Finding useful metrics to measure corporate culture is not always an easy task for ethics and compliance officers—but once unearthed, such data can be a gold mine for an ethics and compliance program.
Without metrics, chief ethics and compliance officers have no way to gauge the effectiveness of corporate culture. A single metric by itself has limited value until it can be correlated with other metrics to provide actionable context; something that helps to facilitate insight and decision-making.
The more data that can be mined, the easier it becomes for ethics and compliance teams to unearth where a problem may be brewing or where cultural weaknesses lurk. Best of all, most compliance metrics are universal; they can be used by any company—public or private, large or small, and no matter the industry.
At NAVEX Global’s 2017 Ethics and Compliance Virtual Conference, ethics officers shared their approaches toward cultivating a speak-up culture and measuring effectiveness within their organizations. Fundamentally, an effective speak-up culture is one in which employees feel comfortable coming forward with a question or to raise a concern, without fear of retaliation.
Two common metrics that most companies traditionally have tracked to measure culture are the number of reports per 100 employees and the anonymous report rate. “What’s very important for organizations to do is also break your total data down by business unit,” said Carrie Penman, chief compliance officer and senior vice president of advisory services at NAVEX Global.
Penman cited a real-world example of reporting data provided by a chief ethics officer showing that the anonymous report rate by business unit in that company ranged between 33 percent and 81 percent. A high rate of anonymous reports may indicate that there are some issues worth looking at, she said.
What this data set further revealed is that 77 percent of reports coming into the corporate center were anonymous, which was troubling because that’s the one group that should be leading and managing ethics and compliance initiatives and culture, Penman said. “It was an opportunity for this organization to do some further analysis as to what was driving this set of data,” she said. “They found that they did, in fact, have a culture of fear and concern about retaliation—in particular, at the corporate center.”
“Instilling a speak-up culture is not just the responsibility of the ethics program alone; it’s an enterprise-wide responsibility.”
Lawrence Wasnock, Corporate Ethics Officer, L3 Technologies
Aerospace and defense company L3 Technologies is another example of a company that compares the reports of each business unit to make sense of the data. Lawrence Wasnock, vice president and corporate ethics officer at L3 Technologies, said he also looks at each business unit’s data individually over time “to get a historical feel of whether reporting is going up or down.” Moreover, Wasnock said he also looks to external benchmarks from the aerospace and defense industry in which L3 operates, as well as to general benchmark data to use as a comparison tool.
When cultivating a speak-up culture, collaboration is key. “Instilling a speak-up culture is not just the responsibility of the ethics program alone; it’s an enterprise-wide responsibility,” Wasnock said.
By partnering with HR, legal, security, internal audit, and environmental health and safety, resources and data can be leveraged, and alignment achieved. HR reports, especially, can be a valuable source of data, but may often be overlooked by ethics and compliance teams.
For many years, Duke Energy, for example, reported only on cases it received through its hotline before it started to incorporate data from HR, said Allen Stewart, Duke Energy’s director of ethics. In fact, Duke Energy “recently started paying much more attention to all types of HR reports,” Stewart said, including both specific allegations and general reports it receives from HR. “Those are also turning out to be a very rich source of data,” he said.
It’s important to keep any eye out for certain themes and trends in both HR reports and hotline data. Red flags to watch for include a spike in the volume of HR reports or hotline calls coming from a specific business unit, geographic location, or even concerning a specific supervisor; or a high volume of complaints concerning a specific type of allegation—such as labor violations or sexual harassment.
NAVEX Global CCO Carrie Penman warns of corporate culture red flags
A spike in volume of HR reports at a location;
Ignoring or trivializing HR reports;
Management either not wanting to see data, or not wanting data reported up the chain;
Spikes in reports that are out of the norm for the company or location;
Changes in substantiation rates;
Change in patterns of anonymous reporting;
No, or few, reports or leadership pride in lack of reports;
Long case closure times in certain locations or for certain investigators;
Departmental requests to forward reports and then close without further information; or
Reports from organizations that have compliance responsibilities—and particularly if those reports are anonymous in nature.
Source: NAVEX Global
Also, pay attention not only to individual cases, but also the aggregate number of cases coming from a specific location or division. A high number of cases could be an indication that employees don’t feel comfortable raising concerns to a certain supervisor, and so they turn to HR or the hotline instead. That suggests a culture that could use some adjustment, Stewart said.
Moreover, ethics and compliance should partner with HR during the exit-interview process, Penman said. That’s a good opportunity to ask employees who are leaving if they have ever witnessed wrongdoing. If so, did they report it? If not, why not? “The exit interview is a very critical process and can be compared with the hotline data,” she said.
Outside of HR, ethics and compliance teams should think creatively about what other departments may hold data that can be captured internally to gauge culture. Take, for example, a pilot program that Duke Energy just recently launched to track information coming through its customer call centers. The idea is to capture information received as it relates to employee behavior, Stewart said, like if a technician’s behavior violated one of Duke Energy’s core values.
Internal investigations provide yet another opportunity to foster a speak-up culture. One thing L3 does, for example, is “at the conclusion of an investigation, when we close out with the reporter (the individual who raised the concern), we will actually ask the individual, ‘were they satisfied with the process?’ Hear what I said: the process, not necessarily the conclusion,” Wasnock said.
Even if it turns out that the allegations were unsubstantiated, it’s still important that employees feel that their concerns were heard, and that the process was fair, Wasnock said, “so the satisfaction rate is very important at L3.”
Above all else, throughout the process of seeking key metrics and measuring culture, it’s important not to lose sight of the end goal: “One of the most important goals of an ethics program,” Wasnock said, “is to identify the root cause.” What factors are contributing to the issues that the company is seeing? What can be done to improve the situation?
Accumulating data to mine for rare gems of insight is just one part of cultivating a speak-up culture. The other part, Stewart said, is “offering actionable recommendations that will materially impact our organizational culture.”
Having a clear communication strategy is a vital component of getting long-term value from the data that the ethics and compliance team gathers, “meaning, we need to do more than just present accurate information,” Stewart continued. “We must explore the data, translating it into key strategic insights. The end game here is to identify organizational trends or significant issues that are most likely to create ethical risk for the company.”
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