Measuring and Reporting on the Organization’s Culture (Part III of IV)

While the value of a positive corporate culture is clear, a strong culture does not always develop organically. Companies must devote attention to measuring, managing, and promoting ethical cultures.

Let’s start with a simple proposition – if a company’s culture is its most important internal control and its most valuable intangible asset, a chief compliance officer (CCO) should devote commensurate time and energy to promote and monitor the organization’s culture.  Along with this responsibility, the CCO should regularly report to senior management and the board about the organization’s culture.

A company that is building a strong ethical culture often achieves lower employee misconduct rates in contrast with organizations with a weak culture.  This is a valid indicator of the strength of a company’s culture.  The key to this equation is monitoring employee misconduct rates.

An important caveat to measuring employee misconduct.  An organization has to collect and analyze employee incident reports from all available sources – human resource reports, internal reports, and hotline or employee reporting systems.  Employee misconduct data cannot be limited to just hotline reports.  Most organizations have expanded employee reporting systems to include broad incident reporting systems – walk-ins, oral reports, and formal internal reports. 

Employee incident data is a valuable source of culture information.  The data can be collected and organized across the business, in specific divisions, in geographic regions or other relevant categories.

To supplement this key indicator, a number of organizations adopt “proxy” measures of culture – number of investigations, conflict of interest disclosures, seriousness of investigations, training attendance, and other typical compliance data. 

CCOs who rely on these measures have to adopt a new multi-pronged strategy.  While CCOs enjoy staying in their expertise lane, CCOs have to embrace a new strategy that incorporates three specific tasks.

First, CCOs have to survey relevant groups in the organization.  A simple 12-question survey can be designed and executed for small or larger populations.  Most organizations conduct an annual or bi-annual employee survey, usually for the entire organization. A CCO can piggy-back on this survey and ensure that specific culture-focused questions are included (e.g. What is your view of corporate leadership?  Have you observed a colleague or supervisor engage in misconduct?  Did you report it?)

CCOs should develop targeted surveys to address smaller groups (e.g. a country, a division, a manufacturing site) and collect results.  A rapid, targeted survey strategy can provide important indicators, along with employee complaint  or misconduct rates, of culture trends in the organization. 

A robust survey program can be executed with the assistance and cooperation of human resources since the information will have immediate relevance to both HR and compliance functions.  The data can be collected on a continuing basis, assessed and analyzed.  Ultimately, the data trends can be reported to senior management and the audit/compliance committee.  The CCO and HR functions can take ownership of the culture issue by providing valuable insights to senior management and board members.

Second, CCOs can engage business managers and employees through a proactive interview program.  CCOs can collect valuable insights and observations from key employees.  CCOs can use employee incident and complaint report trends to identify specific offices or operations where trends appear to indicate potential culture issues.  For example, if the organization identifies increasing employee complaints of discrimination or harassment in an office or specific country/region, a compliance professional can prioritize individuals in that area for a few interviews.  The culture interviews should not be used as a means to investigate potential misconduct.  Rather, a few, informal interviews should be conducted. The interviews can provide important insights into the office or country/region and any specific concerns.

Third, CCOs should conduct focus groups focused on culture.  Bringing together a cross-section of managers and employees and assuring them of confidentiality, a focus group can generate important insights about a company’s culture.  While a focus group does not generate measurable data, the observations while anecdotal often includes important observations that can provide valuable to monitoring a company’s culture.

This is not an exhaustive list.  Prior to the pandemic, some companies conducted on-site interviews as part of a compliance audit scheduled at corporate offices.  The interviews included culture-focused questions, the results of which were reported to senior management and the audit/compliance committee. 

There are a number of ways to collect and analyze culture-related data.  My only suggestion is to avoid “proxy” measures and embrace a robust survey process, either with HR or as part of a compliance initiative. 

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