© 2008-2013 v. scott killingsworth all rights reserved. 1 modeling the message: driving compliance...
TRANSCRIPT
© 2008-2013 V. Scott Killingsworth All Rights Reserved.1
Modeling the Message:Driving Compliance Results through Ethical Leadership,
Culture and Trust
Scott KillingsworthACE Best Practices WorkshopOctober 24, 2013
© 2008-2013 V. Scott Killingsworth All Rights Reserved.2
If people are good only because they fear punishment, and hope for reward, then we are a sorry lot indeed.
— Albert Einstein
Culture, more than rule books, determines how an organization behaves.
— Warren Buffett
© 2008-2013 V. Scott Killingsworth All Rights Reserved.3
Agenda
› Command and Control Compliance Model
› …and its limitations
› Values-Based Model
› Pioneering Studies on Comparative Effectiveness
› Legitimacy: What Gives Your Rules Moral Authority?
› Group Dynamics, Commitment and Framing
› How Culture Operates, and What it Can Do
› Leadership’s Roles in a Healthy Culture
› Compliance and Ethics Program Opportunities
© 2008-2013 V. Scott Killingsworth All Rights Reserved.4
Command and Control Compliance Model
› Aims to control or influence employee behavior mainly through negative and positive incentives
› Based on the “rational choice theory” of classical economics:
› We compare Reward for Misconduct to Risk
› Highest number wins – Risk or Reward
› Heavy reliance on specific rules, plus monitoring, detection, punishment and deterrence to increase perception of risk
Severity of PunishmentProbability of Detection = Estimated Risk
© 2008-2013 V. Scott Killingsworth All Rights Reserved.5
Command and Control Limitations
Even if we accept the rational-choice assumption, Command and Control has built-in limits:
›Only two levers for improving results:
› Very costly to increase perceived risk via better detection (“Cop on every corner” method)
› If punishment is too harsh, reporting of violations declines and enforcement gets spotty
›Self-interested rational choices for individuals aren’t always good for the organization
› A person’s situation can skew the equation
› Risk/Reward framing puts everything up for grabs – what’s your price? – but right and wrong should be non-negotiable
© 2008-2013 V. Scott Killingsworth All Rights Reserved.6
Command and Control Limitations
› Rationality is Overrated: In actual human beings, well-known cognitive biases distort risk/reward decision-making processes (See, e.g. Predictably Irrational, Nudge, Thinking Fast and Slow, The (Honest) Truth about Dishonesty, Freakonomics)› We consistently over-value definite, near-term
events – such as the rewards of rule-breaking
› We under-value uncertain, future events, even if catastrophic – such as the risk of getting caught
Source: Messick and Bazerman, “Ethical Leadership and the Psychology of Decisionmaking”
© 2008-2013 V. Scott Killingsworth All Rights Reserved.7
Command and Control Limitations
› More cognitive biases that distort risk/reward and ethical judgments:› Self-Serving Bias and Conflicts of Interest
› Overconfidence, Confirmation Bias and Motivated Reasoning
› Authority Bias and Conformity Pressures
› Remember the Milgram and Asch experiments?
Sources: Messick and Bazerman, “Ethical Leadership and the Psychology of Decisionmaking”;; Kim, The Banality of Fraud: Re-situating the Inside Counsel as Gatekeeper; Milgram, Behavioral Study of Obedience; Asch, S. E. Effects of Group Pressure upon the Modification and Distortion of Judgment
© 2008-2013 V. Scott Killingsworth All Rights Reserved.8
Command and Control Limitations
› Hidden costs of strong Command-and-Control Focus:› Mistrust of employees signaled through multiple channels
› Reverse Pygmalion effect: projection of negative expectations may be self-fulfilling
› Adversarial relationship with employees – resentment and backlash misconduct (Reactivity effect)
› Risk/Reward framing can crowd out ethical thinking
› Deterrence message is one of pursuing self-interest (avoiding punishment) rather than doing the right thing
› Bottom Line: Command-and-Control alone is, at best, an inefficient (and therefore expensive) way to influence behavior
Sources: Treviño, Weaver, et. al; Stansbury and Barry, Ethics Programs and the Paradox of Control; Ayers and Braithwaite, Responsive Regulation: Transcending the Deregulation Debate
© 2008-2013 V. Scott Killingsworth All Rights Reserved.9
Values-Based Approach –The Paradigm Shift
› Traditional Command and Control Paradigm:
› Prevent “bad” employees (5%? 20%?) from breaking rules
› Forcibly impose Company standards and values upon recalcitrant employees
› Business and rules-based framing
› Values-based, Self-Regulatory Paradigm
› Harness the positive values of good people (80%? 95%?)
