What is organizational culture? Eric Feldman, SVP  and Managing Director, Corporate Ethics and Compliance Programs at Affiliated Monitors has said it comprises the mission, vision and values of an organization. A similar way to consider it might be as a company’s values, visions, norms and beliefs. Whichever way you define it or look at it, corporate culture affects how groups within a company interact with each other. A key inquiry is whether the corporate incentive structure supports the articulated beliefs of a company. How does one measure or audit these articulations?

Jose Tabuena in an article entitled, “Can You Audit Corporate Culture” said that  “an important feature of a good culture is that the majority of employees can be positively influenced by values and environments that reinforce strong company values. Such a climate arises when the workforce believes that certain forms of ethical reasoning and behavior are expected norms for decision making. The ethical climate of an organization serves many useful functions in organizations. It helps employees identify ethical issues and address those issues by giving answers to “What should I do?” when faced with an ethical dilemma.” The oft-used corporate tactic to blame the ubiquitous ‘rogue employee’ is an “attempt to deny the flaws in the system and the culture that spawned the bad acts in the first place.”

Some of the techniques for measurement include employee interviews, focus groups and employee surveys to measure corporate culture. This is because through “identifying cultural strengths and areas needing improvement, a cultural assessment can guide the creation of communications plans and culture-building initiatives that are tailored to the company’s needs. In many cases, an effective strategy may be to target weak spots while simultaneously anchoring the overall message to positive values already strongly shared across the organization.” It is important to understand that corporate culture will not be uniform across geographies, functional areas or operating systems. But this can be useful in comparing the results.

Feldman noted some of the key areas of concern in a culture audit are the following are those when can greatly influence a company’s culture, making it periodically necessary to determine whether the company is on track. If your CEO says that your only goal is the make your numbers, that creates pressure to hit the target goals and the implicit message is that you must do so by any means possible. It provides an example of saying your values are around doing business ethically and in compliance but modeling the actions of making your numbers at all costs.

One of the key indicia of a toxic culture is the fear of raising your hand to report an issue and facing retaliation. It is also an omen of other negative cultural factors such general distrust of management. Here you should consider whether employees are willing to address matters with their immediate supervisor or to use the compliance hotline and what would happen if they reported misconduct can be meaningful. An even better approach would be to measure a company on how issues are reported and ultimately addressed. A final test is the work place promotion and incentive history of internal whistleblowers going forward in the employment tenure with the organization; are they promoted or even celebrated?

Next you should consider a company’s compensation and incentive structure, together with its employees’ promotion to management as key indicia of culture. Consider that Wal-Mart, after it began its years-long FCPA investigation in 2012, began basing a portion of compensation for top executives on the company’s ability to meet compliance goals. If executives do not meet their compliance objectives, they risk having their annual bonuses reduced. Therefore, one measure to incentivizing compliance is the degree to which ethical business practices have been factored into executive-level performance evaluations and/or compensation criteria. This can be leveraged down into the organization as well.

What is the tone coming from management? Here, you should question employee turnover and retention such for information. Through employee interviews, you can determine whether the turnover rate is attributed to organizational transition or stress stemming from management’s philosophy and operating style, which might include such things as inappropriate compensation packages, unreasonable sales goals, requirements, etc. One only need to consider the Wells Fargo fraudulent accounts scandal to understand how the failure to use the information developed from such employee surveys was detrimental to the bank.

It is important that a company actively recruit new hires based on its mission, vision and values of an organization and reinforce these when people join the company. All of this can be done through a rigorous hiring process, which incorporates a company’s ethical values into the process. But it does not stop at the hiring and onboarding process. It should occur during every Human Resources touchpoint in the employee lifecycle, during reviews and evaluations, consideration for promotion and even at departure. You will need to review the records of employees who have had poor compliance evaluations in the past years and determine whether those employees had appropriate qualifications relative to their job descriptions. The review should be performed with an eye toward ascertaining whether the company’s hiring and promotion practices appropriately noted compliance qualifications, skill set, and delegated authority to their formal position and job description.

Companies must have a high-performance corporate culture for doing business ethically. One of the ways to do so is through the culture audit. It can also be a powerful tool for continuous improvement going forward. Find out what your employees are saying about your corporate mission, vision and values and most importantly remediate if those mission, vision and values are found wanting.

Three Key Takeaways

  1. What are the mission, vision and values of a company?
  2. What are the compensation and promotion incentives in the culture?
  3. Always be closing or doing business ethically and in compliance?

For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit this month’s sponsor Affiliated Monitors at www.affiliatedmonitors.com.