How Do You Know If Your Company Really Has Strong Ethical Culture?
by Curtis Leicht, Senior Culture Analyst, Ethisphere
Ethical culture matters to employees, investors, and all stakeholders. Companies that have strong, values-based cultures are better places to work and well-poised for long-term success. But the key to maintaining a strong ethical culture is by measuring it. When we elevate culture from a subjective art to an empirical process, business integrity becomes something achievable, measurable, repeatable, and sustainable.
Ethical culture is the act of closing the loop between your ethics and compliance program and the lived experience of your employees.
Senior Culture Analyst, Ethisphere
The 2024 Five-Year Ethics Premium is 12.3%. That is the amount by which the publicly listed honorees of the 2024 World’s Most Ethical Companies outperformed a comparable index of global companies from January 2019 to January 2024. That is a pretty big number. Specific metrics like this are instrumental not only for helping to prove the value of a strong ethical culture, but they help organizations better understand where their cultural strengths and opportunities for improvement lie.
When people think of “culture,” they often think of it as a subjective and unquantifiable thing. But we know that’s not true. The truth is, it is crucial for organizations to measure their culture and develop a strong set of skills around that process so they can better understand what their data tells them, and take substantive action to transform their workplace for the better.
It’s helpful to think about ethical culture as the act of closing the loop between your ethics and compliance program, and the lived experience of your employees. At Ethisphere, we measure across eight different pillars:
- Awareness of the E&C Program and Resources
- Perceptions of the Function
- Observing and Reporting Misconduct
- Pressure
- Organizational Justice
- Perceptions of Managers
- Perceptions of Leadership
- Perceptions of Peers and Environment
Organizations can measure the degree of each of these pillars through things like employee surveys. It is important to make sure there is some sort of robust benchmark or comparison tool against which to measure any survey data, since data in a vacuum is difficult to contextualize.
But this speaks to the reality that culture is not some kind of amorphous thing that organizations can just hope works out for the best. Organizations need to take concrete steps to make sure that their culture is strong by addressing problem areas, celebrating successes, and supporting strengths.
Typically, they start that process through some sort of measurement effort to see where they’re at, to kind of get a gauge of how the employees are feeling about the program.
What does the Culture Measurement Process Look Like?
At Ethisphere, we partner closely with organizations to help plan their surveys. Ethisphere has its standard topics that we typically survey, but most organizations have the survey topics in mind that speak to their particular situation. Besides the survey itself, we also help organizations after the survey data comes in to know what it really means.
Surveys often produce thousands, if not tens of thousands of data points. How do you slice and dice that data? Are there differences in your organization from department to department? Are there differences from country to country? (And if so, are you really diving into what are those differences?) How does that compare to a peer benchmark?
Answering those questions provides a lot of context for organizations where they may not be sure where to start. But it can also help make the best use departments’ finite resources. There is a tendency to focus on a particular topic or area of the business that might be struggling more than others, but this could also be an opportunity to identify areas of the business that are doing really well, and sharing success stories on something the organization is quite strong in. It could be a particular business unit, manager, or senior leader that’s really crushing it in a specific area. And then the question becomes, how can you take what they’re doing and operationalize that across the organization?
Keeping Data Fresh
When a company undergoes a cultural survey and they’re starting to measure their culture, it produces a lot of data. And that data can be like gold if it’s used the right way. But once you have that data and you’ve worked to analyze and really understand what story it’s telling you, how long is that data good for?
There isn’t one true answer for all organizations, but data does, in fact, get stale. Typically, we see organizations measure either on an annual basis, every 18 months, or every two years. And the reason for this is because the conditions in which a survey is conducted can be impacted by big world events that themselves may affect the results of the survey. A good example of this is the COVID-19 pandemic. That crisis really changed the cultural experience for a lot of employees. A lot of employees went from on-site all the time to remote entirely, and then maybe back to hybrid. How they interacted with the organization during that time really changed the types of things that they saw and heard from their coworkers, managers, and leadership.
COVID-19 is a really clear example, but that kind of phenomenon is always happening to some extent that can impact survey results. There could also be organizational changes, leadership changes, reorganizations, different pressures depending on economic conditions. The list of potential X-factors can be extensive, so organizations will want to measure their culture on a relatively regular basis, both to see how those types of things are affecting their organization, but also, they will want to see to what degree the changes in their ethics and compliance program have had upon the organization’s culture itself.
Consider, for example, when an organization addresses a particular area like perceptions of whether people believe in the non-retaliation policy. That organization will want to remeasure to see if that work actually made a difference and then either adjust if it didn’t, or celebrate that success if it did.
Spreading the Word
Messaging and communications is incredibly important when it comes to improving organizational culture. Many compliance departments know this already, but that doesn’t make executing on it any easier. Compliance programs have a lot of control over what they do and the messages that they specifically put out. But whatever the message is that the compliance team puts out, what we see as being the most effective is when people outside of the compliance program also echo that message. That goes a long way to gaining buy-in from various stakeholders.
It also pays to think beyond the message itself—the words on the page, the content in the email or on the SharePoint site, the video or audio content—and think about who is sending that message. Who is talking about it? Who is backing it up? Because if it always comes from the same source all the time, and that source is the ethics and compliance department, then there is probably an opportunity being missed to incorporate people like senior leaders outside of ethics and compliance, middle managers, and direct managers, to talk about the messaging and really magnify its impact.
