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How To Measure Ethical Culture

Melissa Klein Aguilar | June 6, 2007

It’s the $64 million question in Corporate America: How do you “measure” culture and determine whether your ethics and compliance initiatives really work?

Despite the mainstreaming of governance and compliance, that challenge remains daunting for companies of all stages and sizes, according to a panel of compliance experts.



Klafter

“We’re still struggling to figure out what our metrics ought to be,” Cary Klafter, corporate secretary and vice president of legal and government affairs at Intel Corp. told attendees during a panel discussion on the topic at Compliance Week’s annual conference Thursday afternoon. Klafter said measuring success and identifying the data that’s “of real use” is an ongoing process.

Since Sprint and Nextel merged roughly two years ago, one of the toughest challenges has been defining the culture of the new company, Sprint Nextel’s chief ethics officer Christine Hill said. While a merger presents an opportunity to create a new culture, determining what you want the culture of the new company to look like can be difficult, Hill said. She noted that the company experience “post-merger euphoria,” scoring its highest marks on one of its survey measurements around culture, then later saw those scores drop.

Klafter noted that there’s a “lot of low-hanging fruit” in compliance and ethics that companies can measure, such as the amount of and type of training, and the number and outcome of investigations.

While you don’t want to duplicate efforts by looking at data being used already in other areas, he noted, “There may be a lot of good data you’re not capturing.”

Andy Hinton, ethics officer at Google, where the mantra is “don’t be evil,” said he views culture in the simplest form as “Will you do the right thing when push comes to shove?” At the young company, Hinton says the focus is currently on answering basic questions, such as whether employees will feel comfortable raising a compliance concern and determining whether they know how to raise one if they spot one.

While Hinton said he’s not looking to create a compliance culture like that of GE, where he previously headed compliance, since Google’s culture “wouldn’t sustain that,” he noted, adding, “You don’t want that entrepreneurship and that freedom to lead the company to places you don’t want to be.”

All of the panelists said that surveys are an extremely useful tool for measuring culture and gauging the progress of compliance and ethics initiatives. However, they also warned against “overkill.”

It’s important to give the board “enough to inform them” while at the same time, not overwhelming them, noted Hill. “Our board is very vocal and lets us know when they’ve reached their pain threshold,” she said. Her committee reports to the audit committee quarterly and to the board annually.

Panelists noted that it’s equally important to make sure your employees don’t suffer “survey fatigue.”

Hill noted that the metric that’s gotten the most attention from the company’s board is its “Integrity Index,” a series of five ethics questions based on National Business Ethics survey questions that the company asks in its annual all-employee survey, any smaller periodic surveys it conducts, and during its exit interviews. The questions focus on whether employees feel pressure to compromise the Code of Conduct. The company has set a target for where it wants the response on those questions to be. Hill noted that her team has put “20 percent of our short-term bonus compensation at risk if we don’t achieve that.”

Panelists also noted the need to be sensitive to cultural differences when applying ethics and compliance training and surveys in overseas locations, where U.S.-specific questions might not apply and some aspects of the Code may get “lost in translation.”

Other tools panelists said they use include focus groups, one-on-one meetings with management, and fireside chats.