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Workplace Culture: Enabling Organisational Management through Speak-Up Initiatives

Codes of ethics and codes of conduct are increasingly part of most businesses’ cultural management strategy. Despite this, they remain ineffective because hotlines simply don’t work. There is now 20 years of field research to show that employees don’t use them. They are often afraid that raising issues will impact negatively on them. Or they believe that nothing will change – so why bother?

This belief leaves companies vulnerable to internal risk or illegal behaviour. It is employees – not the internal or external auditors – who are the first people to see risks. So, if staff don’t speak up, then you can have a PR crisis on your hands.

It pays off big time to invest in promoting speak-up cultures. To achieve such a culture, you must formally recognise the power of the social life of your company. It is here that employees learn what the acceptable ways are of relating to each other. These interactions can undermine formal codes and policies.

Key steps in creating a speak-up culture include:

Insist that the top team participate in any speak-up initiative. The behaviour of management gives the loudest message around the safety of raising concerns.
Appeal to personal identity. Most people have a strong self-concept and self-identity that they are ethical. Employees rarely self-identify as part of the problem. That’s why appealing to employees’ sense of personal identity is a powerful lever for behaviour change.
Build life skills. Values conflicts are inevitable, so forewarn employees to be alert to other stakeholder perspectives. Also, notify them of the contextual pressures surrounding them. These actions will help offset defaulting to an auto-pilot decision-making cultural norm.
Train managers and employees in speak-up skills. Enabling a shared language around risk is a prerequisite to a speak-up culture.
Take a systems approach. Organise training in cross-sectional groups to enable employees to hear each other’s concerns. This dynamic will amplify the usually silenced company social life that shapes employees’ assumptions. A whole of business approach shows employees that you are asking everyone to change their behaviour. Speak-up skills draw on the lessons from conflict management, mindfulness, and behaviour science. The book ‘Giving Voice To Values’ – and assertiveness training may also be useful.
Implement peer to peer accountability. Managers and leaders must hold each other accountable to model the appropriate behaviour. Insist managers at every level develop action plans for what this will look like in their areas.
Embed in the company. What gets measured and rewarded, gets done. Align the existing reward and recognition systems to support the speak-up cultural change program.

Ideally, speak-up initiatives will be a cornerstone to your company living its stated values. Communicate in positive terms and invite employees to identify additional ways to raise issues that will work for them. These techniques will build trust and restore confidence in the integrity of your code of conduct or code of ethics.

Please fill out the form below to get in touch regarding your organisation’s needs and we will get back to you as soon as possible. You can also call us on 0430 889 850 or email us directly at [email protected].

Ethical Culture – What Does Good Look Like?

Having a scandal-free year is at the top of most company leaders’ agendas. Such is the world today that this can seem like a lofty ambition. The internet is shrinking the world and consumers are hitting out at brands falling short of their business conduct expectations.

Lack of Trust in Leaders

Many leaders put profit goals ahead of the conduct risks they spawn. This mistake has resulted in trust in leaders being at an all-time low. The British Social Attitudes surveys have been around since 1983. A report published by a University of Manchester professor in 2013 noted the most significant change ever recorded by the study. This shift was the loss of public confidence in British banks between the early 1980s and 2009. Social media has become the public noticeboard to name and shame those who do wrong. It keeps the pressure on businesses refusing to recognise changing societal tolerances.

In 2019, Google’s New York-based employees staged a sit-in. They were protesting against a perceived culture of retaliation against employees who demand higher standards of behaviour. This protest then spread to other global offices and social media via the hashtag #NotOkGoogle. That protest followed on from a previous demonstration just six months earlier. During that event, thousands of workers at Google offices around the world walked out of their jobs. They did this to protest at how the company handled sexual misconduct claims.

Google, however, is far from being alone in its failure to respond appropriately to conduct risks. E&Y’s 2018 research shows that many employees don’t trust that their company will act on complaints or keep them confidential. There was recently a Royal Commission into Australia’s banks and insurance companies. It involved most of Australia’s top brands in this sector. The findings highlighted the real shortcomings of their state-of-the-art compliance programmes. The results sent a clear message about the drawbacks of focusing too much on compliance only.

