In an era of stakeholder capitalism, with eyes on environmental, social, and governance (ESG) efforts, culture is the key to the authentic expression of a company’s commitment to purpose and values. Data from the LRN Benchmark of Ethical Culture shows that there is a present, growing need to shape culture globally. But traditionally, this has been a challenge. Regions vary by language and cultural sensitivities, and LRN's research has shown that large multinational organizations have especially struggled to achieve consistent ethical cultures and behaviors across all locations. However, that doesn’t change the fact that strengthening ethical culture has been on the minds of many in the corporate sphere—from E&C professionals to employees to board directors—going into 2023.
The findings in the Benchmark of Ethical Culture report represent a strong need for companies to promote strong ethical cultures lest they lose in the competitive, stakeholder-led business environment. So, how can compliance professionals help make the case that strengthening ethical culture should be a top business priority this year? As you develop your culture strategy to gauge executive buy-in, consider using these four charts that highlight data and key insights from the report (which you can download in full here).
Ethical culture has a significant impact on business performance
The insight: There is a close association between strong ethical values and business performance.
The data: According to the LRN Benchmark of Ethical Culture, companies with the strongest ethical cultures outperform—by approximately 40%—across all measures of business performance, including levels of customer satisfaction, employee loyalty, innovation, adaptability, and growth. Research by the University of Notre Dame further supports this finding, indicating that low unethical behaviors and high product quality are critical in predicting a company's performance.
What it means: In the competitive business environment, brands always focus on improving their product offerings. It means that consumers have many options, and only a set of strong ethical values will attract the largest market share.
There is a company culture disconnect across management levels
The insight: The perception of the current state of company culture is disjointed.
The data: Top managers and senior executives often report that their company maintains a favorable culture. Middle managers more often rate their culture as average, while the hands-on employees (typically individual contributors, who deal directly with the consumers) have significantly lower perceptions of their companies' cultures.
What it means: Senior leaders must be careful when making conclusions about their company culture based on personal experiences. As a best practice, LRN recommends surveying all employees when assessing culture to get the whole picture.
Certain aspects of company culture nurture ethical behavior more than others
The insight: Cultures steeped in trust and organizational justice encourage employees to express their ideas and speak out about observed instances—or personal experiences—of ethical misconduct.
The data: The Benchmark of Ethical Culture report suggests that When trust or organizational justice is high, respondents are eight times more likely to observe ethical standards upheld when under pressure.
What it means: Employees usually exhibit unethical behavior when faced with the pressure to perform. However, if workplace behavior is based on trust and fairness, they feel motivated and obliged to uphold ethical policies. Specific “Culture Catalysts” can highly influence employee conduct.
Employee loyalty is driven by trust, corporate ethics, and inclusion
The insight: Companies built on trust have higher employee loyalty and low turnovers because workers feel more empowered in their respective positions, regardless of where they work. In addition, when an organization promises and practically demonstrates its commitment to diversity, equity, and inclusion, employees nurture a sense of safety and belonging.
The data: An employee’s desire to stay with their company is predicted by their organization having a culture of trust (81%), purpose-driven and ethical business practices (82%), and a sense of belonging and inclusion (83%).
What it means: The COVID-19 pandemic upended how people work. Many employees started working remotely while others had shorter but highly productive working hours. Such shifts in work schedules have increased their awareness of how their companies should treat them. In fact, many people have resigned from their previous jobs, citing burnouts, mental health, safety, demand for more flexibility, work-life balance, and more inclusivity as reasons for leaving their jobs. Ensuring that employees feel supported in living their organization’s values is crucial to talent retention, performance, and overall culture.
The key takeaway
The LRN Benchmark for Ethical Culture makes a compelling case that organizations must prioritize culture in their 2023 strategy to ensure high ethical performance and business performance. It's not enough to have written ethical policies. Organizations need to create powerful Culture Catalysts to ensure that those policies are brought to life as employees interact with each other, whether it's an executive and mid-level manager or a frontline worker and a C-suite officer. Download a copy of the report to get full insights into company culture and its impact on ethical and business performances.
