Not a headline

This is a “how-to” on keeping your organization’s ethics problems out of the headlines – not by hiding them from view but by preventing them from getting big enough to be “newsworthy”. 

 ©Frank J Navran

 What follows is a “how-to” on keeping your organization’s ethics problems out of the headlines – not by hiding them from view but by preventing them from getting big enough to be “newsworthy”. We will focus on how an effective ethics management system and an equally effective ethics communications strategy, along with some thoughtful leadership can put out smoldering sparks before they become raging fires.  It all comes down the front line supervisor. If a problem or concern gets to the ethics office, it is already too late.

We can probably all agree that it is better if there are no significant ethics issues in our organizations. We can probably also agree that if there are ethics issues it is better to address/resolve them than it is to ignore them. And we can also agree that we would prefer that when we do address them, that the matter be kept “in-house” and not splashed all over the front page of our local newspaper or the lead story on TV.

So, how might we do a better job of preventing ethics issues from arising in the first place and addressing those that do arise, despite our best efforts, so that they are not newsworthy? After all, that is the best way to keep them off the front page. If there is nothing to report, no one is going to report it. You don’t sell a lot of newspapers with a headline that reads, “Once Again, This Month The XXX Corporate Ethics Office had Nothing of Significance to Report to the Board of Directors”. That is not to suggest that the goal is to suppress the reporting of ethics issues. Rather, is suggests we can all do a better job of preventing more of them and addressing those that do arise more effectively, so there is nothing “newsworthy” to report.

The basics are fairly simple and familiar to all of us. They are the components of “an effective program to prevent and detect” ethics issues first promulgated in the 1991 revisions to the US Federal Sentencing Guidelines, and later, in the RSA, in the 2002 King Report. The motivating factor in both systems was the promise of reduced “exposure” if the organization had made a good faith effort to prevent and detect ethics violations. The above-referenced components were a model that was widely adopted since the promised reductions in “exposure” for the organization was a factor of 80:1.

The key to not becoming a headline is not the total elimination of human fallibility in our organizations. Rather, it the effective management of that very fallibility that is required. Unfortunately, as Ethics Offices and corporate ethics initiatives have become routine, many such management efforts have been watered down and their perceived significance lessened, in some cases to the level where ethics is nothing more than another box to be checked on a “to do” list.

Checking the “ethics box” may satisfy some of the lawyers and auditors but it will not keep you and your company off the front page when the inevitable ethics issues erupt. The only surefire way to prevent those damning headlines is to prevent those damnable ethics issues from occurring in the first place. So, what have we learned in the twenty-some years since organizational ethics initiatives were first mandated that will help keep those issues from arising and keep your name off the front pages?

I am going to suggest that there are at least seven key learning points that we should review. It then becomes you job to ascertain whether or not your organization has effectively addressed each of those or has “retreated” to a less than effective semblance of same – creating an appearance of compliance that would not withstand scrutiny. Not surprisingly, the key learning points align with the components of an “effective program to prevent and detect violations” first prescribed in US Federal Sentencing Guidelines and later adapted for South Africa in the King Report on Corporate Governance for South Africa and its successor reports.

The Front Line

As implied above, the “front line” of any ethics initiative is not the Ethics Office. Rather, it is the actual “front line” – the first level of supervision in your particular hierarchy. That is where management meets the task worker and that is the critical juncture.  That is not to suggest that only our “line employees” have ethics issues. It does suggest, however, that in most organizations the 80:20 rule applies and if the 80% who do the actual work of the organization operate within the prescribed ethical boundaries then, it is reasonable to assume that most of those above them are doing so as well. There have been notable exceptions in recent times, but those exceptions actually prove the rule, since they are indeed “exceptions”. For our purposes, we are better served to discuss on the norm.

The critical player is the front line supervisor.  Who are they? What do they do? What must they know? What do they think matters to you?

First, a quick overview of those seven components with a specific set of suggestions re what front line supervision/management can/ought to do to help create and/or sustain a workplace where violations of applicable laws, regulations, policies, procedures and ethical standards are the rare exception.

Then, a review of how the “ethics office” function can help facilitate success from the front lines to the C-Suite and above.

We will close with a set of specific recommendations regarding what the senior leadership and Board really need from the Ethics Office during those periodic Board ethics briefs.

Seven Mandated Components

We should start with two observations:

1. The mandated components of an “effective program…” are a minimum. They ought not be the ultimate goal. They are process steps – a “how to” manual. The goal should be defined in the reduction/elimination of ethics violations within the workforce and key relationships the organization enjoys with vendors, suppliers, subcontractors, etc.

