.
PNL: Business ethics is about deciding how to do the right thing for all the stakeholders who interact
with your enterprise, and then having the courage to implement these decisions fairly. Better decisions mitigate risk and consequentially preserve reputation. Organisations that consistently meet these standards justify their licence to operate and earn the respect of society. John Lewis, South West Airlines, Arup Construction, Tata, Wholefoods etc. Professor Raj Sisoda [a leading figure in the Conscious Capitalism movement] has termed such organisations ‘firms of endearment’ and they outperform others handsomely – measured by stock market indices. The business ethos powerfully articulated by Unilever CEO Paul Polman, is another example of a global business seeking to be a force for good for the benefit of the planet, but we need many more.
JH: Reputation is a double-edged sword. The minimum standard is to avoid the negative but firms
like John Lewis, Virgin and latterly the Post Office have developed a positive reputation for being a force for good. This helps attract and retain staff, maintain customer loyalty and support long-term resilience.
PFB: Reducing integrity and reputation risk; attracting top talent; increasing brand loyalty; and enhancing shared value, make a company more sustainable in the long term. A trustworthy firm is a secure one and enhances the lives of its stakeholders by being a great place to work; treating suppliers with respect and paying on time; marketing responsibly; reporting transparently; minimising impacts to the environment and considering its tax obligations. The IBE advocates doing the right thing for the right reasons. Doing business ethically, makes for better business.
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