Do You Know Your Organization's Ethics Reporting Ratio?

Ethical and legal lapses are a serious organizational risk. From lawsuits to customer boycotts, from lower market value to higher turnover, unethical or unlawful employee behavior can spark financial disasters. And leaders don't always know there's an integrity problem until it's too late -- and too public -- to fix.

Their best bet is preventing that behavior from happening at all, with a culture that establishes "doing the right thing" as a basic expectation. Such cultures make it easy -- in a practical and psychological sense -- for employees to behave properly and speak up about criminal or otherwise shady behavior if they see it.

Unfortunately, many organizations don't know how strong their ethical culture really is. Leaders may hope employees stay on the right side of the law, that individual employee's moral compass always points true north, and that the risk of ethical and legal lapses are well-contained.

But hope isn't certainty, let alone confidence.

Confidence requires data, evaluation, and benchmarking to gauge ethical vigilance within an entire organization. Leaders can begin that transformative analysis by getting feedback directly from employees -- if they ask the right questions.

Some Questions, Like These, Are More Predictive Than Others

There's no shortage of questions related to ethics, compliance, and integrity, but some are more predictive than others. These types of questions allow leaders to perceive and forecast the strength of their organization's culture and lift the veil on trust issues that silence workers:

• How many of your employees have seen an issue related to ethics, compliance, or integrity over the last year (or 6 months, in some instances)?
• Of those who are aware of a problem, how many chose to say something to someone in the organization about that issue?
• If they chose not to mention the issue to anyone, what affected their decision?
• If they did speak up, who did they speak with in the organization about the issue?
• Would they speak with someone if a similar situation occurred in the future?

These questions are practical because they measure how your organization's culture influences employees' actual behaviors -- specific decisions and actions taken, or decisions to not take action -- not their perceptions or opinions. Perceptions and opinions influence your organization's culture, but expectations and actions are the ultimate tests of it.

The most important of those questions is whether employees choose to report a problem or not. Your reporting ratio -- the number of employees who saw something and chose to say something -- may be the single most powerful means of gauging your organization's culture related to ethics, compliance and integrity.

Here's What You Should Know and Expect

You might not like what you hear. Gallup recently surveyed the working population in the U.S and found that 24% of respondents reported seeing or being aware of unethical behavior in their workplace in the last 12 months. However, less than half, only 47% chose to report a problem they witnessed or knew about.

Consider that -- the odds than an employee will report a problem they witnessed or are aware of are about the same as a coin flip -- but employees don't make reporting decisions that cavalierly. Their decision-making hinges on the established norms and expectations communicated and modeled by others. The organization's culture drives their actions.

And cultural expectations can vary broadly within an organization. Leaders must understand how strong their culture is in general -- across the entire organization -- and locally. Variations in cultural influence need to be known because the weak spots expose the organization to the most risk.

That leaves leaders with a three-part agenda:

1. Know your reporting ratio. Collect data and determine which groups of employees -- based on length of service, geographic location, or level within the organization -- are most and least likely to report.
2. Find out why those employee populations are less likely to report an issue.
3. Connect the results with your organization's risk profile to understand how reporting fits into the larger risk management strategy.

Understanding how your culture influences your employees' ethics, compliance and integrity is essential to a strong risk management program -- and it is a moral responsibility. It's a financial one, too. There's an endless list of corporate horror stories about shady behavior that wasn't stopped in time. Those stories always end badly. And the worst part? It's always that the disaster could have been avoided -- if leaders had stepped in before it was too late.