Companies are failing to inculcate a culture of integrity and ethical behaviour

Both integrity and ethics should become an integral part of organisational culture to ensure good performance.

Ethical behaviour is key to building a great organisational culture. It is important for an organisation to build a culture of integrity, and for its employees to behave ethically to avoid any reputational or financial damage.

However, most companies fail to inculcate ethical behaviour in their employees and executives. Embracing ethical behaviour in a company’s culture requires a top-down approach, which means the top executives must exhibit ethical behaviour and integrity, so that ethical behaviour percolates to the other employees down the hierarchy.

A study by Gartner, which surveyed 5000 employees, reveals that only one in four employees believe that their teammates and colleagues engage in and model the right ethical behaviours. Employees learn from their team-mates and peers, the way they do their work and interact with others.

Most of the compliance executives have a goal of building a culture of integrity within the organisation, but still they are unable to reduce the incidents of misconduct. Most of the survey respondents said that building a culture of integrity was their priority in 2016.

For a decade, organisations have been investing resources on improving corporate culture, but the result has been dismal. A study of two million employees’ responses on corporate culture and misconduct has shown that in the last eight years, there has been only one per cent reduction in the number of employees indulging in misconduct at the workplace. Organisations need to notice this and improve their culture.

Organisations can initiate certain behaviour from the top to inculcate a culture of integrity and model ethical behaviour in employees. If the top executives show integrity and ethical behaviour, the employees can learn from them. This top-down approach requires limited resources and is very effective.

Over 50 per cent of the employees surveyed believe that senior leaders engage in and model the right ethical behaviour. Around 61 per cent of the respondents believe the same about their direct manager.

Small behavioural changes at the employee level can bring about a culture of integrity. Companies can help employees exhibit good behaviour in their work by linking these behaviours to performance expectations and objectives.

While most employees know how to avoid committing a compliance violation, they do not know how to exhibit positive compliance and ethical behaviour in their daily work. Companies can encourage employees to publicly share positive compliance and behave ethically with their colleagues and teams.

A point to note is that employees tend to engage in unethical behaviour under pressure of deadlines and other business needs. The managers need to send a consistent and clear message to the employees to ensure that compliance is met.

The promotion of integrity and ethics improves the overall culture of the organisation. The survey reveals that employees from a strong culture of integrity are 90 per cent less likely to observe misconduct and more likely to report any misconduct which they happen to notice. They also perform well on individual and team goals.

Apart from the cultural benefit, a culture of integrity also brings financial benefits. Companies with a strong culture of integrity have a shareholder returns of seven percentage points higher than companies with low integrity.