Culture is arguably the most beneficial asset a business can have: it can impact on performance, reputation, profit and growth in equal measure

So much has been written about culture in recent years that we are in a position now where most businesses and business leaders understand its value. Compliance culture is a really important element that can impact on the wider cultural challenges that a firm could face. Your long-term success as a company strongly relates to how well you’ve managed to define your ethics and compliance, both inside and outside the organizational structure. A mistake made by many businesses – small or large – is to leave this in the realm of the abstract.

In a business environment where reputational threats lurk around every corner, a strong culture of ethics and compliance is the foundation of a robust risk management program. The lessons learned related to scandals and organizational crises that trace back to the early 2000s make one thing clear: without an ethical and compliant culture, organizations will always be at risk. More and more, culture is moving from a lofty concept to something that should be defined, measured, and improved.

Culture is the foundation

Global Consultants Ethics and Compliance Framework recognizes that an ethical culture is the core element of an organization’s ethics and compliance program. If the culture of the organization does not support principled performance, then all of the people, processes, and technologies that are put in place to mitigate ethics and compliance risks cannot be effective.

A code of ethics provides companies and employees a structure on which to build an organizational culture of accountability and transparency. While in some cases, the law already covers conduct within the workplace, companies can take this extra step to establish a code of behavior inside the workplace.

That means there’s less room for mistakes, as both employees and employers have a set of guidelines to respect. Furthermore, having a clearly defined organizational culture can help improve employee performance even in the management sector, particularly when the set of values reinforced within the code of conduct is in line with the individual’s own set of values.

Culture has always been important to how organizations operate. So why is it getting so much attention lately? One reason is that Regulators have come to the realization that without a culture of integrity, organizations are likely to view their ethics and compliance programs as a set of check the-box activities, or even worse, as a roadblock to achieving their business objectives. In fact, organizations responsible for some of the most nefarious acts of misconduct have had quite impressive, formalized ethics and compliance guidelines.

Grounding a culture in integrity

There were some common messages with regard to culture that many companies integrated into their ethics and compliance programs:

  • Emphasis on organizational values: a set of clear values that, among other things, emphasizes the organization’s commitment to legal and regulatory compliance, integrity and business ethics.
  • Tone at the top: executive leadership and senior managers across the organization encourage employees and business partners to behave legally and ethically, and in accordance with compliance and policy requirements.
  • Consistency of messaging: operational directives and business imperatives align with the messages from leadership related to ethics and compliance.
  • Middle managers who carry the banner: front-line and mid-level supervisors turn principles into practice. They often use the power of stories and symbols to promote ethical behaviors.
  • Comfort speaking up: employees across the organization are comfortable coming forward with legal, compliance, and ethics questions and concerns without fear of retaliation.
  • Accountability: senior leaders hold themselves and those reporting to them accountable for complying with the law and organizational policy, as well as adhering to shared values or organizational values.
  • The hire-to-retire life cycle: the organization recruits and screens employees based on character, as well as competence. The onboarding process steeps new employees in organizational values, and mentoring reflects those values. Employees are treated respectfully when they leave or retire;
  • Incentives and rewards: the organization rewards and promotes people based, in part, on their adherence to ethical values. It is not only clear that good behavior is rewarded, but that improper behavior—such as achieving results regardless of method—can have negative consequences.
  • Procedural justice: internal matters are adjudicated equitably at all levels of the organization

While a strong office culture won’t necessarily change people’s values, it can influence the way they behave within the workplace. Organizations with strong positive cultures create trusting relationships with stakeholders. In our experience, those relationships become reciprocal; that is, stakeholders trust the organization and the brand. This creates employee, customer and supplier loyalty. A strong culture helps to build positive relationships with regulators and it helps attract long-term customers. Ultimately, a culture of integrity is reflected in superior, long-term performance.

None-the-less, creating an effective compliance program requires companies to go beyond a list of written rules. It requires instilling a top-to-bottom environment of achieving business goals with a commitment to compliance. It involves using compliance monitoring tools to identify and mitigate potential risk such as risk management systems, data analytics and company wide open reporting.

In addition, employees must be properly trained on a firm’s internal policies and external regulations, and this understanding should be reviewed periodically to embed the learning. Live and online training helps employees believe to their core that their conduct is right for the company, right for them, and something to be proud of. Indeed, today’s employees’ value corporate culture more than ever.

Written by Elena Panayiotou on Monday 21st July 2020