Leaders Must Take Charge of Risk Culture

Companies can no longer delegate risk culture to the compliance or HR departments. It is, and always has been, the domain of CEOs. Only they have the positional power to shape it. What leaders do and reward sends the loudest message about how people should act. It determines the extent of the conduct risk.

The advances in AI and big data cannot compensate for the past failures of the ‘three lines of defence’ model. Technology will not save ethical reputations. Leaders must step up to purposely design their company cultures. They need to take charge of monitoring activities to ensure that their teams maintain desired behaviour standards. That is how companies can save their ethical reputations.

Why does unethical behaviour emerge in compliance run businesses? The answer is not clear-cut; there are several systemic sources. All of these emanate from the human dimensions of workplace culture.

Relationships and interrelationships are the roots of all conduct risk. They cannot be managed by policy, no matter how sophisticated the surveillance is accompanying it. Leaders themselves must set and maintain behaviour standards. Only then will employees be able to differentiate between unethical behaviour, risk management, and criminal conduct.

What Does an Ethical Organisational Culture Look Like?

The good news is that most conduct risk is avoidable. It requires leaders to get serious about managing culture or maintaining the one they have inherited. So, what makes for ethical workplace culture?

It is actions, not words, that set the tone from the top. Behaviour demonstrates for all employees how they should pursue business goals. Ethical cultures emerge when leaders lead by example.

For the board, this means selecting executives who can champion the company’s ethical standards and values. Actions of the board and top executives need to align with the company’s values. Then, employees can relax, the rules are clear, and it’s safe to expose unethical conduct.

Company culture is about human behaviour. That’s why leaders need to understand personal beliefs, motivations, and incentives. The new must-have is knowledge of how these interact with leadership styles and the design of policies and systems to create conduct risk. It requires a lot of reframing of old ideas of why people do the things they do.

New ‘mental models’ of leadership and human motivations are also useful for this. The behavioural sciences are a powerful tool that can be used by leaders. This information can enable them to encourage responsible decision-making and improve behaviour. Leaders can leverage behavioural science insights in their interventions.

This material gives them the chance to forewarn employees about the ethical business issues they will face. Then staff can prepare themselves to offset contextual pressures.

It is also important for leaders to manage the ‘the mood in the middle’. That is, how middle managers behave and react to unethical behaviour. After all, it is middle managers who have the most impact on how employees act.

How Ethical Cultures are Created

Ethical cultures embed formal and informal incentives promoting and reinforcing desired conduct. Employees are rewarded not just for achieving operational goals but also for how they gain them. The rewards could be in the form of informal praise or through a formal company recognition system. These are public symbols of leaders’ commitment to promoting ethical behaviour. They also serve as validations for employees.

Ethical businesses jealously protect and promote their culture because they know it is their competitive edge. They recruit in their likeness and ensure newbies sign up to their standards as part of their employment contract. The famous Zappo culture offers a prime example. After four weeks of training and a week on the job, all new hires are given more than just payment for their time. Zappo also offers them a $2,000 bonus if they decide the company is not right for them. That is how serious Zappo is about maintaining their cultural advantage.

Even where leaders formally manage culture, misconduct can still emerge. In this scenario, however, there is a much greater chance that someone will report it. When left unreported, unethical behaviour undermines cultural strengths, enabling risk to flourish. Employees opt-out of pointing out risks, especially when their managers are involved. The reason is that they believe no one will do anything about it.

Companies must address this significant internal barrier to risk management. One way of doing so is by investing in building ‘speak up’ cultures and showing zero tolerance for backlash. Companies can learn about where the system is failing by removing the fear of speaking up. By doing this, they enable realignment between employee motivation, skill set, and risk management.

Good governance requires a focus on leaders’ traits and behaviours and how they influence others. That may be through guidance, communications, rewards, and discipline. Boards need to reframe the role of leaders. They need to recognise ethical leadership as a process of social influence. It is a process where leaders steer staff towards a standard of behaviour and hold people accountable when they breach it.