› Make sure Company is seen as measuring up to employee’s values
› Ethical and social framing
› To win loyalty – and voluntary adherence to rules – show that the company deserves it – Walk the talk
© 2008-2013 V. Scott Killingsworth All Rights Reserved.10
Values-Based Approach: Motivating Compliance via Ethical Culture
› Ethical Culture = Engaging Employee Values so that Employees Identify Positively with the Organization and Act Accordingly
› “Your values are what you do when no one is looking” › When employee aligns with Company values, motivation is
intrinsic, compliance is voluntary and doesn’t depend on monitoring, detection and fear of punishment
› Tyler’s Studies of Workplace Compliance:› Value-based factors (legitimacy and value congruence)
explained over 80% of variance in compliance behaviors
› Punishment and reward systems explained less than 20%
Source: Tyler, Deinhart, & Thomas, “The Ethical Commitment to Compliance: Building Value-Based Cultures”
© 2008-2013 V. Scott Killingsworth All Rights Reserved.11
Culture and Compliance
Cultural Markers › Ethical leadership (Executive
and Supervisory levels)
› Fair treatment of employees
› Rewarding ethical behavior
› Punishing misconduct
› Open discussion of ethical issues
› Ethical issues considered in decisionmaking
› Employee and Community Focus
Compliance Goals› Reducing unethical conduct
› Reporting misconduct
› Increasing awareness of ethical issues
› Increasing advice-seeking on ethical issues
› Comfort delivering bad news
› Better ethical decision-making
› Increasing employee commitment to employer
“What Works and What Hurts”: Very Large-Scale study of Effect of Cultural Factors on Compliance Outcomes
1. Values-Based Compliance Programs produce better results than those with a Command-and-Control, deterrence emphasis.
2.
Source: Treviño, Weaver, Gibson and Toffler, “Managing Ethics and Legal Compliance: What Works and What Hurts, Cal. Mgmt. Rev., Vol. 41, NO. 2, 131 (1999)
© 2008-2013 V. Scott Killingsworth All Rights Reserved.12
Values-Based Approach --Legitimacy and Culture
› What Drives Voluntary Adherence to Rules? (Tyler)
› Company’s values and policies are perceived as measuring up to employee’s moral values
› Company is perceived as a legitimate source of authority: employee believes it deserves to have its rules followed
› These factors are more influential than likelihood of detection or fear of punishment (80/20)
› So, how can we promote these perceptions?
› Measuring up on values: “When managers say ‘ethics,’ employees hear ‘fairness.’”
Sources: Tyler, Deinhart, & Thomas; Treviño, Weaver, Gibson & Toffler
PSYCHO-
PATHSSAINTSTARGET POPULATION
© 2008-2013 V. Scott Killingsworth All Rights Reserved.13
Values-Based Approach –Fairness, Legitimacy and Culture
› Fairness Perceptions and Ethics Outcomes (Treviño and Weaver)
› Measured effects of company’s perceived fairness to employees
› Fairness strongly correlated with less observed unethical conduct and with more reporting of infractions
› What Works/What Hurts: Fair treatment had the strongest correlation with employee commitment to the company and with comfort delivering bad news
Source: Treviño and Weaver, “Employees’ Fairness Perceptions and Ethics-Related Outcomes in Organizations,” chapter in Managing Ethics in Business Organizations (2003)
© 2008-2013 V. Scott Killingsworth All Rights Reserved.14
Values-Based Approach --Legitimacy and Culture
› Leading criteria for legitimacy of authority› Procedural fairness in decision-making
› Quality of interpersonal treatment of employee
› These factors are more influential than:› Fairness of actual decision outcomes
› Whether outcomes are favorable to employee
› Risk of punishment
› Rewards of employment: salary and incentives
Source: Tyler, Deinhart, & Thomas
© 2008-2013 V. Scott Killingsworth All Rights Reserved.15
Values-Based Approach-- Legitimacy and Culture
› What is Procedural Fairness?› Opportunity for input from affected persons
› Understandable, articulated rules and processes
› Consistency over time and across similar cases
› Objectivity: Same rules for everybody
› Communicate reasons for decisions
› What Is Quality Interpersonal Treatment? › Respect employees’ rights: necessary but not sufficient
› Courtesy and dignity – respect the person
› Listen
› Communicate reasons for decisions
› Employee feels trustedSource: Tyler, Deinhart, & Thomas
© 2008-2013 V. Scott Killingsworth All Rights Reserved.16
Values-Based Approach – Trust is the Glue
› Managers at all levels must earn trust
› Values → consistent, coherent, predictable behavior → trust
› Actions speak louder than words (or Codes of Conduct)
› “Mood in the Middle” as well as Tone at the Top
› Treatment of employees is paramount
› Interactions with third parties matter too
› Social Media: untrustworthy to one → known by all
› Four leadership drivers of ethical culture (CEB):
› Honesty – truthfulness, promise-keeping
› Respecting and trusting employees
› Listening carefully to the opinions of others
› Taking action on verified misconduct
› All 4 relate to employee trust in managementSource: Tyler, Deinhart, & Thomas
© 2008-2013 V. Scott Killingsworth All Rights Reserved.17
Consistency is Crucial
“It takes many good deeds to build a good reputation, and only one bad one to lose it”
-Benjamin Franklin
“Bad is Stronger than Good”-Review of General Psychology, Vol 5 No. 4
(December 2001) by Baumeister, Bratslavsky, Finkenauer and Vohs.
