Q&A from ECI’s Live Webinar: The State of E&C in the Workplace – Differences Between Small, Medium and Large Enterprises

ECI had a very engaged audience during the webinar which featured ECI’s Global Business Ethics Survey®: The State of E&C in the Workplace – Differences Between Small, Medium and Large Enterprises. If you missed the webinar, please visit the events page to watch it on-demand.

We had a record number of questions from our audience and wanted to ensure that they were addressed accordingly. Below are those questions from the attendees and the responses from the presenters.

Question: I would think it is as interesting that the top management and coworker numbers are meaningfully higher than for small and large organizations. The supervisor number on the other hand is right in line with small and large organizations.

Response: Yes, the data show that the aggregation of top management and coworker actions in medium-sized organizations is higher than in small and large organizations.

It might pertain to employees’ level of knowledge about the actions themselves and awareness of the actions of others thus enabling them to agree others are undertaking the actions.

• Employees in small organizations might not be knowledgeable enough about formally constructed ethics-related actions,
• Employees in large organizations might be knowledgeable enough about formal ethics-related actions but not interact frequently enough with senior managers and others to be aware of their actions.
• Employees in medium-sized organizations might be both familiar enough with these formal ethics-related actions and interact frequently enough with others who also know about these actions thus enabling them to agree that others are undertaking the actions. It is kind of like finding the right temperature porridge in the three bears’ story.

The findings on the later slide regarding lower levels of program element awareness by employees in small organizations help to support the explanation that employees in small organizations might be less knowledgeable about formally constructed ethics-related actions. The employees are less likely to be exposed to these through ethics & compliance (E&C) training, performance evaluations, etc.

Question: What is an example of building ethics into an incentive-driven organization?

Response: You could measure ethics culture and manager perception, followed by developing incentives and metrics designed to improve those scores.  For example, increasing perceived manager frequency of communicating ethical values.  For business operations, you could develop incentives around audit and inspection results (i.e., quality, accuracy, and integrity-based metrics).  You could also include E&C in the manager promotion process to comment on prior issues, departmental culture, and employee reporting.

Another way to look at building ethics into incentives is to look at how to prevent fraudulent transactions that result in increased incentives.  For example, suppose you are incentivizing based on the number/amount of sales. In that case, you could work into the incentive plan that there is a claw back if that sale isn’t a viable sale (e.g., the client cancels in the first 30 days, there is negative customer sentiment from a survey given about the interaction, etc.). This will help to prevent the unethical activity of padding numbers with false sales.

Question: When you say build in ethics into the metrics, what does that look like? Hit the goals but take points away for violations? Or some more positive metric re: ethics?

Response: See above.  This is a constant source of debate in our industry.  Penalty for violations is a risk for discouraging reporting, so penalizing for undisclosed violations is an option.  I prefer more positive incentives around culture and quality.

Question: Do BU managers in large organizations also face the same pressures – incentive goals – that Elizabeth mentioned that managers in medium-sized organizations face?

Response: Yes, absolutely, particularly if the BU managers’ incentives are based on short-term results (weekly, monthly, quarterly) vs. long-term results and mission/vision/values focus.

Bonus Question: What can big organizations do to help their small- and medium-sized supply chain organizations?

Response: Provide incentives to suppliers in the procurement process for quality of E&C programs and compliance track record (this is already a growing practice in third-party due diligence).  Provide additional transparency into the big organization’s E&C program to give smaller organizations insight into industry-accepted practices.

Question: Do you think that the hiring processes of these types of organizations, in, say, a growth mode, have a relationship with the high reporting rates of misconduct? Hiring to fill a need versus hiring to fill the position with the appropriate skillset and/or background?

Response: Absolutely.  Rapid hiring will often focus on checking boxes for technical skills and experience and track record for productivity, as opposed to true manager/leadership skills around empathy, teamwork, and emotional intelligence.  There is also less time invested in important steps such as behavioral interviewing, checking references, and similar due diligence.

Question: Interesting that there is more pressure in medium-sized organizations but also higher reporting. Thoughts on why that is?

Response: It’s hard to generalize for this subset (based on organization history, industry, capitalization, etc.), as there is no bright line between small, medium, and large.  Research suggests that medium-sized organizations are often challenged by (i) operational growth and financial objectives that exceed tools and processes that were sufficient when they were small organizations, (ii) lack of controls around auditing, documentation, and separation of duties that large organizations have invested in, (iii) increased focus on financial metrics as they try to scale up.  Medium-sized organizations also tend to face challenges around management reorganization, M&A, and turnover of key leadership associated with growth and change.

Question: Or is it that in a small organization, senior leaders have more direct impact on all employees; larger organizations are more likely to have formal E&C programs, and the mid-sized organizations have less touch with senior leaders, and do not yet have formal programs?

Response: I think that’s a fair statement.  I’d suggest that the mid-sized organizations can also be challenged by the need for a control environment that can require investment in new corporate systems and technology.

Question: On this slide are they reporting about one misconduct event or possibly more than one?

Response: Reporting misconduct is asked as to whether the survey respondent reported All, Some or None of their observations of misconduct.

ECI has learned from previous research that much misconduct is ongoing or consists of multiple occurrences. Misconduct is less likely to be a single event. It is frequently perceived by employees as the way things are done around an organization or else seen to be repeated.

Question: Can you share how “reported rates” are calculated here? And can you share how “misconduct” was defined when asking employees if they reported?

Response: Reported rates are calculated by asking if the individual observed misconduct in the past year and if they reported All, Some or None of it. The reported rate is the combination of All and Some.

Misconduct was defined as violations of the organization’s standards of conduct, policies that describe right versus wrong behavior at work, laws and regulations, and/or the organization’s values.

Question: Do you have data from outside the USA?

Response: ECI has data from non-US countries; however, the number of responses from each country (approximately 1,000) is too small to cut the data by organization size and then provide results. This is because results for questions are based on subsets of survey respondents. For example, all survey participants were asked if they observed misconduct but only some observed misconduct (a subset), then only some of them reported their observation and only some of them experienced retaliation after reporting (further subsets).

ECI is releasing country-specific data overall. Visit ECI’s website to see results for the UK. Results for other countries will be released over the next several months.

ECI website:  https://www.ethics.org/global-business-ethics-survey/

UK data: https://www.ethics.org/wp-content/uploads/2021-ECI-GBES-Country-Profiles-UK.pdf

This report was made possible through the generous support of the Business Ethics Resource Center (BERC), powered by U.S. Bank and the Melrose & The Toro Company Center for Principled Leadership at the Opus College of Business at the University of St. Thomas in Minneapolis, Minnesota.