Maybe the down economy has a silver lining after all: Employees behave better in times of a recession.
That’s according to the findings of a survey of nearly 3,000 employees conducted by the Ethics Resource Center. The study revealed that key measures of ethical behavior—the amount of misconduct observed, the willingness to report misdeeds, the strength of ethical cultures, and the pressure to cut corners—have all improved since 2007, shortly before the recession started.
Forty-nine percent of respondents said they had witnessed misconduct on the job, down from 56 percent in 2007. In addition, 63 percent said they had reported misconduct when they did observe it, up from 58 percent in 2007. Overall, perceived pressure to commit an ethics violation such as harassment, improper hiring practices, or theft declined from 10 percent in 2007 to 8 percent in 2009.
Harned
Ethics and compliance professionals say the numbers surprised them. “We, frankly, expected them to be terrible given all that was going on, and the measures companies were having to take because of the recession,” Patricia Harned, president of the Ethics Resource Center, said during a recent Webcast discussing the survey results.
One reason for the good behavior might be that in tough economic times, “people are more willing to come forward and report ethics matters, as they view them as issues of fairness,” said Maureen Mohlenkamp, deputy ethics officer for Deloitte.
In addition, employees’ perception of their senior leaders continues to be very high. Seventy-one percent of respondents considered their senior leaders to be open and informative with employees in their organizations; 80 percent said their organizations hold employees accountable for wrongdoing.
“We believe as the economy recovers and as performance improves, ethical conduct will slip again.”
—Patricia Harned,
President,
Ethics Resource Center
That positive sentiment may be because communication from management improves in difficult times, encouraging high standards to help steer the organization through times of conflict. “Senior leaders are continuing to talk to their employees in ways that employees perceive as setting high standards,” Harned said. “So the challenge for all of us is to try to keep that up as the economy improves.”
The results also showed a strong connection between the strength of an organization’s ethical culture and positive employee attitudes about levels of executive compensation. In a weak ethical culture, 34 percent of employees said that their CEO was motivated to take excessive risks to achieve business goals.
Still, Harned was quick to caution that surges in ethical behavior have come and gone before. For example, the ERC detected a similar pattern of improved behavior from 2000 to 2003 with the bursting of the dot-com bubble, the 9/11 attacks, and corporate scandals such as Enron and WorldCom. That attitude then faded as the economy revived in the middle of the 2000s.
ERC STUDY KEY POINTS
The following excerpt provides some key points taken from the 2009 National Business Ethics Survey:
Overall, 78 percent of those interviewed this year said they or a colleague had been affected by company efforts to weather the U.S. recession. Yet surprisingly, most of ERC’s key measures improved:
Misconduct at work is down. Fewer employees said they had witnessed misconduct on the job; the measure fell from 56 percent in 2007 to 49 percent in 2009
Whistleblowing is up. More employees said they had reported misconduct when they observed it; 63 percent in 2009, up from 58 percent in 2007
Ethical cultures are stronger. ERC’s measures of the strength of ethical culture in the workplace increased from 53 percent in 2007 to 62 percent this year—a positive sign
Pressure to cut corners is lower. And overall, perceived pressure to commit an ethics violation—to cut corners, or worse—declined from 10 percent two years ago to 8 percent
Only retaliation against those who reported misconduct increased—a negative trend.
Source
2009 National Business Ethics Survey (2009).
That means management must “be ready for the return of business as usual,” Harned said. “We believe as the economy recovers and as performance improves, ethical conduct will slip again.” Ethics and compliance officers should therefore talk to senior leadership now about how to maintain the positive ethical momentum into the future, she said.
Altizer
The survey also examined how employees choose to report misconduct and found that only 3 percent actually took their complaints to a hotline. That’s not to say hotlines don’t get a lot of calls, said Leslie Altizer, senior director of benchmarking services for the Ethics Resource Center. “It just means when employees see something, the first line of reporting that they tend to go to is someone within management,” he said.