“Quotations found on the Internet are not always accurate.”
-Abraham Lincoln
© 2008-2013 V. Scott Killingsworth All Rights Reserved.18
Culture and Misconduct – The Role of Trust
Ethics Resource Center identified 5 “Negative Work Environment” factors:
› Success is rewarded regardless whether achieved through questionable means
› Mistrust of top management’s promises and commitments
› Mistrust of supervisors’ promises and commitments
› Dissatisfaction with information from top management
› Dissatisfaction with information from supervisors
› Strong correlation between these negative factors and workplace misconduct
0%10%20%30%40%50%60%70%80%90%
100%
0 1 2 3 4 5
% of WorkersWitnessingMisconduct perYear
Number of Negative Workplace Factors Present
Source: Ethics Research Center, 2007 Business Ethics Survey
© 2008-2013 V. Scott Killingsworth All Rights Reserved.19
Group Dynamics, Commitment and Framing
› People use groups to support and nourish our identities and our positive self-concepts› Identification with the group promotes
commitment, engagement and cooperation
› Fair and respectful treatment
› Tells employees that they are important and valued
› Promotes trust
› Encourages identification, commitment, and cooperation with the group
› Pride in the group also encourages identification
Sources: Tyler and Blader, “The Group Engagement Model: Procedural Justice, Social Identity and Cooperative Behavior, Personality and Social Psychology Review, 7: 349 (2003); Ariely, “The Cost of Social Norms,” chapter in Predictably Irrational (2008).
© 2008-2013 V. Scott Killingsworth All Rights Reserved.20
Group Dynamics, Commitment and Framing
› Social/Group norms can govern behavior more effectively than market norms
› Social norms = Culture
› Market norms = Reward and Punishment
› Social vs. market framing: People will do things for free, for social reasons, that they won’t do for money; and social penalties can trump economic ones
› The power of social PLUS ethical framing: “Around here, we do what’s right.”
Sources: Tyler and Blader, “The Group Engagement Model: Procedural Justice, Social Identity and Cooperative Behavior, Personality and Social Psychology Review, 7: 349 (2003); Ariely, “The Cost of Social Norms,” chapter in Predictably Irrational (2008).
© 2008-2013 V. Scott Killingsworth All Rights Reserved.
Promoting Employee Commitment
› Employee commitment (engagement) strongly linked to:
› Management’s actions show character and integrity
› Management welcomes those seeking advice about reporting policy violations
› Clear guidelines for acceptable behavior
› All 9 Ethical Culture measures in the What Works/What Hurts study
Sources: McDowell, “The Hidden Bonus in ‘Doing the Right Thing; Treviño, Weaver, Gibson and Toffler
© 2008-2013 V. Scott Killingsworth All Rights Reserved.22
Committed Employees Boost Compliance and Peformance
› Benefits of Committed Workforce
› Voluntary rule adherence
› Less need for surveillance/monitoring
› More likely to report misconduct, which means:› Less accommodating environment for rule-breakers – more
“eyes on the street”
› Significant increase in voluntary actions to benefit the organization
› Oh, by the way, also: › Higher sales, profits, customer satisfaction and
loyalty
› Lower turnoverSources: Tyler, Dienhart, and Thomas; Ethics Resource Center, 2009 NBES, Supplemental Research Brief on Ethics and Employee Engagement; Harter et al, Well-Being in the Workplace and its Relationship to Business Outcomes
© 2008-2013 V. Scott Killingsworth All Rights Reserved.23
Do We Notice a Pattern?
