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Martens, L. T., & Day, K. (1999). Five common mistakes in designing and implementing a business ethics program. Business & Society Review (00453609), 104(2), 163. https://doi.org/10.1111/0045-3609.00046

FIVE COMMON MISTAKES IN DESIGNING AND IMPLEMENTING A BUSINESS ETHICS PROGRAM 

Contents

1. MISTAKE NUMBER ONE: FAILING TO SET REALISTIC, REASONABLE AND MEASURABLE PROGRAM OBJECTIVES

2. MISTAKE NUMBER TWO: FAILURE OF SENIOR MANAGEMENT TO TAKE OWNERSHIP OF THE PROGRAM

3. MISTAKE NUMBER THREE: DEVELOPING PROGRAM MATERIALS WHICH DO NOT MEET THE NEEDS OF THE AVERAGE EMPLOYEE

4. MISTAKE NUMBER FOUR: DESIGNING EDUCATION PROGRAMS WHICH ARE LITTLE MORE THAN LECTURES

5. MISTAKE NUMBER FIVE: EXPORTING LARGELY "U.S.-CENTRIC" ETHICS PROGRAMS TO INTERNATIONAL OPERATIONS

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Corporations are investing a great deal of time, energy, and financial resources to the development of corporate ethics and compliance programs. The majority of these efforts are undertaken with the best of intentions, yet ultimately many of these programs either fail at the outset, or become a "program of the month." A "program of the month" is the most likely outcome, where, following a burst of initial enthusiasm and activity, the program becomes little more than a few binders which gather dust on the shelves of Human Resources and the Law Department. 

At the International Business Ethics Institute, we have examined the reasons why some programsflourish and deliver real results, while others fail. The majority of program failures can be traced to several common mistakes made by corporations in the design and implementation of their programs. With a little foresight and preparation, however, these errors can be anticipated and avoided. This article examines the five most common mistakes relative to program design and implementation and provides recommendations on effectively addressing these issues. 

MISTAKE NUMBER ONE: FAILING TO SET REALISTIC, REASONABLE AND MEASURABLE PROGRAM OBJECTIVES

Many corporations become so caught up in fulfilling a "checklist" of program elements (e.g., code of conduct, office of ethics, training, etc.) that they either fail to establish program objectives at the outset, or lose sight of the real objectives which should drive the development of specific programelements. 

There are a number of objectives that a corporation may wish to consider in establishing an ethicsprogram. A few of the most common are: 

1. To deter and detect violations of company policies, standards of conduct, and the law; 

2. To gain competitive advantages from improved relationships with key stakeholder groups, including customers, suppliers and employees; 

3. To create a unifying corporate culture among far-flung and disparate geographic locations. 

Once consensus objectives have been established, an employee "sensing" can aid in the analysis of how such objectives can be achieved. The sensing helps to ensure that the program addresses specific and unique issues which may exist within the corporation. The sensing should solicit input and feedback from employees and mangers in all functions and at all levels of the organization. This can be accomplished through interviews, focus groups and survey instruments. 

A sensing often reveals critical information necessary to develop an effective program. For example, if the company's objective is to prevent violations of company policies and the law, then the corporation must understand the principal causes of misconduct and the specific drivers of such behaviors within the organization. Through employee sensings, many companies have found that a majority of misconduct does not result from a lack of knowledge of what is legal and proper conduct. Instead, employees or senior managers know what they are doing is wrong, but engage in misconduct anyway for a variety of reasons. One of the most common is a belief that the misconduct "is for the good of the company." Another commonly cited reason is to circumvent what is perceived as corporate "bureaucracy," which employees may view as impeding their individual (or collective) ability to meet performance targets. 

Finally, the program objectives should contain some elements which are measurable. It is a fact of corporate life that "what gets measured is what gets done." Without maintaining a set of program-related measurements to track performance, companies often overlook needed modifications or updates to the program. The sensing, particularly if it includes a quantitative survey, can serve as a benchmark to measure ongoing program performance. 

MISTAKE NUMBER TWO: FAILURE OF SENIOR MANAGEMENT TO TAKE OWNERSHIP OF THE PROGRAM

The CEO in particular must take a highly visible leadership role in promoting the corporate ethics program. Without a visible commitment by the CEO, the program may lack credibility among employees, particularly among the senior management team itself. 

