Nbes research brief2


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Nbes research brief2

  1. 1. This report was a joint project of the Ethics Resource Center and Hay Group,a global management consulting firm www.haygroup.com
  2. 2. Founded in 1922, the Ethics Resource Center (ERC) is Ameri-ca’s oldest nonprofit organization devoted to the advancementof high ethical standards and practices in public and privateinstitutions. For 87 years, ERC has been a resource for publicand private institutions committed to a strong ethical culture.ERC’s expertise also informs the public dialogue on ethics andethical behavior. ERC researchers analyze current and emerg-ing issues and produce new ideas and benchmarks that matter— for the public trust.For information about the National Business Ethics Survey, seepage 7.
  3. 3. Ethics and Employee EngagementThe recent recession was a jarring reminder that efficiency and effectiveness are essentialto the survival of any organization and that employee engagement—the commitmentemployees feel toward their employing organization—is a critical part of the equation.Engaged employees recommend their company to friends and family, take pride inworking there, and intend to stay with the company. They are also willing to go the extramile for their organization, making it possible for the company to do more with less.And because they can be counted on to make independent decisions and take action inways that are consistent with the company’s culture, objectives, and values, they requireless supervision and direction and adapt easily to changing roles and responsibilities.Recognizing that engaged employees are vital for orga- Experience and common sense tell us that a company’snizational success, more and more leaders are asking: ethics are an important factor in employee engage-“How can we increase the level of employee engage- ment, but little research has been done to confirm thisment?” “What actions and decisions decrease engage- view. Using data from the Ethics Resource Center’sment and should be avoided?” “With limited resourc- 2009 National Business Ethics Survey (NBES), re-es to invest in salaries and benefits during these tough searchers from ERC and the Hay Group explored thetimes, what else can I do to increase engagement?” relationship between company ethics and employee engagement in order to answer several key questions:Fortunately for executives whose resources are al- n Does ethical culture play a part in employeeready stretched thin, employee engagement is heav- engagement?ily influenced by factors that have nothing to do n Does management’s commitment to ethicswith money: the overall purpose of the organiza- impact employees’ engagement with thetion, trust and confidence in senior leaders, and company as a whole?the amount of recognition employees receive. It’snot that money doesn’t matter. It’s just that money n Does misconduct undermine employeetends to be a “deficiency need.” If employees feel motivation?that they are significantly underpaid—that their pay n Do engaged employees respond differently todoes not reflect their contributions to the organiza- observations of misconduct?tion—their motivation is likely to suffer. But whenit comes to encouraging employees to pour discre-tionary effort into their work and deliver superior FINDING 1:performance, the chance to contribute to some- Positive perceptions of an organization’s ethical cul-thing larger than themselves and be recognized for ture are associated with higher levels of engagement.it is likely to provide a much stronger incentive. Furthermore, management’s commitment to ethics is particularly important for employee engagement.©2010 Ethics Resource Center Research Brief from the 2009 NBES | 1
  4. 4. Ethical culture is the extent to which an organization’s stronger employee engagement scores. The actionsethical standards are given priority and promoted by of management are especially powerful. The stron-its management, employees, policies, processes, and gest correlations between employee engagement anddecision-making. Basically, the ethical culture for- ethical culture involve the Top Management Culturemally and informally teaches employees “how things and Supervisor Culture Indices, which measure em-are really done around here.”1 The more employees ployee perceptions of each group’s commitment tosee others being held accountable for ethical actions open and honest communication, positive ethicaland acting with integrity, the stronger the ethical cul- role modeling, and accountability.ture of the organization will be. In order to assess thestrength of an organization’s ethical culture, the Eth- Past research has similarly shown that confidence inics Resource Center has developed indices to mea- leaders is a strong engagement predictor. Today’ssure employees’ perceptions of their peers, direct su- employees recognize that their prospects for con-pervisors, and senior leadership. Prior ERC research tinued employment, career development, and ad-has shown that stronger scores on these indices lead vancement depend on their companies’ health andto reductions in pressure to commit misconduct, stability. And they cannot be expected to bind theirfewer observations of misconduct, increased report- futures to those of their employers unless they areing of observations, and decreased retaliation against confident that their companies are well managed andwhistle-blowers. well positioned for success. Analysis of 2009 NBES data highlights the particular importance of leadersAnalysis of 2009 NBES data shows that strong scores displaying and emphasizing ethical behaviors.on the ethical culture indices are also linked to Correlation Between Employee Engagement & Ethical Culture Management Indices (2009) 0.80 2 0.73 Correlation Coefficients 0.60 0.69 0.40 0.20 0 Top Management Direct Supervisor Culture Index Culture Index Ethical Culture Management Indices Correlations are significant at the 0.01 level_______________________1. Treviño, Weaver, Gibson and Toffler. (1999) Managing Ethics and at the same rate and if A decreases B will decrease at the same Compliance: What Works and What Hurts. California Manage- rate. As the correlation coefficient approaches 1, it becomes ment Review, 41 (2). closer to a perfect correlative relationship in which the two items always trend in exactly the same way. Note: In the graph above,2. Correlation coefficients define the degree to which two trends go all correlation coefficients are statistically significant at the 0.01 together. A correlation coefficient of 1 between A and B equates level. to a perfect positive correlation, i.e., if A increases B will increase©2010 Ethics Resource Center Research Brief from the 2009 NBES | 2
  5. 5. TAKEAWAY 1: Analysis revealed that employees who observed con- duct that violated company ethics standards, com- Given the profound connection between a com- pany policy or the law were less likely to be highly pany’s ethical culture and employee engage- engaged. Only 61 percent of employees who wit- ment, managers and supervisors should work nessed misconduct displayed high levels of engage- actively to demonstrate a commitment to ethics, ment, compared with 85 percent of those who did foster open communication, promote ethical not witness wrongdoing. role modeling, and encourage accountability. Additional analysis showed a link between specific forms of misconduct employees observe and their levels of engagement. The 2009 NBES asked respon-FINDING 2: dents to identify whether they had observed any of 27 specific types of company policy, regulatory orEmployees who observed misconduct3 were less en- legal violations such as sexual harassment, contractgaged than those who did not. In addition, engaged violations, abusive behavior, substance abuse, etc.employees are less likely to feel pressure to commit Then, looking at each specific violation, respondentsmisconduct. who observed the violations were segmented based on whether they said they felt disengaged or engaged. Level of Employee Engagement Based Upon Observed Misconduct (2009) 100% Percentage of Employees Highly Engaged 80% 85% 60% 61% 40% 20% 0 Observed Misconduct Did Not Observe Misconduct_______________________3. 2009 NBES respondents were asked about 27 specific behaviors. “Yes” respondents indicated that they had observed at least one of the behaviors in the previous 12 months.©2010 Ethics Resource Center Research Brief from the 2009 NBES | 3
  6. 6. Across all violations, 51 percent of employees said FINDING 3:they were engaged and 49 percent said they were dis-engaged. However, certain violations were connect- Engaged employees are more likely to report miscon-ed to higher levels of disengaged employees. Seventy- duct when they witness it, thus reducing the compa-three percent of employees who observed the bribing ny’s ethics risk.of a public official were disengaged, 67 percent whowitnessed environmental violations were disengaged, When management is made aware of issues, those is-67 percent who saw the misrepresenting of financial sues can be resolved. Hidden problems – especiallyrecords were disengaged, 60 percent who saw anti- unreported misconduct – put the company at riskcompetitive practices were disengaged, and 60 per- for loss of reputation, decrease in customer/clientcent who observed insider trading were disengaged. satisfaction and loyalty, costly litigation, and evenNot surprisingly, these are the types of serious viola- fines and other penalties. Misconduct that goes un-tions that tend to yield large fines, public scrutiny, reported can be a huge liability. As a result, ethicsand ruined reputations. and compliance professionals put a great deal of ef- fort and resources into encouraging reporting of ob-ERC research also has demonstrated that employees served misconduct.who perceive pressure to commit a violation are alsovery likely to observe misconduct in their workplace. In this context, it is worthwhile to know whether en-Ethical culture is certainly one factor that can influ- gaged employees respond differently to observationsence pressure. But, according to 2009 NBES data, of misconduct than their disengaged peers. NBESpressure