DIMENSION
Trevino and WeaverCultural
Factors thatDrive
Compliance
TylerLegitimacy and
Voluntary Compliance
Ethics Resource Center
Favorable Perception of Management
Corporate Executive
Board – CELCLeadership
Attributes that Drive Integrity
Corporate Executive
Board – CELCLeading
indicators of Misconduct
Leadership and Modeling
Ethical leadership
Employee trust of supervisor and management
Modeling good behavior; keeping commitments
Honesty Co-workers compromise values for power and control
Interpersonal Treatment
Fair treatment of employees – courtesy, respect, dignity
Quality of interpersonal treatment – courtesy, respect, trust towards employee
Respect and trust employees
Lack of trust and respect from direct manager
Justice, Accountability, Follow-Up on Misconduct
Follow-up on reports of misconduct; rewarding ethical behavior; consistent treatment
Procedural fairness;same rules for everybody; consistency
Maintaining accountability among all employees across the business
Taking action on verified unethical conduct
Fear of retaliation; discomfort speaking up
Communication
Open discussion of ethical issues
Listen; opportunity for input from affected persons; communicate reasons for decisions
Good communications, including communications on ethics
Listening carefully to the opinions of others
Discomfort speaking up
© 2008-2013 V. Scott Killingsworth All Rights Reserved.24
Building Culture
MANAGEMENT’S WORDS (Code,
policies, procedures, training…)
Management’sActions
Co-Workers’ Actions
LIFE
© 2008-2013 V. Scott Killingsworth All Rights Reserved.
Effect of Ethical Culture
25
Source: Ethics Resource Center, 2011 National Business Ethics Survey
Percentage of employees observing misconduct
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Weak Weak-Leaning Strong-Leaning Strong
Culture Strength and Observed Misconduct
Observed Misconduct
© 2008-2013 V. Scott Killingsworth All Rights Reserved.
Effects of Ethical Culture
26
Source: Corporate Executive Board, “Ethical Leadership” 2010
16.2 percentage point swing
© 2008-2013 V. Scott Killingsworth All Rights Reserved.27
Leadership’s Role› Leaders at all levels must take ownership of
organizational culture
› Model the message through the broader company culture:
› Treat employees with respect and conspicuous fairness
› Keep your door and your mind open to employees
› Engage and communicate – consistently and in both directions (listen!)
› Transparency
› About responses to misconduct
› About reasons for decisions
› Be the change you want to see; live up to employee values and they’ll internalize yours
› Create a place where people are proud to work
© 2008-2013 V. Scott Killingsworth All Rights Reserved.28
Program Opportunities › Senior Executive/Board Education on Compliance
and Productivity Impact of Ethical Leadership, Values-Based Culture and Organizational Justice
› Coordination with HR/Engagement initiatives
› Cultural Assessment and targeted responses to areas of weakness
› Company-wide weaknesses
› “Pockets of Resistance” -- microcultures
› Integration of values and compliance measurements into employment functions:
› Hiring and onboarding
› Evaluation, compensation, recognition, promotion
› Managers especially
› Separation (bad apple disposal and exit interviews)
© 2008-2013 V. Scott Killingsworth All Rights Reserved.29
Program Opportunities
› Senior Executive/Board “Tone at the Top” training
› Evaluate employment decisionmaking processes (procedural fairness, consistency, transparency, etc.)
› Ethical Decisionmaking Training
› “Speaking up” Training
› Management soft-skills training
› Values communications through multiple channels
› Storytelling (See, e.g. KathleenEdmond.com)
› Real-life examples of good and bad decisions and their consequences
© 2008-2013 V. Scott Killingsworth All Rights Reserved.30
Leverage Other Voices to Get the Message Across
© 2008-2013 V. Scott Killingsworth All Rights Reserved.31
Bryan Cave LLP
One Atlantic Center
Fourteenth Floor
1201 West Peachtree Street, NW
Atlanta, GA 30309
Tel. 404.572.6600
Fax. 404.572.6999
www.bryancave.com
Scott [email protected]
Questions and
Discussion