Fostering an environment of compliance

January 01, 1970 by Mark Dunn

Organisations and financial institutions are under pressure to become more ethical.  Fostering an environment of compliance is central to holding an organisation up to higher ethical standards, but how can business leaders ensure they are doing this?  What happens when this goes wrong?  

Studies looking at ethical behaviour have consistently shown a contrast between how ethical people believe their behaviour is and how ethical it is in reality.  People are more inclined to predict their behaviour will be more ethical and recollect that their previous actions were more ethical than is true.  This is an issue for businesses wishing to do the right thing – how do they ensure employees' moral compass is pointing due North?

The right environment encourages the right behaviour

Ethics and compliance Consultant Richard Bistrong, who was imprisoned for conspiracy to commit bribery under the Foreign Corruption Practices Act (FCPA), was recently interviewed by Forbes about the 'dangerous excuses' people give themselves for carrying out unethical behaviour in business.

Bistrong explained that, in the wrong environment, even the most ethical employee may consider taking unethical action.  The temptation to do so may come from rationalising the behaviour within the corporate environment or justifying the activity as low-risk in the face of high-pressure.

Bistrong explained: "Slippery slopes are most dangerous when we conclude we are not at risk of sliding down them.  Whether you are a sales professional trying to make quota in regions known for corrupt business practices, or you are vying for a competitive job, temptations to compromise our integrity and rationalise doing so are plentiful."

I have no choice.  I want to keep my job

In the summer of 2016, Ashish Awasthi, a 27-year-old Sales Executive at US-headquartered pharmaceutical company Abbott Laboratories committed suicide.  In his suicide note Awasthi stated: "I am going to commit suicide because I can't meet my company's sales target and my company is pressuring me." The case exemplifies the negative impact a poor corporate culture can have on the wellbeing of employees and the reputation of the organisation.

While there has not yet been any indication given as to whether the company has committed any FCPA violations, some of the pressures the company puts on its employees were explained by the New York Times in an article following a six-month investigation into the case.

The company required its sales representatives to conduct 'health camps', where potential customers were invited for health check-ups and Abbott employees would recommend Abbott products, whether warranted or not.  It has also been suggested that Abbott employees posed as medical professionals during these events despite being unqualified.

Sales representatives have also admitted to purchasing Abbott medicine out of their own pocket in a push to meet sales quotas.  This could equate to half of an employee's monthly wage.

The 'how' is just as important

Sales executives are always under pressure to meet performance targets.  Companies that foster not only a culture of compliance, but one of ethical behaviour, significantly reduce the risk of employees exposing the company to compliance risk.   In the wrong corporate environment, high-pressure sales targets can cause people to rationalise unethical behaviours, cut corners to reach targets, or worse.

Bistrong explained to Forbes that: "Sales leadership is the make or break organisation of a compliance program… It is where compliance can get amplified, distorted or discarded depending on the leader."

When the only messages employees hear are about hitting sales targets at all cost, there is an unspoken message about compliance.  Leaders of an organisation need to stress that they care about how employees hit sales figures.  When employees are confronted with compliance issues, knowing that the organisation is there to help and support them minimises the risk of unethical or illegal behaviour taking place.

Four steps towards a compliant environment

  • Encourage employee engagement: organisations that encourage a culture where employees speak freely will be less likely to inadvertently encourage unethical behaviour.  Two barriers are crossed when employees can discuss concerns over pressures, ethics or practices with leaders that are genuinely open, interested and approachable: fear and futility.  Employees should not fear retribution for speaking out, or feel like no action will be taken if they do.
  • Remove unnecessary pressure and unrealistic targets: setting unrealistic goals is more likely to encourage unethical or illegal behaviour.  Employees may either cut corners to reach the targets or falsify reporting to indicate higher results.  This has the potential to expose a company to unnecessary legal, financial and reputational risk.
  • Make compliance a routine conversation: discussing compliance and ethics regularly is far more effective than only having the conversations when problems arise.  Nick Eply, Professor of Behavioral Science at the University of Chicago, explained in his book, Four Myths about Morality and Business that "It is important to also talk about the positive examples of ethical behaviour, not just the bad ones.  Focusing on the positive reasons you are in business, and reinforcing the good things people do strengthens ethical choices as 'the norm' of the organisation."
  • Holding higher standards: leaders must hold themselves to a higher standard of ethics and compliance to set the tone for the whole organisation.  This involves thinking about how employees interpret behaviour, as well as how the leader intends their behaviour to be.  Marc Hodak, Adjunct Professor at NYU, explained: "The closer you are to the top, the more ethical you believe things are."

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