10/30/2013 1 1 INCENTING EMPLOYEES TO SPEAK UP SCCE WEB CONFERENCE November 14, 2013 12:00 p.m CT Carolyn S. Egbert Creative Solutions for Executives 2 INTRODUCTION • Multiple federal and state reporting laws (Whistleblower laws); – Provide protection from retaliation (e.g., Sarbanes‐Oxley; Dodd‐Frank;) • Employee reporting of misconduct still a challenge; • Strong programs/robust cultures that champion/reward moral courage are directly proportional to employee reporting.
Transcript
10/30/2013
1
1
INCENTING EMPLOYEES TO SPEAK UP
SCCE WEB CONFERENCENovember 14, 2013
12:00 p.m CT
Carolyn S. Egbert
Creative Solutions for Executives
2
INTRODUCTION
• Multiple federal and state reporting laws (Whistleblower laws);– Provide protection from retaliation (e.g., Sarbanes‐Oxley; Dodd‐Frank;)
• Employee reporting of misconduct still a challenge;
• Strong programs/robust cultures that champion/reward moral courage are directly proportional to employee reporting.
“To have an effective compliance and ethics program, for purposes of subsection (f) of §8C2.5 (Culpability Score) and subsection (1) of §8D1.4 (Recommended Conditions of Probation – Organizations), an organization shall – (1) exercise due diligence to prevent and detect criminal conduct; and (2) otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.”
4
BACKGROUND (cont’d)
Standard six of the 2004 revisions to the FSG’s seven standards for an effective compliance and ethics program provides:
(6) consistent promotion and enforcement of the program
with appropriate incentives for proper performance and appropriate disciplinary measures for those who engage in criminal conduct or fail to take reasonable steps to prevent or detect it; . . .
10/30/2013
3
5
BACKGROUND (cont’d)
Federal Sentencing Guidelines:
• are clearly remedial; mitigate culpability;
• Distinguish between rewarding ethical and compliant behavior and disciplining/deterring unethical, criminal behavior; and,
• Recognize that organizations cannot prevent inappropriate behavior from ever occurring.
6
BACKGROUND (cont’d)“Right now, we know there are misdeeds going on somewhere in our company. We just hope it is small and we find it.”
Warren Buffett, Business Nightly interview, May 2005
10/30/2013
4
7
BACKGROUND (cont’d)“Berkshire would be more valuable today if I had put in a whistleblower line decades ago.”
BACKGROUND (cont’d)In the 2012 Morgan Stanley matter, the DOJ/SEC gave the company a pass (NPA agreement) due to “rogue” employee behavior, citing MS’ compliance program elements:
High School students are cheating, lying and stealing less:
2012 2010
Cheating on an exam: 51% 59%
Lying (to parents): 55% 61%
Stealing (from a store): 20% 27%
*Josephson Institute, Center of Youth Ethics, 2012 survey
12
WHO’S IN THE WORKFORCEBOOMER (Born 1946‐1964):*
• Hard‐working, idealistic, committed to harmony• Sense of entitlement; self‐centered; self‐motivated• do not appreciate feedback; resent negative feedback• Salary‐motivated
*Ethics Resource Center, Generational Differences in Workplace Ethics, 2011
10/30/2013
7
13
WHO’S IN THE WORKFORCEGEN X (Born 1965‐1980):*
• Entrepreneurial, self‐reliant, comfortable with technology• Skeptical, cynical, slackers, question authority figures• less hierarchal, prefer flexible structures, expect multiple employers,
multiple careers• Feedback unnecessary• Motivated by security/salary;
desire to build transferable career
*Ethics Resource Center, Generational Differences in Workplace Ethics, 2011
14
WHO’S IN THE WORKFORCEMillenials (Gen Y) (Born 1981‐2000):*
• Lack literacy basics; distracted/distractable; not loyal to employer
• Demand immediate feedback/recognition; expect many employers
• Accustomed to rules/regulations; prepared for enforcement
• Motivated by constant feedback; will build parallel careers/have several jobs simultaneously
*Ethics Resource Center, Generational Differences in Workplace Ethics, 2011
10/30/2013
8
15
WHO’S IN THE WORKFORCEPressured to break rules/compromise standards:*
– Millenials 15%– Gen X 13%– Boomers 9%
Observed Misconduct:*
– Millenials 26%– Gen X 35%– Boomers 35%
Reported Misconduct:*
– Millenials 67%– Gen X 69%– Boomers 64%
*Ethics Resource Center, Generational Differences in Workplace Ethics, 2011
16
SILENCE IS NOT ALWAYS GOLDEN
• Willingness to speak up depends on:
– Perception – what others think• boss, peers, team player, public humiliation
– Sense of isolation or connection –• greater the connection, lesser the restraint
• familiarity increases sharing
– Lack of processes or forum• need environment conducive to expression
• appropriate avenues
10/30/2013
9
17
TOP 10 REASONS FOR NOT REPORTING OBSERVED MISCONDUCT*
1. Belief that no corrective action will be taken – 62%2. Fear of retaliation from co‐workers – 29%3. Fear of retaliation from top management – 28%4. No confidentiality – 42%5. Issue already addressed – 28%6. Resolved it myself – 28%7. Would have to report to person involved – 25%8. Someone else would report it – 23%9. Not know whom to contact – 15%10. Past experience of retaliation – 14%
*National Business Ethics Survey of Fortune 500 Employees, Ethics Resource Center 2012
based on core principles shared by all;– Shared values and principles inspires everyone to align
with corporate mission, purpose;– High‐achieving employees; strive to be leaders;– Focus is on long‐term legacy and endurance; and,– Fosters transparency, sharing of information;
collaboration.