The program, including the standards of conduct and training workshops, must apply to all members of the organization, including senior management. Many companies often mistakenly target the program to lower levels of the organization. However, it is the senior managers who create the overall corporate culture and operating environment and from whom employees are most likely to take their cue. Additionally, senior managers are a critical target audience in that if they participate in or know of organizational misconduct, the organization will receive no mitigation of penalties under current U.S. Sentencing Guidelines--no matter how extensive and sophisticated the rest of the program may be. 

If a company determines that a training program is necessary, then the first session should be led by the CEO for his/her direct reports and then be cascaded throughout the rest of the organization. This ensures that managers are fully aware of the implications of ethics issues in advance of their employees. Additionally, the attendance of senior management at such sessions enhances the program's credibility among rank-and-file employees. 

Such training serves an important purpose in building the skills which managers require to create an integrity-focused workplace environment. Employees will only take the program seriously if upper management possesses such skills and demonstrates the standards of conduct through their own behavior. 

MISTAKE NUMBER THREE: DEVELOPING PROGRAM MATERIALS WHICH DO NOT MEET THE NEEDS OF THE AVERAGE EMPLOYEE

Increasingly, ethics and compliance programs are developed by internal or external lawyers and are designed to ensure that the client--the corporation--is adequately protected legally. However, attorneys often forget that the ultimate "end user" of the program is the employee. 

For example, many corporate codes of conduct are overly complex and not readily comprehensible to the average employee. The codes are often unwittingly written in "legalese," and may register at a post-graduate reading level. However, depending on the industry, many employees may have only a high school education (or less). Some corporations may also have large numbers of employees who are functionally illiterate. There will need to be mechanisms in place to ensure these employees are properly aware of relevant standards. 

Internationally, companies must ensure that the code document is accurately translated into the respective languages spoken by their employees. While many international employees may have a working knowledge of English, they may not readily grasp certain topics covered in typical U.S. codes of conduct, subjects which may not often arise in their country or cultural contexts. The easier it is for employees to comprehend the document, the more likely they are to refer to it when they have questions. To ensure that the translation clearly and correctly communicates the concepts contained in the original version of the code, a translated code of conduct should be translated back into English. 

Layout, both structure and format, constitutes another major problem of many codes. Some recommendations to make a code of conduct more user-friendly include: 

• Incorporating a question and answer section. Sample questions and answers illustrate the application of the standards to "real life" situations and thus help employees to interpret specific standards. Additionally, presenting the standards in context increases the likelihood of employees recalling the information in the future. 

• Referring employees to additional resources for further guidance on key issues. 

• Providing a simple checklist which employees may use to help interpret the standards in "gray areas." A Questions to Ask/Ask Yourself section could provide additional guidance with respect to such issues. 

• Using white space, illustrations and even cartoons to increase the code's user-friendliness (and thus the likelihood that the document will actually be read, retained, and utilized). 

The structure and format of the code should be simple and should focus on a single unifying theme. In general, codes of conduct should present the company's standards based on one of two distinct classification systems: (1) classified by stakeholder responsibilities, or (2) categorized by the corporate values/principles statement. A unified thematic structure reinforces the message that the standards of conduct are neither arbitrary nor punitive, but actually flow from core corporate values. 

MISTAKE NUMBER FOUR: DESIGNING EDUCATION PROGRAMS WHICH ARE LITTLE MORE THAN LECTURES

Training sessions which are largely lecture and presentation may not be interactive enough to maintain participant involvement in the learning process. Such training programs generally fail to capture the employees' attention or make any long-term impact by increasing employee knowledge. Studies have demonstrated that lecture is of limited long-term value. Typically, participants will recall less than 15% of lecture content the day after training. More emphasis should be placed on allowing employees to practice skills and to use new knowledge. Case studies and small group exercises should be used to fully involve participants in the training. 

The company should be careful not to cover too many issue areas. Too much information on too many topics can overwhelm employees. Not all employees will require training on all topics. The education program, where feasible, should be tailored to the participant's job requirements. A comprehensive training matrix--with learning objectives and material to be covered in stand-alone courses or integrated into existing courses--should be developed. This allows for continuity of information from one course to another as well as providing a framework for continual compliance reinforcement. 

