This year, LRN’s annual Benchmark of Ethical Culture Report found that globally one-third of respondents said they had observed misconduct or unethical behavior in the past year. This concerning figure is made all the more alarming when we consider that of this group, one-fifth did not report their observation.
LRN’s research looked at the reasons why people were staying silent in the face of unethical behavior. Overwhelmingly, people didn’t report misconduct because those surveyed either didn’t think their company would do anything about their concern (36%), assumed their organization wouldn’t handle it effectively (30%), or because they feared retaliation.
These trends are deeply concerning to business leaders and junior employees alike, as they signal an overwhelming lack of trust in the systems of procedural justice within organizations.
The importance of trust and “psychological safety”
“Speak up culture” has been a priority for compliance functions for a long time. In recent years, the attitude towards achieving this has shifted from “how do I get my employees to speak up” to “how can I create an environment where employees feel safe, empowered, and encouraged to speak up?”
Trust in an organization is the cornerstone of a productive and harmonious relationship between employees and leadership. In our work fostering ethical cultures and helping management teams architect purpose-led, values-based companies, the topic of organizational trust comes up frequently. How can organizations expect employees to raise their hand when they see something wrong if they don’t trust they will be listened to?
This view is often called “psychological safety”, which LRN defines as an environment where employees can share their ideas and opinions, voice concerns, ask questions, make mistakes, and “speak up” in the more traditional sense. Our 2024 research found that for every unit increase in psychological safety, the likelihood of reporting misconduct is 2.4x higher. Of all ethical culture dimensions, psychological safety was the greatest predictor of reporting misconduct.
Building trust and ‘safety’ in the workplace can be a long and complex process, one which can take years to fully develop. Addressing this challenge and creating an environment where people feel free and confident to speak up and be heard is critical to business success. The first step to achieving this should be establishing clear ethical standards and policies.
How can workplaces build this trust?
Organizations should have clear, robust, and easily accessible policies on ethical behavior, outlining the consequences for violations and the channels for reporting such misdemeanors. These policies need to be regularly updated to reflect new work policies or external legal guidance and should be clear and accessible at any point. One way to ensure that this is reaching employees is regular training.
Secondly, transparency is key. It’s important that leaders foster an environment where open communication is encouraged and valued – this includes regular candid updates about company decisions, changes, and the rationale behind them. When employees are kept in the loop, they are more likely to feel valued.
Start at the top
To this point, it’s important that ethical culture starts from the top down. In LRN’s research, the large majority of employees who observed misconduct reported their observation to their direct manager or another manager in the company (79%), demonstrating the essential role that management plays in the pipeline to flagging unethical behavior.
Interestingly, the research also found that there is a divide in the experience of senior leaders, middle management, and individual contributors. Senior leaders are 2.6x more likely to indicate that their company has a strong ethical culture compared to front-line employees, illustrating a divide between leader’s perceptions of their workplace’s ethics and reality. The “leadership disconnect” is a long-studied corporate dynamic, whereby the further up the corporate hierarchy one is, the rosier one’s glasses tend to be. Given leadership’s role in shaping organizational culture, it’s essential that leaders have methods of receiving feedback from employees to truly understand how these dimensions play out on the ground.
Leadership sets the tone for the entire organization. It’s crucial that those in charge be visible examples of ethical behavior, while also being realistic about what actions need to be taken to ensure this behavior is mirrored company-wide.
Reporting and rewards
Harassment, discrimination, conflicts of interest, and employee health and safety violations were the unethical workplace offenses cited most frequently in our research. Issues like harassment and discrimination can be extremely sensitive topics for individuals, creating a barrier to speaking up.
Ensuring that your organization has a confidential reporting system that can be trusted and where individuals are taken seriously is perhaps the most important factor in building this trust. This can include anonymous reporting channels and clear procedures for investigating and resolving reported issues. As well as this, it may be beneficial to have support resources such as counseling services, employee assistance programs, and wellness initiatives.
Building a culture of trust is an ongoing process and requires deliberate effort and commitment from all levels of an organization – particularly leadership. By establishing clear ethical standards, promoting transparency, leading by example, and supporting those who need it, organizations can build a foundation of workplace trust that enhances productivity and morale.
