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Can We Trust the Boss?

Thursday, July 12, 2018
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Why Compliance Training Alone Will Not Change Behavior

Compliance training alone will not shift behavior. Corporate culture—expressed in actions, stories, symbols, and values—is what changes behavior. Corporate leaders are recognizing more and more the impact of organizational culture on the bottom line. They are also realizing just how important frontline management is when intentionally developing ethical corporate cultures. The regulators are increasingly pointing to culture as the critical litmus test of a compliance and ethics program impact.

The influence that frontline managers have on setting the tone of acceptable behavior, modeling ethical decision-making, and fostering a safe space is how employees engage with that culture. Research shows that ethics and compliance programs that deliver higher levels of impact are those programs that leverage leaders in the middle to reinforce key messages. Effective programs are shifting from rules-based decision-making to values-based decision-making, combined with policies and procedures that are framed by a leadership commitment to compliance and active modeling of ethical behavior.

Unfortunately, companies often forget that the employees in the best position to frame everyday decision-making with practical and relevant examples are those involved in frontline management. Without integrating frontline management into driving and reinforcing key messages, it is nearly impossible to scale an effective program, especially if the organization’s footprint extends across multiple countries and regions.

Less than 2 percent of frontline leaders are trained to be active listeners. Yet research shows that nearly 60 percent of the workforce will voice claims of misconduct to frontline management. How they hear and respond matters.

Leveraging local leaders as global agents for delivering key messages and modeling everyday ethical decision-making helps nurture and embrace local business cultural similarities, differences, and sensitivities. Who else is in the best position to take the key messages from the company’s corporate mission “off the wall and down the hall”?

Positioning managers as local champions of the core messages puts them in a strong position to help initiate conversations about complex compliance themes, such as respect in the workplace, navigating the pitfalls of social media, or fostering a “speak up” environment. These critical topics can really resonate when there is an ongoing dialogue led by local management, not just an annual “tone at the top” message from the CEO.

Organizations with large global footprints find that localizing the messages geographically can bring greater context to issues that can pose serious risks to the organization. Having these conversations regularly, from the middle and throughout the organization versus the top down, can bring more resonance to the workforce.

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Help Middle Managers Understand How They Matter

To improve its tone in the middle, a company should consider investing in helping managers become more aware of how their daily interactions with team members can either support or undermine an atmosphere where ethical decision making and living the company code is a welcome topic of discussion rather than an interruption.

A leader’s apathy or behavior misalignment with the code of conduct can breed skepticism about the ethics and compliance program and dampen the organization’s ethical culture as a whole. For example, most reports of misconduct are initially made to the frontline manager, while less than 10 percent are made to the ethics hotline. However, managers may not always make it clear that they are available to discuss compliance issues. Sometimes managers simply do not have the self-awareness to realize that their behavior makes them appear unavailable to listen.

When a manager is unavailable or uninterested in receiving input, employees are less likely to speak up. When a colleague builds up the confidence to raise an issue directly, escalates it to their supervisor, and sees it fall upon deaf ears, this poses a huge risk. Most likely, these issues will never be called in to the hotline and can snowball into larger issues.

To avoid this, companies must invest in tools, resources, and development programs to help this frontline group create a consistent, effective tone. It is critical to provide a vehicle to help leaders develop the skills they need to drive engagement with the code of conduct. Accordingly, manager training should squarely center on managers’ responsibilities as mentors and coaches — they should be taught to listen, offer feedback, and provide guidance.

Develop Managers to Lead

Frontline management is in the best position to provide practical and contextual reinforcement about how the code applies to everyday decision making. They can also reveal blind spots in policy and procedures.

Managers at every level need the right tools to proactively engage their teams by facilitating natural and informal conversations around living the code of conduct. Leveraging frontline management is a critical and reinforcing point of integration that can often be a missed opportunity when planning an ethics and compliance program strategy and implementing that strategy. As a part of 2019 planning, companies should consider implementing opportunities to develop and coach managers to be more comfortable and prepared to exercise visible leadership in the context of living the code of conduct.

Managers should demonstrate through guidance and visible action that every colleague can choose to exercise ethical leadership and help others find a more balanced and responsible decision path. As you begin developing your 2019 compliance training program strategy, consider adopting a strategy of developing the workplace culture’s tone from the middle of the organization to foster greater trust and dialogue.

Marsha Ershaghi Hames is presenting a session on Regulations and Compliance at the Talent Development Across Industries (TDI) conference on October 18 at Yale School of Management.

About the Author
Dr. Marsha Ershaghi Hames is a managing director at LRN, a global compliance and ethics firm that specializes in developing principled corporate cultures. She has spent two decades advising boards and executive teams on transforming organizational culture, building effective compliance risk mitigation strategies, improving training effectiveness, and promoting greater leadership accountability. She believes compliance matters are no longer just legal issues but business and reputational priorities.

As a highly cited thought leader, Marsha has delivered speaking engagements at industry and association meetings including the Defense Industry Initiative, Society of Corporate Compliance and Ethics, Ethics & Compliance Initiative, and Ethisphere, and led executive programs at Georgetown University and the University of Southern California. She also leads workshops for corporate boards and executive leadership teams. She has guided projects for organizations across a spectrum of industries in the private, commercial, and nonprofit sectors. Marsha has been interviewed and cited by media including CNBC, CNN, Entrepreneur, Anti-Corruption Report, Ethisphere, ComplianceWeek, Risk & Compliance magazine, and SCCE’s Ethikos. Marsha is an expert fellow at the USC’s Neely Center for Ethical Leadership and Decision Making and serves on the advisory board of Compliance.ai, a financial tech firm that runs an AI platform designed to help distill financial regulatory risk into tangible intelligence.

Marsha holds a doctorate in educational technology and leadership, an MA in educational technology from Pepperdine University, and a BA from the University of Southern California.
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