By Zahn Alimbay in Culture — Mar 9, 2024

Tone from the Top

Many organisations have articulated values and ethical standards to which they adhere. But without a clear Tone from the Top, those values and standards are just declarations.

Often, leaders underestimate the effect their actions have on the organisation and its employees. Employees are more likely to adhere to the organisational ethical standards when they see leaders at all levels (board, executives and middle management) adhere to the declared values and follow the same rules.

It needs to be clear and loud.

Tone from the Top shall be clear and heard across the organisation. But it’s more than just Leadership communication. It is about day-to-day actions upholding organisational values and ethical standards. This is what it means to set the Tone:

Setting clear objectives and policies and exercising oversight. The board plays a critical role in setting the right Tone.
Doing the right thing every time, even when no one is around. Persisting in commitment in the face of competing business objectives.
Leading by Example. Model the right behaviours and encourage subordinates to abide by the same standards.
Embedding in business. Taking concrete actions embedded in strategy, decision-making, oversight and consequences management. Leaders shall be transparent in their decisions.
Performance Management. Recognising ethical behaviours through performance management, compensation, rewards and incentives. The same tools can disincentivise misconduct, too.
Accountability. Assign ownership, roles, and responsibilities and hold individuals accountable.
Everyone is subject to the same rules, with no exceptions. Misconduct is deterred through a consistent and fair (progressive) disciplinary process.

Board’s role in establishing the “right” Tone.

Everyone has to play their role. However, the Board is ultimately responsible for the state of ethics, compliance, and corporate culture of the organisation. They set the long-term vision for the organisation and oversee how it adheres to the strategy and organisational standards, ensuring the organisation moves in the right direction. This is what is important:

Setting compliance objectives and policies and ensuring those are aligned with the strategic direction.
Ensuring compliance risk assessment is periodically conducted and identified risks are evaluated and controlled. Defining an organisation’s risk appetite.
Exercising oversight: Periodically review the operation and effectiveness of the compliance program to ensure that it functions as intended.
Reviewing the operation of the Speak Up line and investigations. Three questions to be asked: What has happened? Why has it happened? What is being done to prevent it from happening again?
Ensuring the Ethics & Compliance organisation is independent, appropriately resourced, possesses authority and competence, and is provided with the means to do its job. Compliance leaders shall have direct access to the Board.
When the time comes to make tough decisions, the board needs to act decisively and promptly, upholding the values and standards of conduct. No exceptions.

The board shall demonstrate an active, visible, and sustained commitment to ethical standards of conduct. This also means taking a broader view of the company’s strategy and direction and keeping leaders accountable. It is also essential that the organisation has fit-for-purpose processes and reporting, ensuring that the right information is escalated to the board.

Senior Leadership

Leaders shall demonstrate leadership and commitment, not by words but by modelling proper behaviours and taking decisive actions. It’s the role of senior leaders to embed compliance standards, policies and objectives into the business and operational process. This comes across three dimensions:

Shared Commitment:

Leading engagement with clear messaging on Culture of Integrity, Values and the importance of adherence to organisational standards
Clearly articulated ethical standards and rigorous adherence by example modelling the “right” behaviours.
Reinforce standards through concrete actions and encourage middle management to abide by them.

Actions:

Ensure business ownership of compliance actions and alignment between strategic and operational targets and compliance obligations.
Ensuring the Compliance function is adequately resourced, given tools and support required, and of the appropriate level of seniority and stature, autonomous and empowered to perform their mandate successfully.
Periodically review the operation of the E&C Program and ensure compliance processes operate as intended.

Accountability:

Integrating compliance performance qualifiers into the performance appraisal of personnel.
Incentivising and rewarding “right” behaviours and disincentivising misconduct.
Organisational fairness and due process reinforced through progressive accountability.

The effectiveness of a compliance program requires a high-level commitment by company leadership. Leaders can encourage employees to adhere to the “right” standards or to act unethically to achieve business objectives at “any price”.

Middle Management

Middle management is the engine of the business. They connect the organisation's top with the people on the front line. Their upward and downward influence should not be underestimated. And they can play a vital role in building the “right” culture in the organisation. This is how:

Reinforcing high-level commitment through actions and words.
Supporting compliance leaders in furthering the message and actions, taking the lead in embedding the standards in the tool-box meetings, one-to-one and team discussions.
Employees are more likely to adhere to organisational standards when they see their leaders follow the same rules. “Speak Up,” “Listen Up,” and “Follow Up” are essential principles. You need all three to create an environment of trust and mutual respect in the organisation.
Direct supervisors are typically the first point of contact for raising compliance concerns. However, they need the tools and resources to address them.
Taking ownership of corrective actions and ensuring those are implemented in a timely manner.

Middle management's role in embedding ethical standards shall not be neglected. Their influence up and down the chain is enormous. And it can work both ways—either encouraging or discouraging compliance.

Middle managers are also instrumental in fostering a psychologically safe environment. It affects morale, innovation, productivity and team effectiveness. Employees who feel psychologically safe can ask for help, admit mistakes, raise concerns, suggest ideas and challenge the status quo without fearing personal criticism. And it goes beyond just ethical standards.

If you would like to discuss any of the above further, please get in touch. I am happy to help.

See you next time!

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