The role that managers play as the “point people” for employee perception of the health of the organization’s culture is incredibly important. When we look at Ethisphere’s own culture survey database, it’s clear that managers are the most trusted person in someone’s work life. You work really closely with your direct manager. In our 2023 data set, for example, 90.9% of employees believe that their manager acts ethically at all times. But that number for senior leadership is only 78.5%. So the data shows us there is a bit of a gap there. Largely, we think about this as people interact with their immediate manager a lot more than senior leadership. They interact in more of a direct way, either in person, day to day on Zoom calls, via Slack, and so on.
There is distance between senior leadership and the bulk of your employees. There are layers of the organization, and less interaction between them. So, knowing that immediate managers are a more trusted source of information, ethics and compliance teams can collaborate with them on ethics messaging or to have their conversations and messaging with their team align with your compliance program messaging around key topics.
We often advise organizations to engage their managers in order to amplify ethics and compliance messaging. If you can gain buy-in from your managers on a particular topic that you want to improve, and have them echo the messaging that’s coming from the compliance program or senior leadership, that will have an effect on employees because it’s coming from an internal source of information that they trust.
Case in point: An organization may have a great non-retaliation policy with a lot of messaging around it. Oftentimes we’ll hear, “We message around this all the time. I don’t know why employees don’t have faith in this policy.” If you can engage managers to talk about that policy and how it is enforced at the organizational level, then the message will come from a source of trust that will really matter to employees.
To that end, one of the things that we measure frequently is whether conversations happen between managers and their direct reports on ethics and compliance issues. This doesn’t have to be a dedicated conversation. It could be a part of a larger conversation or part of a team meeting. But we know that there is often a strong correlation between the frequency of those conversations from direct managers and positive perceptions about other key areas that we measure.
Again, turning to our 2023 data, 88% of employees that are having these conversations with their managers monthly believe that the company enforces their non-retaliation policy. But if they are only having conversations about ethics and compliance related issues annually, that confidence drops to 70.5%. There is a big impact that that we can glean from that correlation. It really shows that when managers are echoing the message or aligned with it, that makes the efforts in the ethics and compliance department a lot more effective, because they are coming from a source that is trusted already.
It Pays to Train Your Managers
It is often said that people don’t leave jobs, they leave managers. With that in mind, and as we consider just how important the manager’s role is as an arbiter of organizational culture, it falls to the organization itself to ensure that managers are adequately trained to live up to that role.
Managers are the heart of your culture, and they are a big lever that you can pull to affect cultural change. So when you’re thinking about your managers, remember that they are already being asked to do a lot from different departments, from their direct reports, and their own manager. So it’s important to remember, when we’re thinking about training managers to have these conversations, that their time is scarce. It might be worth thinking about not necessarily having more conversations about ethics and compliance, but perhaps incorporating them into something else that’s already happening. That could be a weekly team meeting, or during their one-on-ones with their direct reports. It doesn’t always have to be a brand new thing.
But it’s important to remember that managers are asked to do a lot, and gaining even five minutes of their time to have a conversation can be difficult, which is certainly something to look into if you are measuring culture and you are not seeing the conversation rates that you would like, or if you’re seeing poor perceptions of managers in general.
Final Thoughts and Best Practices
The Ethisphere Culture team conducts a great deal of culture surveys. We definitely see some common threads between those organizations that see really terrific results in advancing their culture once they started to measure it.
First and foremost, they know where they stand when it comes to ethical culture. It starts with knowing where your culture is at, because only then can you know exactly where to focus your efforts, time, and resources. They also know how engaged their managers are and whether that is helping their cause or reinforcing their message.
Some of the organizations with best-in-class results do this is by providing resources and tools for managers to have the conversation. Sometimes ethics and compliance topics can be difficult to start a conversation around, but there are ways to make it an interesting conversation.
The best-in-class companies also keep in mind that their employees are probably wondering how some of this stuff works. They might get training about it on an annual basis, but it sometimes leaves them wondering, does this really work this way? Is the organization really going to, for example, protect me if I need to report misconduct? So giving those employees conversation starters and toolkits around those topics can be really helpful.
Another common thread among best-in-class organizations that we see is leadership buy-in throughout the organization. Not just the ethics and compliance department or senior leaders, but when you can get people’s direct managers all the way down the chain having the conversations, that tends to have a big impact.
And finally, we’ll see organizations incorporate ethics and compliance as a key factor in how they evaluate managers. This could be something as formal as putting it as a small piece of an annual review process or just something that they consider when somebody moves up in the organization. Does this person embody our ethical culture? Do they embody our core values? And how does that translate as they move up in the organization?
If people feel like this is a way to differentiate themselves and make themselves stand out in their career goals, then they tend to care a little bit more about it too.
To connect with the Ethisphere Culture team and learn how you can measure and elevate your organization’s culture, please click here.
For further reading, check out the
Culture Masterclass: Accelerate your Speak up Culture from Data to Action Planning
2024 Ethical Culture Report: Closing the Speak Up Gap
2023 Ethical Culture Report: Lessons from the Pandemic,
The Eight Pillars of an Ethical Culture.
ABOUT THE AUTHOR
Curtis Leicht is a Senior Culture Analyst in the Data & Services group at Ethisphere. In his role, Curtis helps manage and execute Ethisphere’s Ethical Culture Assessments, Culture Benchmarking, and other Ethisphere services to help organizations assess and improve their ethics and compliance programs.