It’s time that people distinguished between ethical leadership and leadership as usual. Ethical leaders make it as easy as possible for employees to adhere to ethical standards.

Survey says 50% of employees witness conduct risk

In 2019, a new Global Business Ethics Survey (GBES) into unethical workplace behaviour was released. The survey again showed that conflict of interest is the number one unethical practice observed by employees. Around 34% of those who see it fail to report it. Globally, nearly half of all employees reported witnessing conduct risk.

Why Don’t Employees Speak Up?

Fear of retaliation is a significant factor as to why employees don’t speak up. Backlash can happen in many different forms; fewer working hours, missed promotions, unpopular work assignments. The #metoo movement has made efforts to raise awareness of the pervasive nature of workplace harassment. However, 46% of those reporting sexual harassment in 2019 continue to experience retaliation.

When employees do speak up, they tend to do this with their manager rather than anonymously. The results of the 2019 survey are again consistent with this. Typically, Australian workplaces do not provide specific training for managers on how to respond when employees raise concerns. Is this a barrier to managing conduct risk?

Lack of respect and civility in the workplace is the second most common type of observed misconduct. Abusive behaviour creates low trust workplaces. Aggressive, degrading, or intimidating behaviour is of no benefit to anyone. It not only lowers a company’s ethical standards but also saps employee commitment and overall performance. Is this another unspoken barrier to increased employee productivity?

Is Change Possible?

It is possible to change workplaces to make them more civil and more inclusive. Companies must upskill to be better able to listen and respond to employees’ concerns. There is some good news in that regard. The 2019 survey found that employees reporting violations of health and/or safety regulations were less likely to experience retaliation. Around 30% experienced retaliation vs the 46% reporting sexual harassment.

Isn’t it way past time that leaders allocated sufficient resources to training managers and leaders in how to respond when their people point to risks? eLearning is not going to cut it!

It is time for leaders to step up. They need to design company contexts which enable employees to feel safe when identifying risks. Behavioural sciences show us how to develop workplace cultures that encourage speaking up. Let’s use them.

Making ethics and code of conduct training work

Why do so many business ethics and code of conduct training programs fail? They don’t manage to engage employees nor protect employers. For many companies, the annual code of conduct or ethics training session is a waste of time. People end up resenting the lack of opportunity given to discuss current ethical issues in the business.

These insincere practices lull companies into a false sense of security regarding risk management. Recent scandals and public enquiries have made us all aware of high-risk areas. Now, it seems intentional to not act upon this knowledge to eliminate known risks.

Much training fails simply because of its poor design and its lack of resourcing. A strictly legal or compliance approach drives content rather than the needs of its intended audiences. Lawyers tend to focus on telling employees about what they can and can’t do. They overlook the employees’ innate need to make sense of the requirements and how to apply them. The compliance approach assumes everyone will have the same interpretation. One size does not fit all, and companies can’t ignore the myriad of different situations that arise.

Perhaps more insidious is the training that stays silent on the informal cultural priorities that shape workplace behaviour. For example, obeying the hierarchy, doing more with less, and making financial targets. Many companies insist that employees meet deadlines or stretch goals. Training often stays silent on unwritten rules where people see what behaviour is rewarded and take their cue from this.

Annual online training is often used instead of face to face interaction. Moving all programs online squashes authentic learning. Many high profile global brands such as Wells Fargo or Volkswagen have been found lacking despite their state of the art ethics programs. This issue highlights why there is a need for a new approach that is fit for purpose.

So how do you design ethics or Code of Conduct training with integrity?

