ETHICS CORNER DEFENSE CONTRACTING
Companies Need Culture of Integrity
Compliance is not working; or at the very least, it is not working nearly as well as it should.
Here’s one piece of evidence: Around the same time the U.S. Sentencing Guidelines for Organizations were enacted in response to pervasive wrongdoing by corporations, 22 percent of Americans had a “great deal” or “quite a lot” of confidence in big business, according to a 1991 Gallup poll. By 1999, just before the major scandals that led to Sarbanes-Oxley legislation, that trust increased to 30 percent. This year, a Gallup poll shows it to be down to 23 percent.
A related question was asked about the honesty and integrity of business executives. In 1991, 21 percent of poll respondents rated executives highly or very highly; in 1999, 23 percent; in 2018, just 17 percent.
The public doesn’t trust corporations any more now than they did at the dawn of the compliance profession. I started my first business ethics consulting firm in 1993, and we had close to zero competitors.
Defense industry leaders who read this should do a gut check: Do government customers trust contractors more now than in decades past, after contractors have invested hundreds of millions of dollars in compliance?
Why such a large gap between good intentions and trusted outcomes? One reason compliance fails is that the majority of training and communications is at a junior high school level of moral development. It’s about rule following rather than doing the right thing. This is not the way to get adult employees aligned with a company’s purpose or standards.
Most importantly, compliance fails because it suppresses attitudes and behaviors that make great companies great. Compliance is critical to safety and quality, two attributes every defense contractor must demonstrate faithfully and consistently. However, innovation and service are also critical attributes. Sustained innovation requires out-of-the-box thinking, loose hierarchies and reporting channels, and a certain amount of “asking forgiveness rather than permission” to get things done. Service requires a pro-social employee mindset which is strikingly different from a culture of obedience.
Reflect for a moment on one way employees have historically demonstrated dissatisfaction with management: They simply work to the rule. Every rule, exactly. And when they do this, operations grind to a halt. Complete compliance is a business preventative!
Compliance fails unless it is grounded in ethics. Many employees ignore compliance rules because they don’t make sense to their ethical intuitions. Grounding compliance in ethics requires integration. This integration is most effectively accomplished by emphasizing a culture of integrity. Bringing compliance, ethics and integrity together as the foundation of a company’s culture strengthens the company in all ways — including in compliance.
Extensive research in the fields of ethics, compliance, organizational culture, safety and profitability identifies five key organizational attributes at the foundation of a sustainable, high-performance culture of integrity: commitment, communications, character, courage and candor.
Cultures of integrity are committed to doing the right thing — not just as a matter of marketing or positioning, but as an uncompromising stance embodied by the words and actions of leaders and recognized by employees and business partners. It turns out that commitment can’t be faked. Employees are especially sensitive to how the company acts in a time of crisis or stress. Does the organization still act with integrity as its lodestar, or do financial concerns prevail?
Communication is about “talking the talk.” Every organization must take the time to communicate its commitments to its members. Formal communications about mission, values, code, policies, etc., are important, especially for larger companies. But they are not sufficient. Every organization, even the very smallest, needs leaders talking the talk.
Managers in the middle are the key leverage points, but they are rarely given tools to make them comfortable with the ethics messages they are expected to send.
Character means acting consistently with personal and organizational commitments. Research from over 1,000 focus groups conducted in about 40 countries shows that employees are highly sensitive to whether their company — and its leaders — “walk the talk.” They are especially concerned with honesty, respect, fairness, compassion and courage.
Courage is needed to hold people who are viewed as good performers accountable when they violate company standards. This is one of the two biggest cultural challenges in almost every organization. Most employees do not believe that their company’s leaders hold their star performers, or their favorites, or themselves accountable to what the company says it stands for.
Candor, or a “speak up culture,” is essential to a culture of integrity. It is also at the heart of any system promoting safety, quality, internal controls, or a respectful workplace. Honest and accurate communications about reality are the lifeblood of a thriving company.
The good news is this: Strengthening a culture of integrity does not require more or extra work for leaders whose goal is a sustainable, great company. It requires integrating principles with performance. That’s something all employees can align with and support.
Steve Priest is founder and president of Integrity Insight International LLC, which provides ethics consulting services.