*This blog post was updated on July 23, 2021 to incorporate new data and company services.
In today’s business world, having a strong ethics and compliance program is essential to forming and maintaining positive interactions with customers. Due to the instant and global nature of the media, customers expect more from businesses and their operations than ever before—especially when it comes to acting ethically.
But oftentimes, corporate training programs revolve around either ethics or compliance. LRN has long-held the view that compliance is principally an outcome of values-based ethical cultures—not a driver of them. This is something we write about and research extensively. Let’s explore the characteristics and outcomes of a compliance-based vs. ethics-based approach to programs.
The short-sighted “window dressing” of compliance-based training programs
In compliance-based programs, organizations tend to establish their rules of conduct and put penalties in place for anyone who disobeys those rules. Employees adhere to the rules in order to avoid the repercussions, which makes fear the driving factor for program adoption. The incentive to not receive punishment is strong enough to get the employees to obey the established rules, but it isn’t necessarily enough to get them to believe in those rules.
Many people liken compliance-based programs to window dressing. It might look good on the outside, and it may get the government off their backs. But it is rather short-sighted, for a few reasons:
- Employees that work in a compliance-based culture are not motivated by an interior moral compass or from an ethical place; they are simply avoiding punishments.
- When a business adopts a moral code only to avoid fines or other punishments from the government, it is a reactionary response rather than a proactive one.
- This reactionary approach usually means the business doesn’t have an ethical standpoint of its own. Rather, it is only following the guidelines set down by the government as to what constitutes ethical behavior.
How ethics-based training programs strengthen company culture
Organizations that employ an ethics-based approach to training have often developed their own set of core principles and ask that their employees govern their behavior according to these principles. These principles become a core part of the company’s mission and tie into success of the business, so long as they’re maintained. The approach to an ethics-based program starts at the very top, with those in leadership and managerial positions demonstrating the principles on a consistent basis.
When employees are expected to act according to the company’s defined principles, they are more likely to conduct themselves in an ethical manner. They are also more likely to report any behavior that is not in line with the company mission. The focus in an ethics-based program is on being proactive instead of reactive. Flipping that perspective makes it easier to see the results of the program as well.
- Our 2021 Ethics & Compliance Program Effectiveness Report found that 82% of the 630 E&C professionals surveyed indicated that their organizations emphasized company values—not just rules and procedures—to motivate employees to do the right thing in difficult circumstances over the past year.
- Another 79% said their company’s ethical culture is stronger as a result.
It’s important to remember that employing ethics-based programs, while valuable, sometimes require more training than compliance-based programs—and for good reason. An ethics-based approach to training makes room for life’s gray areas. While that can lead to less concrete guidelines on what is and isn’t ethical behavior, effective ethics-based programs will incorporate elements that get employees reflecting and discussing how they should act in various situations.
The ROI for business leaders? An ethics- and compliance-based approach.
In order to maintain success and be competitive in the modern business world, a company needs an advantage over the competition. Organizations that can successfully blend elements of an ethics-based program with a compliance-based program will have a program strategy that gives them a substantial advantage over other businesses in the same industry.
Combining these two types of programs can reap plenty of rewards—including increased profits. More than ever, customers seek brands that show good citizenship to society and the environment. They will respect a business that demonstrates ethical standards and will likely purchase from companies that reflect their own moral views. That said, it should be stressed at all levels that making ethical choices and making profitable choices are one and the same—and should never be in competition with each other. Adherence to an ethics policy has been shown to increase productivity which, in turn, will show an increase in profits.
Business leaders must maintain profit-growing goals while instilling an ethical approach to business within the organization. By establishing a baseline of conduct and showing positivity toward the integral mission, leaders can create a culture of ethics within the company. Business leaders—including senior executives and board directors—have a responsibility to find ways to motivate employees to adhere to ethical policies.
Setting the tone at the top is crucial to building an ethical culture
Establishing and sustaining ethical culture can be achieved by a trickle-down effect. When the business leaders model ethical behavior and adherence to policies that support the business mission, those on a supervisory level will start to mirror the same behavior. This movement through the ranks will ultimately impact the behavior of every current and future team member, so that it’s clear that employees at all levels are held responsible for their own commitment to the mission of the company.
The key takeaway
When all is said and done, it’s important that a company has an ethically driven training program in place. Failure to do so can lead to severe consequences from the loss of profits to being fined by the government. It can even go so far as to cause members of a company to be charged with crimes and face jail time.
Developing a program that combines ethics-based and compliance-based elements can have a more impactful result. But it’s on business leaders to forge the path and set the example when it comes to ethics by working with integrity and complying to the moral guidelines developed in their organization’s mission. For more information on how to approach building a more ethical culture, check out our latest research on program effectiveness and setting the right leadership tone.