*The HOW Report, LRN, 2012
10/30/2013
10
19
CULTURE IS EVERYTHING (cont’d)
• *Informed Acquiescence:
– Older‐style management based on hierarchy, structure and control processes;
– Employee behavior driven by rules, policies, procedures;
– Performance‐based rewards and punishment used to motivate employees;
– Lacks real transparency; information disseminated based on need‐to‐know.
*The HOW Report, LRN, 2012
20
CULTURE IS EVERYTHING (cont’d)
• *Blind Obedience:– Organizational structure based on command and control;
– Top‐down leadership and coercion;
– Relies on rules and policing;
– Focus is on short‐term objectives; minimal focus on enduring relationships;
– Information is hoarded; increased cynicism, trust issues.
*The HOW Report, LRN, 2012
10/30/2013
11
21
CULTURE IS EVERYTHING (cont’d)Hallmarks of self‐governing organizations:*
• Flatter structures;• High levels of trust;• Enduring values and purpose;• Exceeds others in innovation;• High employee loyalty;• Greater customer satisfaction;• Higher financial performance;• Lowest levels of misconduct; • Highest levels of reporting
*The HOW Report, LRN, 2012; National Business Ethics Survey of Fortune 500 Employees, Ethics Resource Center 2012
22
CULTURE IS EVERYTHING (cont’d)
• Organizations with the most effective ethics and compliance programs foster a cultural atmosphere of moral courage, resulting in employees who:
– Are fully engaged;
– Proud of the company and protective of its organization;
– Willing to stand up for what is right even at personal risk; and,
– View moral courage as everyone’s job and not one person’s job.
10/30/2013
12
23
MORAL COURAGE
“Moral courage is doing what is right even if the personal cost is high.”
United States Air Force Values.
“It is curious – curious that physical courage should be so common in the world, and moral courage so rare.”
Mark Twain
“Courage is being scared to death – and saddling up anyway.”
John Wayne
“Always do the right thing. This will gratify some and astonish the rest.”
Mark Twain
24
ENGAGED EMPLOYEES – KEY TO SUCCESS!
2012 AON HEWITT ANALYSIS:
• Analyzed relationship between employee engagement and financial performance among 94 global companies:
– $5BB organization with 55% gross margin/15% operating margin –increased operating income by $20MM after 1% improvement in employee engagement; 5% increase = $102MM;
– Organizations with ≥72% employee engagement attained 50% higher Total Shareholder Value.
10/30/2013
13
25
INCENTING EMPLOYEE REPORTING
26
INCENTING EMPLOYEE REPORTING
To do or not to do!
Pros?
Cons?
10/30/2013
14
27
INCENTING EMPLOYEE REPORTING
Ethics and compliance incentives should be designed to capture the hearts and minds of employees, inspire trust, strengthen engagement, engender moral courage.
Target ethics and compliance incentives directly or integrate them within other organizational programs.
If directly, awards and rewards should be equal in value, celebration and acknowledgement with other comparable organizational awards and rewards.
28
INCENTIVES
• Celebrating Ethical/Moral Courage Leaders:– President’s Award
– Ethical Champions
– Integrity Spotlights
• Performance Reviews:– Assessing/scoring ethics and compliance performance
– Leadership in promoting Code of Conduct
– Challenging conduct
– Establishing managerial targets/goals
10/30/2013
15
29
INCENTIVES (cont’d)
• Promotions:
– FSG, Standard 3 – requires organizations to use reasonable efforts to not install people in positions of authority who have engaged in illegal activities or other conduct inconsistent with an effective ethics and compliance program.
– Supporting commentary advises companies to avoid promoting such people.
• Learning and Development:
– Companion to promotion process.
– Gaining entry to leadership pathway requires demonstration of ethics and compliance behaviors.
