Lauren Connell, Managing Associate at The Volkov Law Group, rejoins us and provides a posting on corporate culture.  Lauren can be reached at [email protected].

What exactly does “corporate culture” mean?  Compliance professionals often talk about how important “tone from the top” or the “mood in the middle” is, but what does that really mean?

Improving corporate culture has been directly tied to higher profits and a wide range of benefits to all stakeholders.  A recent study by NBER (Here) found that 91% of executives consider corporate culture to be “very important” or “important” at their firm, and 79% rank culture as at least a “top 5” factor among all of the things that make their firms valuable.  A strong company culture is correlated with higher employee retention rates, increased creative thinking and more collaborative work, a decreased likelihood of whistleblowing, and, at the end, a more profitable company.  Statistical research and empirical studies support these conclusions.

But building culture requires a paradigm shift from compliance departments.  Traditionally the ethics and compliance function has been focused on program components – such as training or policies and procedures, but research has shown again and again that we must shift our focus to include corporate culture and the underlying values held by your organization.  This will improve not only compliance with legal and regulatory requirements, but also build a foundation where employees make decisions and act on your organizations values, even when no one is looking.

An example of the paradigm shift compliance departments need to make is asking ourselves why we slow down at school crossings – is it to avoid a ticket or protect nearby children?  As a society, we want the answer to be the latter. Your company should seek to build a similar mindset with its own culture.  Employees, managers, and executives should seek to make the ethical choice, which is also compliance with relevant laws and regulations.  In the FCPA context, “we don’t bribe because it is against the law” should be replaced by “we don’t bribe because it is not ethical.”

But measuring and building culture is not simple. It is not as easy to report on as a 99% training completion rate.  It is also not as easy to communicate success or problems with corporate culture as with other metrics.  The NBER study notes that “corporate culture is a difficult-to-observe force within companies,” and focuses closely on the process it uses to collect and analyze data.  That is putting it mildly, corporate culture is difficult to observe… and measure, and change, and establish.

Corporate culture must be conscientiously built – this is where ethics and compliance departments and professionals must take the lead.  Corporate culture must be communicated through simple messages about the values a company believes in and, at the same time, leverage corporate governance mechanisms, such as the program components mentioned earlier, to strengthen and reinforce these values.  For example, including values-based metrics in employee performance reviews that, ultimately, will lead to increased compensation.  These can be, for example, whether or not the employee collaborates with colleagues or acts as an ethics leader. Another example is structuring compensation to reward long-term success instead of short-term profits.  Here are three simple steps to start integrating corporate culture into your compliance program:

1. First, you have to understand where corporate culture is now. Using tools like surveys, interviews, and focus groups allows you to measure what your employees and managers value now and what your workplace norms are. Use simple questions in surveys to increase participate rates and save more in-depth discussions for interviews and focus groups.  Ask questions about what their values are and how they act workplace.
2. Next, work to define what values should guide your organization. These will form the basis for the corporate culture you want to build and your compliance program as a whole.  Use the information you gathered in the first step to understand where your weak points are.  Most importantly, set a message that will be understood across your organization, taking into account cultural or location differences.
3. Finally, you put the two together and design an implementation process to build and improve on what you have – through not only your policies and procedures and training programs, but also the entire compliance communication structure. Use meetings, emails, social media, and any other chance you have to emphasize corporate values. Your ultimate goal is to ensure that corporate values are reflected within the daily activities of your employees, managers, and executives.

To get the process started, it is important to get the support and buy-in of senior executives and company leaders. Their message has the greatest impact on company values as perceived by employees and mid-level managers.  Involving them in the first steps will build buy-in and ongoing support.  To do that, start with the same message about improving profitably and corporate performance as I did here… it works.