Building a more ethical culture is no easy task—especially in a highly regulated and constantly changing industry like manufacturing. In manufacturing, the workforce is often dispersed across offices, remote locations, production floors, and on-the-road. This makes the task of educating all team members about doing the right thing challenging. But new research shows that there are three key areas of opportunity that, if addressed intentionally, can be crucial stepping stones to inspiring more ethical behavior.
LRN’s Benchmark of Ethical Culture report offers unique insight into why ethical culture is critical to organizational success across sectors, explicitly detailing the impact of culture on ethical conduct and business performance. This comprehensive research is a multi-year, collaborative effort that surveyed nearly 8,000 employees—from frontline staff to top managers—across 14 countries and 17 industries, including manufacturing. Using a proprietary research model called the Ethical Performance Model, the report defines 13 components of ethical culture that, individually and collectively, drive business performance. Digging into manufacturing industry performance, we found that three dimensions in particular present an opportunity for manufacturing organizations to enhance their ethical conduct.
Why does having an ethical company culture matter to manufacturing?
The LRN Benchmark of Ethical Culture finds that companies with the strongest ethical cultures outperform—by approximately 40%—across all measures of business performance, including levels of customer satisfaction, employee loyalty, innovation, adaptability, and growth. Knowing that the cost to comply with federal regulations can be especially steep for manufacturing, this research provides a compelling case to invest in building more rigor in the management of ethical culture upfront.
3 opportunities to build ethical culture in the manufacturing industry
Each industry featured in the report was asked to rate a series of questions about the dimensions of ethical culture on a scale of 1 to 5. Of the 13 dimensions measured, three stood out as areas of opportunity for manufacturing organizations in support of building stronger organizational cultures.
Opportunity 1: Performance under pressure
The study defines this dimension as the extent to which ethical standards are upheld when under pressure to meet quotas, targets, and timelines. With recent supply chain issues, rising material costs, and COVID-19 considerations, manufacturers are under more pressure than ever. On average, members of manufacturing organizations score lowest on the dimension of “Performance Under Pressure,” revealing a broader tension that employees feel when tasked with achieving business objectives. Keep this in mind as you evaluate the information in each element of your E&C program. Does your training provide tangible, ethical decision-making guidance to common production challenges? Do you have accessible materials that reinforce company values and outlets to report misconduct for employees on the go? Clarity and consistency in how you discuss what ethical conduct means goes a long way in helping people uphold ethical standards, even when facing pressure to perform.
Opportunity 2: Rewards and recognition
This dimension represents the extent to which ethical behavior is included as part of formal rewards structures and leaders express appreciation for team members and recognition for how a job is done, not just outcomes achieved. A common theme from the manufacturing employees surveyed was that they are less likely to view the people receiving promotions as role models of company values and ethical behavior. This might warrant an examination of your promotion process to consider how ethical standards can be more accurately assessed—for all managers and leaders, on and off the floor. Provide guidance on behavioral expectations through your code of conduct, communications, stories, training, and leader-led team discussion. ta And, think about ways that managers and leadership can recognize and reward ethical conduct more directly and frequently—from shout outs during team meetings to individual notes with workers at the start or end of their shifts.
Opportunity 3: Speaking out about misconduct
The report defines this dimension as the extent to which employees speak up about ethical misconduct and report improper behavior. Nearly one third of manufacturing employees (32%) indicated they have observed employee misconduct or unethical behavior in the past 12 months. Of those who observed misconduct or unethical behavior, 81% reported their observations to management, another person with authority, or the hotline. Among the 19% that did not report their observations, the top three reasons that influenced their decision were:
- Fear of retaliation
- Thinking their company wouldn’t do anything about the concern
- Fear of reporting the person involved because they were more senior
Consider what this could mean about the messaging your company puts out to your workforce each day. Are leaders talking enough about the importance of doing the right thing—and are they holding all team members accountable to those standards? Have you clearly articulated your reporting and investigations process, or is what happens when employees raise concerns a black box? Do you share sanitized examples of employees that raised concerns in good faith, and what happened as a result? And, does the ethics and compliance team use language that positions themselves as a partner, or as a punisher? LRN research shows that when employees report experiencing workplace behaviors that foster trust and when an organization maintains a sense of fairness, more people are likely to speak out about misconduct.
The key takeaway
Culture matters to business performance—but you can’t manage culture if you don’t measure it. To review all 13 dimensions in ethical culture and where the manufacturing industry stands, download a copy of the LRN Benchmark of Ethical Culture and get in touch with a member of our Advisory team.