Originally published in NAVEX Global's Top 10 Ethics & Compliance Trends for 2019 eBook. Show
Over the years, organizations have tried many different approaches to incentivize ethics with decidedly mixed results. In 2018, at least one company received considerable attention for its program to grade employees on their ethical behavior, which linked to bonus eligibility. In the coming year, we expect other organizations to follow this lead and create their own ethics incentive systems. Even though this topic is currently getting a lot of exposure, it is not new. But few ethics and compliance topics have been the subject of more heated debate. To understand more about the price of paying for ethical behavior, let’s review some pros and cons. Pros of Incentivizing Ethical Behavior
Cons of Incentivizing Ethical Behavior
Measure Value, not TasksAs you consider if/how you will incentivize ethics, there is a key question to answer: Which standard will you use to assess ethics?
Most managers dread having to grade employees on subjective values-based criteria such as “living the standards” or “acting in accordance with our core values.” While this approach may work well for identifying behavior at the extremes, it is very difficult to apply to the vast majority of employees in any meaningful and actionable way. In addition, values-based assessments often result in inconsistencies, and over time can lead to “grade inflation.” It’s far easier for managers to hand out “above-average scores” rather than explaining why an employee “needs improvement” or was only average on “living the value of respect.” If a values-based approach is taken, managers should be given guidance and training on how to make evaluations. Findings should be documented, and the company should have an established process in place for consistently addressing negative assessments. For these reasons, most organizations instead opt for systems that use objective and data-driven criteria. As Tom Fox noted, “the simplest way to incentivize employees is to create metrics that they readily understand and are achievable in the context of the compliance program,” such as completing training. Other similar goals include code certifications, engagement survey results and cooperation with specific compliance office requirements. While this has been the preferred approach, it is not without its problems. Understanding the Fine Line Between Incentivizing Ethics & Gaming the System
The last point above creates the ironic situation where ethics goals can promote unethical behavior. Whenever a performance target is quantified, there is an incentive to manipulate the process to attain the desired number. Engagement surveys are especially prone to management manipulation and efforts to steer employees to the desired answers. Employees themselves, even without coaching, can skew survey results to avoid further attention from the compliance office or to ensure that their boss receives his or her bonus in the hopes that it will improve their work environment. These actions not only undermine the effectiveness of the survey but also artificially inflate the apparent ethics performance of the manager or employee group. Key Steps for Organizations to TakeReview Existing Corporate Incentive PlansBefore creating new ethics-based incentive programs, an immediate impact can be made by reviewing existing incentive plans. Ethics officers should make it a priority to critically examine the role incentives are currently playing in driving unethical conduct throughout their organization. This may include incentives tied to sales and revenue targets. For example, are they structured to promote excessively risky and aggressive sales methods? Do managers exert excessive performance pressure? Consider Alternatives to Monetary IncentivesThere are many ways to incentivize performance, and they should be considered in addition to (or instead of) monetary performance awards. Recognition can be based on courageous or exceptional behavior that aligns with the goals of the company’s ethics and compliance program or it can identify consistent behavior over time. Non-monetary recognition can take a variety of forms, including:
Understand the Power of PromotionsWhether or not you consider building an ethics incentive plan in 2019, remember that by far the most important and effective ethics incentives are promotions. Decisions about promotions truly drive the culture. Employees take note of who gets promoted. If your organization promotes top performers who are known to act contrary to the company’s values, or otherwise undermine ethics and compliance, that message trumps all others. And on the flip side, if it is clear that ethics and values are a key component of who advances, that too sends a clear message. Why is it important to use ethical behavior?Ethics is what guides us to tell the truth, keep our promises, or help someone in need. There is a framework of ethics underlying our lives on a daily basis, helping us make decisions that create positive impacts and steering us away from unjust outcomes.
How does ethical behavior lead to success?A reputation for positive ethical behavior entices more potential clients, customers and partners to work with you. It also builds customer loyalty over time, creating a loyal customer base that is likely to refer your business to others.
Which is a benefit of running an ethical business?Ethical businesses have a good image in the eyes of the public, as people have confidence in the business, which leads towards greater success. Ethical activity is not only good for society, but also for businesspeople and businesses as it helps them enhance the quality of their lives and the work they do.
What is ethical behavior and why does it matter at work?Examples of ethical behaviors in the workplace includes; obeying the company's rules, effective communication, taking responsibility, accountability, professionalism, trust and mutual respect for your colleagues at work. These examples of ethical behaviors ensures maximum productivity output at work.
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