By Zahn Alimbay in Culture — Nov 10, 2023

Speaking Up in Focus!

Integrity scandals continue to rock the corporate world and beyond. We find ourselves asking the same question again and again: How did it happen that no one noticed this before? And, indeed, corporate wrongdoing rarely occurs in the dark of night. Often, people are aware of or suspect something is happening. But why wouldn’t they raise the red flag? Why do they decide to look the other way?

The “silent bystanders” issue is not new or unique to any domain. But there are ways to tackle it.

We Train, Train and Train Again.

The traditional (prescriptive) approach the lawyers and compliance professionals usually resort to is to encourage allegation reporting by adopting a mandatory reporting policy, establish a confidential reporting line (better anonymous and managed by an independent third party), safeguard whistleblowers, and then train, train and train again.

But there is a limit to what can be done through prescriptive compliance.

Why is it not enough?

The assumption that employees do not report ethics concerns because they do not know they are required to do so or do not know how to do it can take you only so far. All the above factors are essential, and continually refreshing the message is also important. But why do people still remain silent when witnessing wrongdoing? What are those barriers preventing employees from reporting?

We do not exist in isolation. There are plenty of factors that affect the decisions we make every day. Some are internal, originating from within the organisation, while others are external. Those factors similarly affect how we decide when to raise a hand and ask a question, report an issue, or look the other way. And let’s have no doubt, the latter is also a decision.

To break the mould, we shall ask ourselves: To what extent do such other factors affect employee behaviours? In particular, is the culture within the organisation conducive to Speaking Up? Are employees trusted and supported, and do they trust the organisation? What are the internal drivers and derailers, and how do we tackle them?

Let’s look at Corporate Culture.

Following the 2008 financial crisis, regulators worldwide started asking what role the culture of aggressive risk-taking in the financial sector played in causing the financial market meltdown. In 2010, the De Nederlandsche Bank (Dutch Central Bank) was among the first to include culture and behaviour oversight in its playbook, followed by the UK’s Financial Conduct Authority and other financial market regulators. [i] US DOJ’s compliance program guidelines underline the importance of adopting and nurturing the culture of compliance within organisations.[ii]

But how do we change the culture then?

The answer comes from the field of organisational psychology.

It’s Psychological safety — a concept developed by Amy Edmondson, Professor of Leadership and Management at Harvard Business School. In the 2014 article Psychological Safety: The History, Renaissance, and Future of an Interpersonal Construct,[iii] she described it as “people’s perceptions of the consequences of taking interpersonal risks in a particular context such as a workplace”. This concept is widely applied across several organisational domains and by companies such as Google and Microsoft to improve team effectiveness, performance and creativity. And not only.

Research collaboration between Amy Edmondson and Novartis Risk & Compliance Team Fostering Ethical Conduct Through Psychological Safety[iv] gives a pretty clear picture of psychological safety's role in fostering Speaking Up.

In the context of Ethics and Compliance, we shall ask: Do people feel safe to report? Will leadership listen and support them? Will the organisation act upon the report and change?

And there are other significant components to this:

Moral Attentiveness: Can employees recognise the situation representing a concern?
Moral Engagement: Do employees believe that the organisation is driven by its declared values? Are they motivated to report? Are they trusted by the organisation and supported by leaders?
Clarity of Expectations: Did the organisation make it clear what standards of conduct are expected from employees?
Organisational Justice: Do employees believe the organisation will apply a fair process? Will leadership act upon a report? Are there consequences for misconduct?

Okay, so what do we do now?

Luckily, many organisations already have tools to make it happen.

Measure your starting point. How do employees see the organisation at this point? Run a culture survey, focus group(s) or just an anonymous questionnaire to start measuring employee perception of the organisation. And you don’t need to do it across the whole organisation – start with a team or location.
Look at the Tone from the Top. How do the Board and Executive leadership set the tone for the rest of the organisation? Is the message clear? What concrete actions do they take to demonstrate commitment to declared values? How ethical behaviour is incentivised and rewarded?
Communication and Engagement. How does the organisation communicate its values and standards? What guidance and resources are available? How does the organisation ensure the message is understood? What leadership has done to let employees know their position concerning misconduct?
Middle Management is critical in improving their teams' psychological safety. How has middle management reinforced the standards of business conduct and encouraged or discouraged their subordinates to abide by them? Do they listen and act? Do they encourage open and honest conversation? Do they trust employees, and are they trusted by employees? How do leaders across the organisation model proper behaviour?
Allegation reporting and investigation management. A higher level of transparency around the investigation process and non-retaliation leads to a higher level of employees’ comfort that the organisation will effectively investigate reports and follow due process.
Measure progress and continuously improve. Measure your reporting volumes, how the reports are made, conduct areas, severity of issues reported and reporting channels used. Repeat culture surveys to re-assess change in employee perception.

All the best on your journey! And if you need a little help, get in touch. We are here to help!

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Endnotes:

[i] DeNederlandscheBank, “Supervision of Behaviour and Culture: Foundations, practice & Future developments”, 2015, supervision-of-behaviour-and-culture_tcm46-380398-1.pdf (dnb.nl); UK Financial Conduct Authority, Culture and Governance Section, 2015, Culture and governance | FCA; “DP18/2 Transforming culture in financial services”, March 2018, DP18/2: Transforming culture in financial services | FCA]

[ii] US DOJ Criminal Deivision, “Evaluation of Corporate Compliance Programs”, Updated March 2023, Compliance (justice.gov)

[iii] Amy C. Edmondson and Zhike Lei, “Psychological Safety: The History, Renaissance, and Future of an Interpersonal Construct”, Annual Review of Organizational Psychology and Organizational Behavior, Vol. 1:23-43 (Volume publication date March 2014) https://doi.org/10.1146/annurev-orgpsych-031413-091305

[iv] Antoine Ferrère, Chris Rider, Baiba Renerte, and Amy Edmondson, “Fostering Ethical Conduct Through Psychological Safety”, MIT Sloan Management Review, June 07, 2022, Fostering Ethical Conduct Through Psychological Safety (mit.edu)

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