1. These mandates allow a good deal of flexibility in their actual implementation. While there may be “best practices” that can suggest how your systems could work, what matters most is ensuring that there is an ideal “fit” between the unique needs/demands of your organization and the standards and processes you have in place.

As we all well know, the Seven Components of an “Effective Program…” as outlined in the Federal Sentencing Guidelines for Organizations (FSGO) are:

1. Establish standards and procedures
2. Assign oversight responsibility
3. Delegation of discretionary authority
4. Communication of standards and procedures
5. Achieving employee compliance
6. Enforcement and discipline
7. Organizational response to ethics violations

Rather than viewing these solely as fine reduction mechanisms, let’s also consider them as “reputation protection” processes – things we can do to keep today’s mistakes and/or shortfalls from becoming tomorrow’s headline. To do that let us first look at each of the seven components in turn. Then, we can look at the resulting “effective program” and consider its overall impact.

And, you might notice that steps 1-6 are clearly aimed at preventing ethics issues. Step 7 is, by definition, how we address those issues that do arise despite our best efforts. This, after

all, is the intent of the FSGO – to motivate organizations to create and sustain organizational cultures that primarily “prevent” and, in the supposedly rare cases where prevention fails, readily ”detect” and address violations of organizations’ ethical standards.

The premise of this paper is that if you are successful in preventing most ethical misconduct, and detecting those cases that were not prevented, you will attend to those cases and consequently, the risk of your organization being the next “headline” for whatever ethical mishaps might occur is significantly reduced.

Preventing – How the Seven FSGO Components can keep us off Page One

1. 1.      Establish standards and procedures – The organization must have established compliance standards and procedures to be followed by its employees and other agents that are reasonably capable of reducing the prospect of criminal conduct

 

The text addresses “criminal conduct”. In most case, organizations expand that expectation to include compliance with all applicable policies and procedures as well as laws and regulations. Simply stated, step one says, “Follow the rules”.

The last thing we want is for our organization to be publically chastised for failing to effectively establish and communicate a set of business conduct standards that meet society’s expectations. That means that we have to first establish standards and then effectively communicate, train, monitor and learn from our experiences with those standards. The key is that the standards be both understandable and attainable. They also have to be credible. In other words, employees at all levels and others, like contractors, vendors, suppliers must believe that the organization is actually serious about their commitment to these standards as the minimum for acceptable conduct. They must also believe that the supporting procedures are to be taken seriously and that both the systems and procedures are usable and effective.

2. Assign oversight responsibility

Oversight is an interesting concept. It implies that someone “over” the management of a process has assumed responsibility for that project’s success. There are really two facets to this component that are not always explicitly discussed within the organization. Somebody has to “own” the ethics initiative. While the Ethics Officer is responsible for managing the processes, who “owns” the commitment? Again, typically, that needs to be way above the EO’s pay grade. The EO manages the process but the CEO and Board need to own the commitment. If ownership “assigned”, or perceived to reside in a position lower than the Board and/or CEO the process is inherently weakened because the perception of commitment at the top is weakened. Oversight has to remain at the very top, otherwise the top is perceived to have excluded themselves from the very standards they are intending to impose on everyone else. Nothing undoes an ethics initiative faster than the perception of a “double standard”.

3. Delegation of discretionary authority

So, while “ownership” of an issue may reside at the very top of the hierarchy, discretionary authority is, of necessity, delegated. And, that authority may not to always be limited to a single person or position. Each person in any given chain of events has some responsibility for the issue in question – including a personal responsibility for the ethics of the decisions and actions they take. So while one may delegate the authority to act, the ethics of both that act of delegation and the subsequent actions of those so empowered, becomes a factor in their decision-making. Responsibility in shared decision-making – as is the case with delegation – includes the responsibility for ensuring that all decisions and actions meet the applicable ethical standards.

4. Communication of standards and procedures

If leaders are going to hold their subordinates to specific ethical standards, that presumes that those same standards have been adequately communicated, and the specific expectations related to those standards are clearly understood. That understanding cannot be presumed. We cannot reasonably assume that everyone we might delegate to knows what we mean when we insist that they must meet the ethical standards of the organization unless and until those standards have been effectively communicated and that shared understanding has been tested.