The authenticity of the content is the first principle. Risk managers need to identify the real ethical challenges employees face. Then they must use this to tailor training content. Such design sends a powerful signal to regulators. It suggests that leaders are genuine in their desire to create an ethical culture where employees are supported to do the right thing.
The design of content needs to be informed by the new behaviour sciences. These show how organisational context trumps employees’ values. Behaviour science insights enable leaders to design the cultures they want in collaboration with all employees. Organisational justice research finds that if employees see the organisation as unfair, they are likely to retaliate. Retaliation may include fraud, data leaks and inappropriate behaviours.
Training also needs to be tailored to specific organisational contexts that are known as high-risk. Focusing on risky situations is more effective than focusing on high-risk individuals. Employees need to be skilled in managing corporate cultural pressures such as making the end of month sales quotas. Or in procurement areas, offsetting the pressures from ‘relationship marketing’ by suppliers.
Ethical issues arise daily. Conversations, in addition to timely and regular training, signal that leaders are keen to make it as easy as possible for employees to do the right thing. The frequency of ethical conversations offsets “cultural drift”. Don’t let informal ways of doing things gradually overtake the formal policies.

It’s time to reset the default button on code of conduct and business ethics training. Both employees and employers will reap the benefit of genuine workplace learning opportunities as a result.

Ethical Leadership vs Ethical Blindness

Knowing the difference between leadership and ethical leadership has never been more critical. Leadership is egocentric while ethical leadership puts others at the forefront.

Ethical leaders design cultures where it’s easy for people to do the right thing. They recognise they have a duty of care to the business for its continued survival. They also realise that they have a responsibility to the broader group of stakeholders. Leaders must ensure that these stakeholders do not suffer because of the way the company pursues success.

The Source of Unethical Behaviour

Recent scandals highlight the systemic source of much unethical behaviour. These scandals are due to the ethical errors of leaders. In particular, their failure to notice and take action when they get an inkling of unethical practices. If leaders had taken action, the cheating enabled at Wells Fargo and Volkswagen would not have happened. They don’t act because changing ‘business as usual’ may get in the way of achieving targets and business goals.

An ethical study by Professor Guido Palazzo had some interesting insights. It found that widespread unethical conduct emerges because employees are often unaware of what is shaping their choices. Influences are usually psychological, sociological, and organisational. Workplaces can narrow the information available to employees which then changes their behaviour choices. Or they may be pressured to follow the behaviour seen as acceptable by their peers. That’s what happened in libor banking scandals – the culture normalised cheating.

Culture is not neutral. It shapes conduct and motivates or saps employee efforts. Cultural norms often override personal values in the workplace. This is especially true in contexts where it is unsafe to voice concerns.

Motivated Blindness

‘Motivated Blindness’ refers to when people overlook the negatives when it suits them. It happens all the time in business. The book Blind Spots: Why We Fail to Do What’s Right and What to Do About It, Bazerman, M.H. & Tenbrunsel, A.E. talks about this in-depth.

Motivated blindness may prevail where leaders don’t recognise the ethical risks they have created. These are often the result of short term incentives and targets. Command and control cultures contribute as well, inhibiting organisational learning.

Ethical blindness can also result from the lack of diversity around the executive tables. Management tolerates poor behaviour from high performers, and this promotes conduct risk as well. Stories often champion results and overlook how people achieve them.

Unethical conduct in business happens because the environment tolerates it. As early as 2002, there was evidence that Wells Fargo could not meet their sales targets without gaming the system. So, for the next 14 years until the final media scandal, many of the employees were aware that the culture was unaligned with the stated values. They just went along to get along.

How Companies Can Do Better

It’s time for leaders to better design their company contexts. They must do so to avoid being blindsided to its ethical risks. How can they start? It begins by leveraging new insights provided by the behaviour sciences. For more on this read our article for Strategic Finance on behavioural ethics.

Other key recommendations include:

Make your CEO the culture champion. They need to recognise culture as a strategic asset that needs to be in sync with the needs of the time.
CEOs ensure they encourage alternative opinions and perspectives to offset being blindsided by group-think.
Make executive teams accountable for bringing company values to life in their areas.
Have zero tolerance for general managers who send competing messages about acceptable behaviour. That is both in the way they behave and the conduct they reward.
Recognise middle managers as people leaders. Upskill them to personify stated organisational values.
Leverage insights from behavioural sciences to design the desired culture. Use behavioural economics insights to forewarn all levels of staff against known risks. Skill everyone to speak up.
Redesign performance management systems to align with stated values.
Build an internal story to engage and motivate employees around a shared purpose. Support this initiative with a communications plan. Translate it into multiple sub-stories relevant to each level of employees. Share this story with contractors, business partners, and suppliers to safeguard brand integrity.
To gain insight into how you can strengthen the culture, run annual ethical surveys. The insights you attain can make the workplace a place where employees feel safe and do their best work.

