For nearly a decade, chief compliance officers (CCOs) have reported compliance culture as one of their top risks. As such, they have prioritized initiatives to strengthen the organizational culture. But despite increasing resources and attention, organizations have made little lasting progress in building a sustainable and thriving culture of ethics and integrity.
“ Knowing the wrong thing to do doesn’t necessarily translate into doing the right thing”
“For most companies, efforts to improve culture start at the top with senior executives, ensuring they exemplify strong ethics in interactions and communications with their teams. But these efforts often fail to recognize the greatest source of influence on employees’ perception of culture and the ethical decisions they make — their peers,” says Brian Lee, Managing Vice President, Gartner.
The Gartner Compliance and Ethics Global Culture Assessment shows that a top-down approach has a marginal effect on culture. CCOs, however, can greatly improve their culture by focusing on building and encouraging a strong climate that positively impacts the organization.
Climate impacts corporate culture
Gartner research finds that the key differentiator between strong and weak corporate cultures is climate — that is, the practices and procedures employees follow and the signals they receive about which behaviors are rewarded and valued. A strong climate is linked to better compliance and stronger company performance overall.
“When surveyed, almost 75% of employees identified as working in organizations with weak climates,” says Lee. “To make matters worse, only one-quarter of employees report trusting that their peers engage in and model the right ethical behaviors.”
“ Your organization won’t have a strong climate if employees only understand how to avoid misconduct”
This is critical — companies with strong cultures outperform weaker cultures in terms of both financial and nonfinancial goals. In strong cultures:
- Employees are 90% less likely to observe misconduct.
- Employees who observe misconduct are 1.5 times more likely to report it.
- Employees are more than twice as likely to be engaged with their job and company, and almost 2.5 times more likely to exhibit higher levels of discretionary effort.
Build a strong climate
To improve an organization’s ethical culture, CCOs should help employees exhibit good behaviors, ensure managers send consistent messages and make colleagues’ positive behavior more visible.
Help employees understand what good behavior looks like with specific examples that enable each employee to see how to exhibit these behaviors in their daily workflows. Your organization won’t have a strong climate if employees only understand how to avoid misconduct.
“ Enable small teams and groups of employees to engage with one another on positive ethical behaviors”
Ensure that managers send consistent, strong messages to their direct reports about what positive ethical behavior looks like. Managers tend to overestimate the effectiveness of compliance messages they send to their teams. For example, a manager might think that by announcing an “open-door policy” that they are doing the right thing, but they fail to actually do anything positive to invite or welcome a sensitive conversation. Compliance leaders should remind managers of their impact on employee behavior and press them to demonstrate consistency between what they say and what they do.
Reward positive behavior, and do so visibly. Many compliance programs already acknowledge the importance of disciplining those who exhibit bad behaviors, but tend to overlook the equally important act of recognizing positive behaviors across the company.
Create environments that enable small teams and groups of employees to engage with one another on positive ethical behaviors. Circulating stories of employees doing the right thing not only encourages them to keep up the good work, but also compels others to do the same.
While there’s much work to be done, it should be reassuring that the best cultural solution is within compliance executives’ reach. When leaders strengthen climates, companies can start to create a strong culture of integrity that will benefit their organizations significantly in the coming years.
Read more: Gartner Top 3 Priories for Legal and Compliance Leaders