Achieving employee compliance has to begin with employees knowing what they must comply with. What are the expectations and the standards? What are the technical aspects and the ethical aspects of the task at hand? Do I have the competence to meet those expectations? Do I have the tools, information and materials at hand to perform that task to spec? Are there any ethical considerations, challenges, risks and/or potential consequences that I might encounter in the performance of this task? Am I equipped to meet all of the challenges inherent in this task and, if I am uncertain, do I have access to whatever additional resources I might need to be successful? This is some of what we think, subconsciously, every time we are tasked to do something – anything – at work. If the organization in general and my leadership in particular, has not adequately communicated the information I need to answer each and every one of these questions, then we are headed for a crisis.

5. Achieving Employee Compliance

If steps 1-4 are done well then step 5 is almost automatic. Steps 1-4 are preconditions for 5. That is not to suggest that your job is done. There is a phenomenon in veterinary medicine called a “flea dip”. It is the procedure used to rid pets of common fleas. The dip (or bath) kills all the fleas on the animal. It does not prevent future infestations. It is akin to evicting an unwanted tenant from a rental property, refreshing the unit with a though cleaning, maybe even some fresh paint, and hanging out a “to let” sign. It is an attractive unit and will certainly attract future tenants. The same is true of a flea-free cat or dog. Nothing attracts fleas like a pet who has no fleas.

If all you do is to “dip” your employees into an ethics workshop, or a presentation on the Code of Ethics or if all that is required is that they “certify” that they have read the Code and agree to abide by its provisions…. If all you require is that they sit at a computer terminal and select a, b, c, or d in response to a stream of multiple choice questions about your ethics code and/or other ethics standards, then all you have done is “dip” you employees into the organization’s “compliance certification” process. You have done nothing to help them understand why ethics matters, how to apply you values to complex situations, how to use the resources at their disposal to address complex ethics issues, address dilemmas, reason through situations the Code does not specifically address. In other words, you have failed them.

Failed employees are banner headlines waiting to happen. If all you are doing is checking the “attended ethics training” box, you will fail. It is simply a matter of time.

Employee compliance requires involved leadership, effective role models, seamless systems and a commitment from the top all the way down to the lowest level new hire, to a set of values and principles that govern every decision. It is not complicated. It IS demanding and it DOES pay off in the long run. The underlying question, “Are you in it for the long run?” or is ethics just a box to be ticked?

6. Enforcement and discipline

 

Even the best ethics program in the most conscientious company will fall short of perfect. That means you need effective support, enforcement and disciplinary processes. Enforcement includes your “help line”, which typically serves both by offering guidance as well as addressing allegations of suspected misconduct (e.g., enforcement and discipline).

When misconduct is identified, how you respond speaks volumes to the entire organization. Is a report of a suspected ethics violation taken seriously?  What determines the level of seriousness of a given violation? Not all “lies” for example are equally serious. An overstated progress report – with assurances that the deadline will be met – can be a minor issue or a serious violation depending on the case in point. Context matters. If I lie saying I have already completed a step in a process when I am 5-10 minutes short of actually completing the task, it is fundamentally dishonest. Falsifying the financial statement in an effort to defraud the tax authorities is also fundamentally dishonest.

In every case I can imagine, these two “lies” would likely carry significantly different penalties. Both are lies. Both are unacceptable. One may require a “stern taking to” while the other may warrant immediate termination of the employee. The “face saving” lie would likely be treated less severely that the falsification of official records and tax statement. What is the nature of the violation? What is the “record” of the employee? What were the potential costs to the company if the lie was not discovered? What if it were discovered? What might be the nature of those costs: financial, reputational, operational, all of the above? What does appropriate enforcement look like? What does appropriate discipline look like? How transparent are enforcement and discipline of ethical misconduct to the workforce at large?

There is also the delicate question about using one employee’s mistake as a “lesson” for that employee and making it a lesson for all your other employees. There are HR and legal issues re privacy as it applies to employee discipline. We cannot pillory an employee, put them on public display to be stoned (or at least mocked) by their peers. That option was taken away from management decades, perhaps even centuries ago, although I have met senior managers who rue that loss and find and employ “psychological” alternatives – using humiliation and verbal abuse instead of the stocks and the whip.

Use the wrong enforcement and disciplinary tactics/strategies and you may be the next headline. Not your employee.