and employee engagement are also linked. study results showed that 67 percent of engaged em-Only 6 percent of engaged employees felt pressure ployees who witnessed misconduct reported it, ver-to compromise company standards, compared with sus only 57 percent of other employees. Perhaps be-18 percent of disengaged employees. In other words, cause of increased trust in leadership or a strongerdisengaged employees were three times as likely to commitment to the company’s ideals and standards,have felt pressure as their engaged peers. engaged employees are more likely to report obser- vations of misconduct. TAKEAWAY 2: Higher levels of misconduct and greater per- ceived pressure to commit a violation equate with lower levels of employee engagement. Therefore, in order to maintain high levels of employee engagement, leaders need not only to set an example but to carefully monitor and manage compliance with corporate ethics standards. All levels of management should be careful not to create work environments where employees perceive that hitting deadlines and meeting revenue goals are the priority regard- less of how those goals are achieved.©2010 Ethics Resource Center Research Brief from the 2009 NBES | 4
  7. 7. Reporting of Observed Misconduct Based Upon Engagement Levels (2009) Percentage Reporting Observed Misconduct 100% 80% 60% 67% 57% 40% 20% 0 Engaged Employees Disengaged or Neutral Employees TAKEAWAY 3: managers, that compromise the company’s ethical standards also erode employee Efforts to increase employee engagement can engagement. serve the parallel purpose of increasing report- n Engaged employees reduce ethics risk. They ing. HR and ethics and compliance profession- are more likely to react to misconduct by als should work together to increase employee reporting their observations to an engagement, which would help to meet the ob- appropriate resource in the company, jectives of both functions. protecting the company by making management aware of problems that need toCONCLUSION be addressed. n Many of the aims of the HR functionIn investigating the relationship between company complement the work of the ethics andethics and employee engagement, the Hay Group compliance function, and vice versa. Whenand the Ethics Resource Center have demonstrated HR is effective in its efforts to promotethat: employee engagement, it is simultaneouslyn Employees’ perceptions of company ethics reducing the company’s ethics risk. do, in fact, impact their overall engagement. Meanwhile, when ethics and compliance A positive impression of the company’s professionals are successful in their attempt ethical culture promotes employee to nurture strong ethical culture, they are engagement; misconduct erodes it. Actions concurrently improving the level of employee and decisions, especially on the part of engagement.©2010 Ethics Resource Center Research Brief from the 2009 NBES | 5
  8. 8. These findings have several implications for n Encourage the human resources and ethicsleaders who wish to increase productivity, decrease and compliance functions to coordinateturnover, reduce misconduct, and lessen ethics efforts and initiatives to maximize therisk: effectiveness of both roles.n Adopt leadership training that highlights n In order to identify areas of weakness and management behaviors, that will inspire promote accountability, regularly assess both and motivate employees to be highly effective the level of employee engagement and the and efficient—while upholding the ethical culture of the company. company’s ethical standards. n Actively and overtly strive to make decisionsn Ensure that ethics resources – such as and act in ways that promote employee hotlines/helplines, procedural justice engagement and demonstrate the importance systems, and standards of conduct – are of ethics and ethical standards. available to management and employees and that those resources are effectively designed, implemented, and promoted.©2010 Ethics Resource Center Research Brief from the 2009 NBES | 6
  9. 9. ABOUT NBESThe 2009 National Business Ethics Survey (NBES) is the sixthin a series of reports that began in 1994. NBES has grown into amainstay of research on ethics in the American workplace.NBES is the most exacting longitudinal research effort examin-ing organizational ethics from the employee perspective. Thelong-term nature of the study is important because it providescontext for national trends. NBES is the only longitudinal studythat tracks the views of employees at all levels within organiza-tions to reveal real-life views of what is happening within orga-nizations and the ethics risks they face.Download the initial 2009 NBES report at www.ethics.org/nbes.To sponsor additional supplemental reports, please contactERC at 703.647.2185.
  10. 10. Call Moira McGinty KlosSenior Vice PresidentEthics Resource Center571-480-4401 or email Moira@ethics.org www.ethics.org
  11. 11. This report was sponsored by Ethics Resource Center 2345 Crystal Drive, Suite 201 Arlington, VA 22202 USA Telephone: 703.647.2185 FAX: 703.647.2180 Email: ethics@ethics.org www.ethics.org