Most companies assume the answer is to write policies and then enforce compliance. Compliance programs are designed to prevent employees from engaging in illegal behavior. They assume that employees will comply because they are self-interested and self-protective. Compliance tactics usually include the things you see here. They increase surveillance and control their audits and monitoring processes. There's penalties for wrongdoing and standards are enforced in that way. They establish the standards and the procedures to follow them. They designate a high-level manager to oversee the compliance, and they effectively communicate the company standards and procedures. There's training, there's manuals, and there's some system to report criminal misconduct without fear of retribution. Each of these is necessary. We do have to catch and stop misconduct. Having a compliance program in place in the US does lower fines when misconduct is discovered. Because of this, the percent of US companies implementing compliance programs has risen dramatically. If you're operating in the US, I do recommend reviewing the federal guidelines that relate to your work, such as the Foreign Corrupt Practices Act. You can find specific up-to-date information here. This link is also in your handout. If you operate in other countries, I recommend reviewing their business laws. But a compliance strategy has limits. What do you think the limits are of a compliance strategy? Limits include, first of all, it leads people to assume that if it's legal, it's ethical and there is a difference. Can you think of any laws that used to be in place that are unethical? Can you think of any current laws that might be unethical? Moreover, I don't believe and I hope you don't either. That just making sure we don't break the law is an off. We want to do the right thing while earning a good living. Second, it assumes deterrence theory works. But it doesn't incorporate actual psychology. Like our health, an ounce of prevention is worth a pound of cure. But we often assume that future me will be better behaved than current me, and that's just not accurate. Many employees see the compliance program their company implements as a threat. They see it as liability insurance for the leaders. What do we need beyond compliance systems? Those who advise companies on ethics at work suggests implementing an integrity strategy. The definition of integrity by dictionary.com is, adherence to moral and ethical principles, soundness of moral character, honesty. In practice, it means doing what you say you're going to do and if you absolutely cannot meet a commitment, letting your stakeholders know and attempting to do all you can to meet it. Another definition is harboring positions of consistency and durability manifested in a correspondence between authentic values, espoused values and behavior, and persisting in adverse situations. What does this mean for you as a manager? Well, an integrity strategy is a conception of ethics. It's a driving force of behavior. It's a frame of reference for everyone regardless of their function, their line of business, their department or location. It's a clear statement of what the company stands for. It's our guiding principles. It's broader, it's deeper, and it's more demanding than a compliance program. The demanding part is that it requires active efforts to define responsibilities and guiding principles and then implement them and live by them. It's created with a cross-function team. It includes corporate counsel like a compliance strategy, but is not comprised solely of the legal department. There are a lot of different integrity strategies, but the best share these characteristics. They're based on guiding values and commitments that make sense and are clearly communicated. They reflect shared aspirations that appeal to employees, they're clearly taken seriously, employees are comfortable discussing them, they have a concrete understanding of those values. This may also be referred to as values-based decision-making, VBDM. Company leaders are personally committed. They're credible. They don't say one thing and then do another. They take action on the values they espouse. They make the tough calls consistently. The espoused values are integrated into the normal channels of the management decision-making and are reflected in the organization's critical activities, plans, goals, opportunities, the way we allocate resources, the way communication flows up and down and across the organization, performance measurements, promotion processes. The espoused values are baked into the organization or poured into the concrete of the organization depending on which metaphor you prefer, the concrete foundation or baked in. The company's systems and structures support and reinforce the values. Reporting relationships are structured to build checks and balances. Performance appraisals are sensitive to the means and not just the ends, the way we do our work, and not just the outcome of our work. Managers throughout the company have the decision-making skills, knowledge, and competencies needed to make ethically sound decisions on a day-to-day basis. That means there's training and the training is not just on the compliance policies and procedures, but also in how do you make decisions that have an ethical component? Given that, what would you say are the differences between compliance and integrity strategies in their objectives, their goals, in the assumptions that underlie them, and in how they get created and implemented? Pause the video here and complete this chart in your handout. According to Bruce Getty's of the Western Governor's University in his article on integrity and compliance-based ethics, integrity-based ethics programs produce employees that are more prone to being committed to their organizations, more aware in an ethical sense, and more willing to report problems ethical in nature. For example, take a look at Johnson & Johnson's credo. The link is in your handout. The credo is on the walls of every Johnson & Johnson office around the world. At headquarters, it's on a 10 by 20 foot wall that everybody walks by as they enter. Its code of conduct, which goes beyond the credo to provide more specific guidance is available in over 20 languages. All employees are trained on the credo and the code of conduct and the credo comes up in business decisions. They ask themselves, what would the credo have us do? The credo has been updated over the years and usually includes a range of employees in shaping it. While Johnson & Johnson may have had some missteps over the years, over the last 100 plus years, this company has built its reputation of trust and it has enabled it to weather tremendous challenges. Watch the five plus CEOs of the past, discuss the importance of trust between the corporation and its customers and leadership and employees. The link to that is in your handout. James Burke, who led the company through the Tylenol crisis in the 1980s, said that the credo liberates creativity. It helps people do things better than they would do them if it wasn't there. In other words, a code of conduct is not enough. It's the culture created by not just the credo's existence, but by the attention they give to it that drives daily decision-making and behavior. The integrity strategy it creates has built a competitive advantage for Johnson & Johnson. Companies need both compliance and integrity programs and the two should compliment each other. Employees need to know basically what's expected of them. What are the rules? How do we enforce those rules? What are the policies? What are the procedures that govern our actions in relation to our products and our services, our customers and our employees? They also need to learn how to generate ethical options, make decisions, and persuade others. Like all of management, these should build on employees innate self-control and moral judgment. The more you lead by example, the more transparent you are, and the more you behave according to a set of clear guiding principles, the more likely your employees will trust you and follow you. We build trust slowly over time by our actions and our words, but we can destroy it in a moment. The more aligned your own values are with the values of your organization, the easier it's going to be for you to live them every day. If your company has a compliance strategy but not an integrity strategy, I recommend you find allies and together propose such a strategy to your senior leadership. That will also provide you the opportunity to practice leadership, which will develop your career.