Step 7 – Organizational Response to Ethics Violations

 

Responding at the level of the individual offender is not enough. What do you do when one or more employees’ misconduct suggests that there is at least the potential, if not the known fact, that others within the organization could be doing similar things for similar reasons? We are intelligent animals, capable of learning from others’ experience. We do not have to burn our own hand on the stove to learn that it is hot. We are capable of hearing, witnessing and understanding the lessons that can be learned through others’ experience – to learn that lesson indirectly without having to “experience” the negative consequences ourselves.

What are you doing to use your “negative” experiences, positively, as learning opportunities – as teaching tools – to prevent others from making what has already been a costly mistake for someone else, another group, department or function?

And that applies to other companies. Even competitors. We join associations. We share experiences and brag about “best practices”. We help each other and are helped by each other. Ethics ought not be a “competitive advantage”. A level ethics playing field serves us all. In our professional and trade associations there is an assumption that we will share information that would serve others without putting ourselves at a competitive disadvantage. When we have systems and processes that help us ensure that we and our employees, suppliers, representatives are all operating to the highest ethical levels, that is worth sharing – and its often on the agenda of conferences attended by the same folks who read ethics journal and support ethics institutions.

The Unspoken Eighth Component of an Effective Program to Prevent and Detect – Share!

 

None of us is perfect. No industry is perfect. However, we can improve when we share best practices. We see this in technical areas all the time. Technical advancements are heralded and shared widely. We do not see it as much in the ethics arena outside the various ethics NGOs, like The Ethics Institute – where best practices emerge out of shared experiences and those practices are shared with the membership. What we are suggesting here is that such sharing need not be limited to members of a given NGO. Rather, we should all seek every opportunity to both share with others and learn from them. Since ethics is NOT a competitive arena there is no valid reason not to promulgate best practices.

When we share best practices we signal that we are willing to both learn from and help coach/tutor those with whom we might otherwise compete. While we may compete in other arenas, we don’t seek to win by undermining others’ ethical standing. It is simply wrong to seek to “win” ethically where we might not have been able to demonstrate that our products and/or services were any better than yours. Ethics is not the next competitive arena. When any organization suffers an ethical meltdown the fallout does not affect that company, or even that industry alone. It contaminates the perception of business in general.

The same is true in governments and in the non-profit world. Think about the last government or NGO scandal. If you operate in the non-profit world, how did that effect your revenue? I am an American and I still shake my head in disbelief that even the most respected NGOs can suffer ethics meltdowns. In my experience, when United Way, one of the oldest and most respected NGOs in the US fell on hard ethics times, contributions across the non-profit spectrum suffered. One “industry” leader’s failing can cast doubt over the entire industry. One NGO’s failings cast doubt over the entire NGO community. Everyone in that sector experienced “hard times”.

We all suffer when one of us fails to meet the ethical standards the public has come to expect. We all suffer when any representative of our segment or industry is in the headlines for failing to meet ethical expectations. We all suffer when anyone in our segment fails to meet their ethical obligations. It hurts us all whenever any organization is in the headlines for “Ethics Failures”.

We all need to do our part. We need to be certain we are not part of the problem. We need to be certain that our houses are in order so that we are “Not a Headline”.

And that means all of us. One cannot safely assume that the “ethics office” is responsible for the ethical culture of the organization. The EO manages the formal processes but the ethical culture is the sum total of the impact of everyone in a position of leadership or responsibility. It is more a front line function than a staff objective or EO responsibility.

Reading the Organizational Chart may suggest that being a headline for an ethical misstep is the EO’s fault. Not so! The “front line” of any organization’s efforts to create and sustain an ethical culture is actually, the “front line”. The EO provides support and encouragement but it is front line management, those who do the work that drives mission accomplishment, who “own” the culture. Thus, when we are a “headline” it is more likely to be a reflection of a failure at the front lines of the organization than in any staff office, including the Ethics Office.

For each of us the most important person in the area of creating and sustaining an ethical culture is the person we report to. I take my cues from that person, just as my direct reports take their cues from me. That suggests that each of us with supervisory and/or leadership responsibility needs to do a good job of communicating who we are as a person, what we expect from those we lead, what those we lead can expect from us and what matters to us.

• If ethics is not a core component of our answer to each of the preceding questions then we, as leaders have failed.
• And if we have failed, it is in our best interest to address that failure sooner rather than later.
• It is in our individual and collective best interest to raise the ethics bar.
• We need to hold ourselves, and each other, to the highest ethical standards.
• A headline featuring an “ethics failure” in any part of our organization hurts us all.
• We all need to do our part so that we are “Not a Headline”.