Opportunities to integrate key concepts into other training courses should be examined to provide ongoing reinforcement and to communicate the message that the company's commitment to business ethics is inseparable from other responsibilities. This is particularly important for managerial training. Many management responsibilities, such as conducting performance appraisals, are most likely discussed in other training courses. Ethics-related elements of those responsibilities can be integrated into these courses. This integration not only reduces the amount of resources required for ongoing ethics program education, but also communicates the message that ethics are inseparable from basic workplace skills. 

MISTAKE NUMBER FIVE: EXPORTING LARGELY "U.S.-CENTRIC" ETHICS PROGRAMS TO INTERNATIONAL OPERATIONS

Many domestic ethics and compliance programs were instituted or enhanced in response to the U.S. Sentencing Guidelines and were initially deployed only in domestic locations. However, as companies increasingly focus on international opportunities and operations, they also wish to expand their domestic ethics programs globally. 

At the Institute, we have not yet seen a domestic ethics program which requires merely language translation of key programelements to be suitable for an international employee audience. Most U.S.-based programs require a great deal of modification and refinement to ensure relevancy to and acceptance by international employees. 

Ideally, a company should include its international operations in the design and development of its ethics program from the beginning. However, as many corporations have pre-existing programs, the following are suggestions for modifications before the program is expanded globally: 

• Involve international personnel as early as possible in the process. A cross-sectional international advisory group should be established, initially to provide input and later to provide reviews of specific program materials. Importantly, these advisors also can serve as "champions" of the program during implementation. 

• Conduct a global version of the employee sensing if international personnel were not included in previous sensings. The sensings, consisting of interviews, focus groups and surveys among employees and managers in the major locations of the company's international operations, ensures that the program will be applicable to the issues faced by employees outside the U.S. The sensing should gather employee feedback on a broad range of ethics-related issues. 

As part of the sensing process, the company should take a complete inventory of its management practices and processes in place globally to ensure that they support and reinforce the standards and do not inadvertently impede compliance. While the exact inventory of management systems will vary by company and by industry, companies should at a minimum examine the following: monitoring and auditing processes, performance evaluations and incentive plans, forecasting and goal setting, hiring and promotion practices, and due diligence procedures. 

• Develop a strategy that provides for a local "alternate reporting and advice channel" where employees can confidentially or anonymously seek advice or report suspected misconduct. While many multinationals have attempted to use their U.S.-based ethics/compliance officers in this capacity, international personnel will rarely call a U.S. corporate number. Time zone differences, language issues and the lack of personal interaction all create major impediments to this approach. 

• Examine the corporation's standards of conduct in an international context. One of the first issues which must be addressed is the extent to which corporate standards will be applied in all geographies. There are three basic options: 1) apply all standards universally; 2) allow local regions to adopt their own policies and standards; or 3) establish a core set of global principles and standards which may be modified or supplemented locally within certain limits. 

Many multinationals are adopting a core set of general standards embodied in a single code of conduct while allowing for local flexibility within certain limits. In some cases the corporate code is supplemented by regional standards which are more detailed and tailored to the particular geography. Once the standards have been finalized, steps must be taken to ensure that they are effectively implemented, adequately monitored and consistently enforced. 

• Develop a global education program. The training should communicate the newly revised global standards and compliance practices, educate employees on when and how to seek guidance, and be tailored to the issues and situations of the particular location. The international advisory group can play a critical role in the development and roll out the training program. The training should be conducted in the local language and wherever possible, by a national of the particular country. 

In summary, developing a business ethics program is an increasingly important investment of company resources. The costs associated with an ineffective program which fails to respond to the needs of the company and of its employees can be high. The steps which we recommend to establish an effective program not only prevent unwanted "mis-steps," but equally help identify the needs specific to each company's international business ethics program by involving employees in the processes of programdevelopment and program implementation. When a program has been shaped by the employees who will benefit from it, they are more likely to respect and to observe it. By following these steps, a company can create an effective global businessprogram which satisfies the company's primary objectives. 

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By Lori Tansey Martens and Kristen Day 

Lori Tansey Martens and Kristen Day are at the International Business Ethics Institute in Washington, DC. 

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