How an Effective Ethics & Compliance Program Helps Employees Behave Ethically

April 8, 2019 Susan Divers

It may seem like a ridiculous question, but the high-profile scandals that continue to unfold demonstrate the value of asking: does your ethics and compliance program actually influence behavior?  Hours of training and pages of policies notwithstanding, not all programs do so effectively, according to LRN’s 2019 Ethics & Compliance Program Effectiveness Report.

The report, based on a survey of about 500 people in ethics, compliance and law, measures the impact of ethics and compliance on three types of behavior: ethical decision-making, organizational justice, and whether employees speak up, actively contribute, and openly exchange ideas.  It ranks as high-performing those programs that inspire employees to behave ethically and support moral leadership in managers, enabling them to think and act based on shared values and not short-term gains.  Such programs are embedded in business operations, not isolated in the legal or compliance department. 

Moreover, “operationalizing ethics and compliance programs instead of relying on checklists isn't just an admirable goal,” stated the report. “It's a necessary shift if organizations are to meet the expectations of government watchdogs as well as mitigate the risks they increasingly face in this time of radical evolution of workplace norms and social media transparency.”  Regulators are increasingly looking at the impact that an ethics and compliance program has in practice rather than how it presents on paper.

LRN’s report found organizations that operationalize ethical decision-making throughout their businesses are four times more likely to have a positive impact on their employees’ consideration of values before they take action. These companies also are nearly four times as likely to have a positive impact on their employee engagement. Additionally, measuring compliance program effectiveness is more useful with this additional data. 

Key examples of best practices in operationalizing ethics and compliance drawn from the report:

  • 28% more respondents take ethical behavior into account in performance reviews in 2019 versus 2018;
  • Almost 3 times as many respondents as last year said that ethical behavior was a factor in bonus allocations;
  • High-impact programs are more than two times more likely than low-impact  programs to focus their training efforts on encouraging and guiding ethical behavior, not just adhering to regulatory  requirements;
  • By a wide margin over low-impact programs, high-impact programs focus their Codes of Conduct on encouraging ethical behavior, not just summarizing rules.

When it comes to making ethical decisions in the workplace “employees need a moral compass, not a 5-lb rule book” as the report notes.

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The report also builds upon insights from LRN’s 2019 State of Moral Leadership Report in Business that demonstrate the high cost of failing to focus on values-based behavior. According to the Moral Leadership Report, leaders not aligned with values are responsible for 70% of observed abuses of power, are 10 times more likely to treat people unfairly, and five times more likely to prioritize short-term results over the long-term mission.

Not surprisingly in light of this data, the 2019 E&C Program Effectiveness Report shows that the most effective ethics and compliance programs feature senior leadership and Boards of Directors that support effective sanctions and penalties on executives and high-performers involved in misconduct.  When it comes to fostering ethical behavior and making it a reality in the workplace, “ walking the walk” as well as “talking the talk” in all aspects of a company’s organization is what counts.

About the Author

Susan Divers

Experienced Ethics and Compliance Executive. Senior Advisor at LRN

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