Inspiration Motivates Employees Better Than Rules

July 29, 2019 LRN Corporation

Why do companies have ethics and compliance issues? One answer: Employees feel discouraged when it comes to reporting ethics violations and speaking out.

Most ethics and compliance professionals say their organizations’ employees–regardless of industry–are not comfortable skipping authority levels to call out ethical issues. And 60% say employees are uncomfortable speaking out about ethical issues during meetings, according to LRN’s 2019 Ethics and Compliance Program Effectiveness Report

Far too few executives and board members are actively invested in promoting ethical behavior in their organizations. 

The LRN report found 49% say their companies’ senior leaders take action against compliance failures, while 38% say their leaders support disciplinary action against high performers who are guilty of misconduct. Twenty-two percent of ethics and compliance professionals say their organization communicates the lessons and remediation measures taken after ethical lapses.

LRN’s research underlines companies still are striving to implement ethics and compliance programs that work well in practice. Often, there’s too little focus on shaping employee behavior, and too much emphasis on rules and prohibitions. 

More than half of ethics and compliance leaders say their organizational efforts continue to focus principally on rules and regulations--on telling employees what not to do, instead of inspiring and teaching them to behave ethically. 

There are positive developments. LRN’s data shows a number of companies are taking positive steps toward operationalizing their ethics and compliance programs into most phases of business decision-making. This helps both leaders and employees to think and act based on shared values instead of minimum legal requirements. 

Three-quarters of professionals say their companies’ programs perform a root-cause analysis when there are instances of misconduct, instead of just following a reprimand procedure. We find it’s much more effective to remediate the underlying process and culture problems than to simply penalize a few employees who are more often than not a symptom rather than the problem itself.

It’s encouraging to see 55% of ethics, compliance and legal professionals say ethical behavior is a major factor in their companies’ performance reviews. That’s a 28% increase from 2018.

“We found that the programs with the highest impact have created ‘speak out, listen up’ cultures and talk openly about right and wrong, while also prioritizing ethics over short-term results,” says LRN’s Emily Miner. “These high-impact functions directly inform business decisions and regularly boost business performance."

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