Ethical leaders know that managing organisational culture is more than just repeating a set of company values. Instead, it’s about how you put these into action. Leaders must commit to linking their decisions to these values. It involves building and rewarding the right attitudes, disciplines, and behaviours. It’s about selecting leaders who have the appropriate set of skills. Leaders must be able to design contexts that empower direct reports to maintain ethical ambitions.

Ethical leadership begins by focusing in on the needs of those you are leading. It promotes cooperation between leaders at the top and managers in the middle. When they work together, this ensures they speak with one voice and act as one team. Together, they can make it easier for their direct reports to do the right thing.

A business case for embracing ethical leadership

Boards and CEO lead an organisational culture that they help to create, whether intentionally or not. Corporate scandals show how organisational cultures can encourage employees to act without integrity. Learning from the mistakes of the past should be the goal. To do this, companies will need to find out how and why business leaders tolerate unethical behaviour. These habits can even flourish in companies. This is shown by Toshiba’s failure, WellsFargo, the Australian banking scandals and Volkwagen’s too.

To date, it seems that leaders have left it to their compliance departments to manage culture. However, the real motive behind this is often reducing risk to the bottom line. Leaving it up to others to address the culture is a narrow and avoidant style of active culture management. It causes employees and middle managers to lack the skills needed to manage ethical risks and tensions. These issues arise from the many conflicts of interest that go unmanaged in organisations.

Other factors such as time pressures prevent people from using the systems in place that promote good behaviour. Budget and cashflow pressures can prevent open and honest accounting procedures and duty of care to customers. The lack of job security can make employees hesitant to raise their concerns. All of these are typical workplace challenges that codes of conduct do not address. Leaders are often not willing to discuss these issues either.

Organisational cultures do not develop on their own. Company leaders are the ones who form and uphold the culture. These leaders could be those who recognise the financial value of a ‘good’ culture. Or the culture can emerge from the behaviours of upper management, for better or for worse.

Organisational ethical foundations need to be built using research insights into how employees behave. Building a better culture often begins by taking away barriers. These include finding out why employees are unwilling to come forward with issues. Businesses also need to discover why middle management hesitates to manage ethical risks. Compliance teams are reluctant to provide feedback on investigations, which is also an issue. Instead, sharing the learning from ethical failures would be far more useful.

When allowed to go unreported, poor management practices create doubt about whether leaders are committed to ethical behaviour. They ensure that people don’t learn from their mistakes, as they have consultants come in to clean up the mess.

The biggest barrier to organisational learning is the employees’ perceptions of organisational justice target=”_blank”. Leaders and managers may talk about the importance of ethics and integrity but what employees hear are examples of fairness, or the lack of it. Research shows us that employee opinions of overall fairness in the workplace strongly relate to the rate of misconduct. The more fairness, the less misconduct there is. The link between the perception of fairness and the willingness to report dishonest behaviour is apparent.

By building a sturdy ethical foundation and training middle and lower management on how to respond to issues raised, companies can increase the confidence of employees in their managers’ integrity. Leaders must also learn to recognise and prevent retaliation, so that staff are comfortable coming forward. Such actions build organisational cultures that help protect against damage to the reputation and profits of the brand. They build ethical resilience and pride in employees who know that they work for a company that values much more than short term results at any cost.

Addressing ethics in business involves leaders creating a new organisational context. In this setting, employees are aware of the ethical risks in their industry. They have the skills to speak up and cooperate with management to ensure that an ethical and respectful culture is maintained.

There’s a strong business case for embracing ethical leadership. Research shows a direct relationship between ethical behaviour, employee well-being and long-term success. Leading brands such as Unilever, 3M, Ikea, Aldi, Patagonia, Avon, and Starbucks show us the power of investing in skill development. No matter where you are in the world, this can accelerate the success of your business.