10 Truths Compliance Must Know About Corporate Culture

Recent scandals litter the news — and no organization is immune. Leaders must create corporate compliance programs that positively impact culture.

The number of corporate scandals due to poor corporate culture continue to rise. Boeing, Volkswagen, Toshiba and Wells Fargo faced public scrutiny for breakdowns in internal culture. Whether emerging from questionable business practices, misaligned priorities, lack of ethical leadership, or conflicting local processes and signals sent to employees, the cost of getting culture wrong is high — in terms of employee recruitment and retention, company productivity, legal ramifications and profitability.

Only 14% of misconduct reports are directed to the compliance program

It’s not enough for leaders to communicate or adjust their personal behavior to have an impact on culture. Instead, leaders must change the way their companies operate — the budget, the processes, structures and policies — to reinforce culture.

Read more: Fortify Your Culture of Integrity

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“What you don’t know can hurt your culture,” says Vidhya Balasubramanian, Managing VP, Gartner. “Leaders must understand these truths to influence the compliance department’s strategy, empower employees and positively change the company’s ethical culture for employees at all levels.”

Truth 1: A strong corporate culture pays off

Employees who have a favorable opinion of their company’s culture are more likely to report any misconduct they observe. They are also less likely to observe misconduct. But the opposite is also true: When employees have an unfavorable view, misconduct observation rates are the highest and report rates are the lowest.

Truth 2: Perceptions of culture are best at the top

Employees in leadership positions are more likely to have positive opinions about their organization’s culture of integrity. When surveyed, 85.2% of managers respond more positively to “My company responds quickly to unethical behavior,” compared to 75% of nonmanagers.

Read more: Create a Culture of Integrity to Improve Corporate Compliance

Truth 3: Non-managers are skeptical of organizational justice

Across multiple industries, employees in non-managerial roles express the highest negative opinions about their company’s culture and organizational justice — the perception that the organization will react quickly and appropriately to proven allegations of misconduct.

Truth 4: Not all industries are equal

Retail, government and service organizations have the most reported misconduct. This misconduct frequently manifests as HR-related issues or reports of preferential treatment, harassment or bullying. This creates a double-edged sword, as employees in these industries also report a high level of fear to report.

A third of managers say they are not comfortable handling all the types of misconduct that might arise

Truth 5: Level of education affects fear of retaliation

Less-educated employees tend to fear retaliation at the highest levels. As levels of education rise, employee fear subsides. Fears lower when employees move from hourly to individual contributor roles.

Truth 6: Gender affects fear of retaliation

Broadly speaking across all levels of seniority, more women than men tend to be afraid that reporting misconduct will lead to retaliation. “It could be that gender itself isn’t driving fear of retaliation directly, but that this is a function of other reporting imbalances in the workplace. For example, female managers are more likely to hear that nothing was done with reports of misconduct than male managers,” says Balasubramanian.

Truth 7: Misconduct reports may be misguided

Stunningly, only 14% of misconduct reports make their way to the compliance department. Worse still, only 59% of observed misconduct is reported to anyone at all. When employees do report misconduct, they most commonly go to their managers.

Learn more: Advancing Corporate Integrity

Truth 8: Managers feel ill-prepared to handle misconduct

Since 2013, managers report an 8% increase in their preparedness to address employees’ misconduct concerns or reports. However, a third of managers say they are not comfortable handling all the types of misconduct that might arise. This level of unease may reflect a lack of compliance training. For example, in 2017, 12% of managers reported that they had not received general or manager-specific compliance training.

Truth 9: Anonymous reporting isn’t clear

Almost one-third of senior executives and 40% of non-managers do not know how to report misconduct anonymously.

Truth 10: Familiarity with anonymous reporting varies by region

Nearly half of respondents in the Middle East and Europe did not know if their companies offer ways to report misconduct anonymously. In France, the number was even higher — 74.7% of French respondents indicated they did not know about anonymous reporting.

Gartner for Legal & Compliance Leaders clients can read more in 10 Truths About Corporate Culture and Rethinking Compliance Role in Culture.

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