You wake in the night, only to toss and turn for what seems like an eternity. When you’re not thinking about how tired you’re going to be in the morning, you are mulling over work concerns. You’re not worried about unfinished business, but the “what ifs” keep running through your mind. “What if our new outsourcing partner leads us into violations? What if we’ve interpreted that accounting rule just a little too liberally? What if our business unit managers aren’t consistently upholding our directives? What if there’s an employee out there who is violating the law, and we find out too late?”
You see your organization as a house of cards waiting to fall. Then your thoughts turn to your staff and you remind yourself that you have strong people working for you. All your good efforts would surely withstand scrutiny, should the worst-case scenario occur.
Your mind then wanders to the email you sent to the entire staff announcing the win of a large contract. “The future looks bright,” you told them at the time. “The quality of our products depends on the skills of our employees; you are our most valuable asset.” Now you regret your words, because the majority of the work is going to be outsourced and layoffs are on the horizon. As you finally start to doze off, you wonder to yourself: “Should I have said all that? Does it even matter?”
What Does Tone Look Like?
It isn’t easy being an executive these days; the risks to organizational and personal reputation alone are enough to cause many a sleepless night. And while being able to point to a Code of Conduct and existing internal controls may help leaders sleep a little better, even enforcement agents are beginning to realize that corporate malfeasance often results from two things: bad decisions by individual actors, and a corporate culture that allows the conduct to occur.
The magnitude of that message—that at the same time corporations must worry about individual employees, they must also foster an overall environment that discourages misconduct from taking place—is huge. Time and time again, we’ve heard policy-makers, pundits, and even prosecutors declare that for efforts to prevent and detect misconduct to succeed and an ethical culture to take root, the effort must come from the top.
Many have offered practical guides for executives, but what exactly does tone at the top look like? How does it get established? Research has begun to uncover some essential truths about the mystery of establishing a proper tone at the top.
Here are The Five Truths:
- Few leaders actually get through to employees with the right tone.
Research by Treviño, Hartman and Brown (2000) indicated that executives do acknowledge the importance of the tone they set in their organizations, and many believe they are perceived by their employees as actually accomplishing the task. But interviews with lower-level employees revealed that some of the most committed executives were considered to be neutral at best on the importance of proper conduct. Others were even viewed by their employees as altogether unethical. The reason? Executives weren’t explicit enough and employees concluded that their leaders just didn’t care.
- Tone at the top does make a difference.
Where it is being established, the proper tone at the top does have a substantially positive effect. According to the Ethics Resource Center’s recent studies, where executives committed to certain actions, the prevalence of misconduct was 57 percent less than in organizations where these actions were not displayed. Similarly, employee willingness to report misconduct was 33 percent higher, and exposure to risk was 66 percent lower. And what reason...
- Big change is the result of small actions.
It turns out that what leaders do to transform their cultures and to reduce misconduct are not broad, sweeping initiatives. The recipe for success is manifest in small everyday activities. Five stand out in particular:
- Talking about the importance of ethics. Annual endorsement of compliance training is a start, but what really matters is continual reference to corporate values in making and explaining business decisions.
- Modeling ethical conduct. Most organizations have a set of core values; leaders who effectively set the tone actively and consistently display those values to the people around them.
- Keeping promises and commitments. The key here is earning the trust of employees that you will keep your promises, based on the fact that you’ve done so before. Avoid saying one thing and then doing another.
- Keeping employees informed. Sharing information about the well-being of the organization, strategic directions, and other activities results in an employee population that feels valued and invested in accomplishing the best interests of the company. Employees trust leaders who give them information.
- Holding employees accountable. When wrongdoing occurs, leaders who set the right tone back it up by enforcing their standards. If not, they will not be believed.
- Some efforts matter more than others.
Together, these ethics-related actions result in employee perception that the organization prizes ethics. That said, some of the above actions make more of a difference than others. Employees are 15 percent less likely to observe misconduct when their top management sets a good example and only 6 percent less likely to see others doing something wrong if their leaders just talk about ethics. It’s not enough simply to talk the talk; one must lead by example to set the right tone and be credible.
- Organizations have many “tops.”
Perhaps most importantly, tone at the top doesn’t involve just a handful of people at headquarters. Direct supervisors who engage in these ethics-related actions have been shown to curtail levels of misconduct by as much as 37 percent. To an employee in a large organization, “the top” might be a direct supervisor, a department head, a business president or a CEO. Every organization has many tops, and the tone must be conveyed by all of them.
Tone at the top is easy to say but harder to do. The truth is that setting a tone is not a strategy; it’s an expectation that is made credible through a relationship. Leaders who set the standard do so by consistently reinforcing their commitment to right conduct, knowing what employees around them are doing, and encouraging their direct reports to do the same. The cascading effect yields the right “tone at the top.”