Without a strong climate, much of the work done to improve culture is wasted.
Compliance executives have put improving the culture of their organization at the top of their priority list for nearly a decade. More than half reported it was their most critical objective in 2017. Although this focus has led to a swelling of resources and training centered on improving corporate culture, little reduction has been made to the amount of misconduct that exists in organizations.
In a CEB, now Gartner, survey of over 2 million employees’ responses on corporate culture and misconduct, the average compliance program has improved perceptions of culture by less than 1% since the late 2000s, which translates into little decrease in observed misconduct.
Only 25% of employees trust that their peers engage in and model the right ethical behaviors
“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,” says Brian Lee, legal and compliance practice leader at CEB, now Gartner. “If compliance teams are fortunate enough, they will be able to leverage middle managers to reinforce messages that support ethical behaviors with their direct reports.”
While this approach isn’t a failed one, it’s limited in its effectiveness, mainly because it doesn’t recognize the greatest source of influence on employees’ perception of culture and the ethical decisions they make — their peers.
Power of peers underestimated
Of the items of integrity surveyed, trust in colleagues ranks the lowest by a wide margin across all position levels — senior executives, managers, individual contributors and front-line staff. Only 25% of employees trust that their peers engage in and model the right ethical behaviors. This is alarming given the tremendous impact people around us — peers, colleagues, bosses — have on what we think and how we behave. If companies want to build cultures of integrity within their organizations, this is what needs to improve.
Climate: Essential, yet neglected, factor
CEB, now Gartner research has found 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 what behaviors are rewarded and valued. Sixty-nine percent of employees in strong climates report trust in their colleagues, a striking difference from the average 25% among all employees. Employees working in strong climates are also 90% less likely to observe misconduct.
We’ve found that almost 75% of employees work in organizations with weak climates, lessening the effect any integrity-building efforts by compliance have on the business, which is why nominal improvements in culture have been seen in the past decade.
Build a strong climate
To preserve and incrementally improve corporate culture, try these four methods to improve climate:
- Help employees understand what good behaviors 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. Knowing the wrong thing to do doesn’t necessarily translate into doing the right thing.
- Ensure 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 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 incentivizes 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 organization significantly in the coming years.
Gartner for Legal & Compliance Leaders clients can read more in Rethinking Compliance’s Role in Culture.