LRN survey: Shared elements of ‘high-impact’ ethics and compliance programs

This year’s report garnered responses from 1,164 ethics, compliance, and legal practitioners across 22 industries and 21 countries, with 60 percent located outside North America. Nearly all respondents came from organizations with at least 1,000 employees.

LRN analyzed the data “to determine the critical differentiators that make some ethics and compliance (E&C) programs more effective than others.” E&C programs were categorized into one of three buckets—high-impact, medium-impact, or low-impact—based on what effect ethical culture had in the organization. “The most crucial factor we have identified in our work is that a values-based approach to governance builds and sustains ethical culture—the essential element of more effective E&C programs,” LRN stated.

Values as a differentiator during the Covid-19 pandemic. According to the findings, 96 percent of respondents in high-impact organizations indicated E&C considerations played an important role in shaping their organization’s response to Covid-19 challenges, versus 68 percent at low-impact organizations.

Respondents from high-impact organizations also indicated their workplaces emphasized company values—rather than rules and procedures—to motivate employees to do the right thing (95 percent vs. 63 percent) and that their ethical cultures are stronger because of their experiences coping with the pandemic (94 percent vs. 69 percent).

Program accessibility. LRN’s findings revealed high-impact organizations, compared to low-impact organizations, are more likely to expect to simplify and streamline policies and procedures (58 percent vs. 19 percent) and expect more regular engagement by their leadership around E&C programs (56 percent vs. 19 percent).

High-impact organizations also anticipate greater use of interactive and web-based tools and program elements (60 percent vs. 23 percent) as well as increased use of data metrics to identify trends, areas of improvement, and compliance (53 percent vs. 20 percent).

Training and communication resources. The survey revealed 90 percent of high-impact organizations made significant changes to their E&C program to meet the needs of employees working remotely, versus 63 percent of low-impact organizations. For example, high-performing programs were more likely to use all available tools for employee training and make their programs more user-friendly.

According to the findings, high-impact organizations plan to prioritize the following enhancements to their E&C programs to a much greater extent than low-impact organizations:

• Integrating major E&C program elements into a mobile app (72 percent vs. 44 percent)
• Creating simplified and searchable policies and procedures (71 percent vs. 53 percent)
• Making greater use of digital certifications from employees in lieu of on-site audits and compliance reviews (66 percent vs. 54 percent)
• Creating a web-based, searchable code of conduct (65 percent vs. 45 percent)
• Creating training specifically designed for virtual platforms, such as Zoom or Microsoft Teams (64 percent vs. 53 percent)
• Improving training to make it easier for employees to use remotely (66 percent vs. 44 percent)
• Using customized content to address risks and challenges (56 percent vs. 43 percent)

Just 38 percent of respondents overall offer shorter, more targeted training courses, and only 25 percent of total respondents said their organizations use mobile devices to deliver training.

E&C metrics. Areas high-impact organizations value versus low-impact organizations include the following:

• Employee engagement with E&C programs (68 percent vs. 41 percent)
• Misconduct trends and patterns (72 percent vs. 30 percent)
• Strengths and weaknesses of ethical culture (68 percent vs. 37 percent)
• Code of conduct and policy “clicks” on specific topics (66 percent vs. 25 percent)
• Root-cause analysis data for compliance lapses (64 percent vs. 33 percent)
• “Speak out” and reporting data (61 percent vs. 32 percent)
• Hotline complaints (59 percent vs. 28 percent)
• Training content retention (65 percent vs. 35 percent)

Regarding areas in need of improvement, LRN’s report showed while most companies use employee engagement surveys, they generally include just a few questions, which could signal a missed opportunity. “An effective ethical culture survey measures employee perceptions of trust, respect, transparency, speaking up without retaliation, and organizational justice,” LRN stated.

Few respondents in both high-impact and low-impact organizations indicated they use employee roundtables or focus groups. The least used metric was “data drawn from the hotline, training, human resources, audit, and other sources.”

Resources and standing. Most respondents said their E&C programs have sufficient resources, authority, and the ability to raise issues or concerns up to their boards. In high-impact organizations, particularly, E&C considerations played a significant role.

For example, 76 percent of high-impact organizations said their board, in the past year, has “taken an active role in ensuring that any misconduct by senior executives or excellent performers is effectively addressed.” Another 67 percent said their organization’s “consideration of E&C risks or factors led to substantially modifying or abandoning a business initiative.”

The report also found high-impact organizations are far more likely to have in place formal requirements that an employee’s ethical behavior be evaluated as a significant factor in:

• Performance management processes (88 percent vs. 53 percent)
• Hiring employees for managerial, executive, or control functions (83 percent vs. 44 percent)
• Selecting employees for promotion (80 percent vs. 44 percent)
• Bonus award process (70 percent vs. 37 percent)

Board engagement. LRN’s survey found respondents of high-impact organizations were three times more likely to anticipate greater engagement by their board of directors in supporting ethics and compliance (57 percent vs. 15 percent of low-impact organizations).

“Last year, our research showed that companies and organizations relied upon their values to go above and beyond their legal and regulatory obligations and meet the challenges of the pandemic,” LRN concluded. “This year, that positive and hopeful trend continues.

“Leaders led by embracing ethics and compliance, rather than bypassing it as irrelevant or burdensome—and strengthened their organization’s ethical culture by doing so. Ethics and compliance teams’ efforts were validated, as their programs helped shape their organization’s response to the ongoing pandemic and continued to guide employee behavior.”