An effective compliance program requires a senior leadership team committed to fostering a culture of ethics and compliance which strikes the right tone at the top. But how successful that program actually is at the end of the day depends greatly on the mood in the middle.

A company's policies and procedures are only as effective as its weakest link, so it's important for managers at all levels to support those policies, because they are who ultimately define the company's culture and values, explains Ted Nunez, ethics and culture practice leader of corporate ethics and culture advisory firm LRN. “For most employees, the manager they work with day in and day out is the face of the company,” he says.

Nunez defines “mood in the middle” as the message that is communicated from all leaders below the C-suite down to the frontline supervisors. “Mood in the middle has to do with all of those levels of management and the tone that they set with their teams,” he says.

Managers can't effectively deliver and promote the company's ethics and compliance message, however, without having the right tools and knowledge at their fingertips.

Appointing the Right Leaders

“You cannot define the value of culture, but you can put a value on hiring the wrong people,” Scott Ward, senior vice president of finance for software-as-a-service company Nanigans, said during a discussion at the annual MIT Sloan CFO Summit last week.

So what does it take, then, to be a good leader, and one who can set the appropriate tone? According to Nunez, effective leaders are those individuals who:

Are honest and act with integrity at all times;

Listen attentively and with real concern when an employee comes to them with a problem; and

Look at failures and mistakes as learning opportunities as opposed to moments for punishment or reprisal.

All of these attributes, Nunez says, keep employees happy and productive and coming back to work.

The most successful companies have the strongest culture, said Neil Moses, CFO of energy company EnerNOC, who also spoke on the panel. “Creating an environment that has the right level of energy that makes people want to be in the office is important,” he said.

Employees value the people they work with more than they value certain perks, executives on the MIT panel agreed. To maintain employee morale, for example, Communispace, a marketing platform for consumers, keeps scooters in the hallway, community kayaks in the basement, and a foosball table in the cafeteria for employees to use, among other bells and whistles.

Those perks, though, are secondary to the culture that managers create with their words and actions, said Communispace CFO Gary Arena. “Do employees like stuff like that? Sure they do,” said Arena. “But the reality is that it's really about folks having other folks that they work with that they can be inspired by.” That doesn't always come just from the corner office, but also from middle management.

To make sure middle management effectively conveys the company's message and supports a culture of compliance, senior leadership must maintain open communication with their management teams.

“You cannot define the value of culture, but you can put a value on hiring the wrong people.”

—Scott Ward,

Senior VP of Finance,


Communispace achieves that, for example, by having in place a pool of officers whose responsibility it is to engage with employees and emulate the company's values, explained Arena. Those officers are guided by the company's five-person executive leadership team.

“We make sure that all the officers are aligned around culture, that they're aligned around strategy, that they're aligned around some of the bigger things we're trying to accomplish as an organization,” explained Arena.

Breakdowns in communication between senior leadership and management occur when ethics and compliance matters are not made a priority as part of the company's overall strategic communications, says Nunez. The idea is that companies “continue to reinforce, and to present in novel ways, messages around the importance of principle business conduct.”

Creating a Responsive Culture

Many managers still don't feel fully comfortable handling employee concerns, says Mary Snyder, senior director of advisory services for SAI Global. Companies must train managers on how to address issues raised by employees, and how to make appropriate judgments in deciding when and where the problems need to be escalated, she says.

One way to do that that, says Snyder, is to take the ethics and compliance messages coming from the corporate office and online training program and “provide ways that managers can turn them into teachable moments, or discussions at meetings.”  She says if senior leaders are leading by example and modeling ways in which questions can be raised and resolved and analyzed, the manager may feel more comfortable addressing issues than if they're not getting that kind of guidance.

Creating a speak-up culture also goes a long way toward strengthening a company's compliance program. When employees feel comfortable reporting issues internally, Nunez says, levels of misconduct go down, and employee morale goes up.

Just as employees need reporting mechanisms to raise issues and concerns, so do managers. “The good compliance teams will make sure managers within the company at all levels know who they can talk to quickly, and get good advice for how to deal with a situation,” says Nunez.

Ethics Advocates

Some companies have started to develop “ethics advocate” networks, Snyder says, in which certain managers in the company are selected to support or lead a specific group or region outside of the group they directly manage. “Those people can help with additional training and serve as another resource to help people in the field deal with ethics and compliance questions,” she says.

Having ethics advocates is essential for companies with remote offices. EnerNOC, for example, has headquarters in Boston, but also has offices throughout the United States and around the world. “Our challenge is to replicate what we've done locally in the remote offices,” said Moses.

A SIMPLE Approach

While manager development can be challenging, according to SAI Global, these SIMPLE steps provide a

framework for establishing a comprehensive and effective tone from the middle:

Set expectations clearly;

I nvest in the tools and learning that managers need to perform their E&C-related responsibilities effectively;

M itigate by training on manager-specific compliance risks as a part of E&C learning initiatives;

P rovide practical support for manager-led initiatives and reporting;

L ook to proactive listening and observation as the foundation for integrity leadership; and

E mbed compliance and ethics into managers' jobs, including integrity leadership as part of their professional development and their measured performance objectives.

The key is seeing tone from the middle as a strategic part of managers' professional development—part of their jobs, not an additional responsibility—and empowering them with the tools and support they need to lead with integrity.

Source: SAI Global.



Nanigans, which has offices in Boston and San Francisco, faces a similar challenge when it comes to bridging communication gaps, said Ward. One way the company is overcoming that challenge is by bringing the entire company to Boston once a year just to “make those face-to-face connections with the rest of our team,” he said.

Other companies reinforce the company's ethics and compliance message through informal mentoring by the company's compliance team, Nunez says, in which ethics champions or ambassadors are placed within certain countries or business units to lead by example and help managers develop training initiatives, he says.

Another challenge many companies face is how to measure, incent, and reward managers' compliance and ethics leadership. “Companies are really grappling with how to make these kinds of things more measurable,” says Snyder. “As part of the performance evaluation process, sit down and come up with specific examples of positive behavior that exceeds expectations or that merits some form of additional recognition,” she advises.

If a manager is promoted for ethical leadership, senior management should make clear to that individual that the reason they are advancing in the company, in part, is because of the way in which they act as a role model for other employees, says Nunez.

Another way in which some companies are rewarding managers for their leadership skills is by offering some sort of annual ethics award, says Nunez. In this way, senior managers publically recognize managers who demonstrate what it means to “walk the talk,” Nunez says, “and who demonstrate a real commitment to the company's core values and mission.”

Fostering tone-from-the-middle is not a one-size-fits-all approach, says Snyder. How each company accomplishes that goal depends on each company's culture, the way in which the company is organized, and how they interface with employees.

In all cases, however, the idea is to ensure that managers understand their expectations and for senior management to provide them with the training and resources they need to help them do their jobs effectively.