Carlson
One company seeing a similar trend in its hotline calls is Hewlett-Packard. “I know from talking to my peers that they’re somewhat in the same boat,” Chris Carlson, ethics officer for Hewlett-Packard, said during the ERC Webcast.
But not all companies do. Eli Lilly & Co. has seen a “dramatic increase” in calls to its ethics hotline, said Pamela Hrubey, senior director of global compliance operations for the company. “In that way, we’re different than the survey results,” she said.
Hrubey
Hrubey added that she believes the high call volume indicates how “aware and understanding” of the hotline employees are, not as a symptom of trouble at Eli Lilly. More hotline calls, coupled with strong communication about the consequences of non-compliance, has made a “huge difference,” she said.
BAD BEHAVIOR
ERC Study Chart: Percentage of U.S. Workforce Observing
Specific Forms of Misconduct (2007-2009):
Behavior
2009
2007
Company resource abuse
23%
n/a
Abusive behavior
22%
21%
Lying to employees
19%
20%
Email or Internet abuse
18%
18%
Conflicts of interest
16%
22%
Discrimination
14%
12%
Lying to outside stakeholders
12%
14%
Employee benefit violations
11%
n/a
Health or safety violations
11%
15%
Employee privacy breach
10%
n/a
Improper hiring practices
10%
10%
Falsifying time or expenses
10%
n/a
Poor product quality
9%
10%
Stealing
9%
12%
Sexual harassment
7%
10%
Substance abuse
7%
n/a
Document alteration
6%
6%
Misuse company’s confidential info
6%
6%
Customer privacy breach
6%
n/a
Environmental violations
4%
6%
Misrepresent financial records
4%
5%
Accept gifts or kickbacks
4%
4%
Use competitor’s info
2%
4%
Anti-competitive practices
2%
n/a
Bribe public officials
1%
n/a
Insider trading
1%
n/a
Illegal political contributions
1%
n/a
Source
2009 National Business Ethics Survey (2009).
Only one negative finding emerged from the data: Of those who said they witnessed and reported unethical behavior in 2009, 15 percent also said they experienced some form of retaliation, versus 12 percent in 2007. Retaliation ranged from physical abuse (4 percent) to verbal abuse by supervisors (55 percent) or peers (42 percent). Others said they were relocated or reassigned, passed over for promotion, or almost fired.
Mohlenkamp
Mohlenkamp of Deloitte noted that while most reports against employees are made in “good faith,” incidents do occur where an unhappy former employee will make numerous reports against former colleagues. “Those tend to arise … during either mid-year or end of year performance reviews,” she said.
Enforcing Ethics
Harned said the overall theme is that if a company does not maintain a strong ethical culture, it runs the risk of facing long-term business problems. “For ethics and compliance practitioners, your primary focus should continue to be on continuing to strengthen the culture within your organization,” she said. “The first thing to do is to focus on your management—and even more so, senior management—within your organization.”
Altizer agreed. “Organizations need to continue to be focusing on that management level to make sure they are equipped with the resources and the knowledge in terms of how to recognize an issue once it’s been brought to you and where to take that issue,” he said. “It’s not enough to rely on some external data source alone to make decisions in your organization about what could be going on.”
Altizer said benchmarking surveys are an excellent way to glimpse national trends, but individual data is important not only to understand the perceptions of the ethical culture within your organization, but to identify specific risk areas as well.
Eli Lilly, for instance, conducts enterprise-wide surveys focusing on employee impressions overall, Hrubey said. Training on ethics as early as possible also helps, she added; the company even gives job applicants an ethics case study during interviews and asks how the candidate views a particular ethics issue. “We have a way right off the bat to understand somebody’s views on ethics,” she said.
“Fundamentally, I think we all have to continue to ask our employees how they feel most comfortable bringing up issues,” Hrubey continued. “The best shot we have is to have people report them to us so we can fix the [work] environment.”
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