Why do you need to work out someone’s stance on integrity?
When conducting the project and interviewing the executives, there is a need to have some consistency when describing the stancebelonging each type of leader. More importantly, you will need to determine whether any observed negative behaviour is an isolated instance or whether it is systemic in relation to a certain function or department. Will the outcome of your project be to discipline a “bad apple”, or will it be to install internal controls across a particular department?
Working out someone’s stance
Whether someone is ethical or not is not a binary question as there are several degrees of integrity. It may be too simplistic to ask, “Are they ethical? Can we trust them?” The Red Flag Group has defined ten different types of stances which we have called “Stances on Integrity”. Each different Stance on Integrity™ has its own set of different characteristics and behaviours. Knowledge of a person’s Stance on Integrity™ allows you to see those differences, therefore letting you see the situation from that person's perspective. We are not trying to label a person or make value judgements on his or her personality type; rather, we are providing a contextual scale for a person’s ethical behaviour in relation to their company or organisation. The sales manager, who is everyone’s friend and who will always buy the first round of drinks, may be more inclined to make ethically-challenged business decisions due to his particular take on corporate ethics and integrity. A marketing executive who runs her department with an iron fist may be the one who champions ethics across her department.
Some people fall into a particular category because their job depends on it, simply because certain jobs are more likely to have higher levels of particular categories than others. For example, it might be likely that a human resources department has a higher percentage of “Ethical Leaders” (i.e. those in levels 8 to 10) than a sales department, who might have more in the “Go-Betweeners” section. This is not an indictment of sales people, but more of a reflection on the nature of that department – it typically attracts a certain type of person: one that likes to talk, likes to embellish and likes money. We find it particularly apprehensible when people who are in positions of trust (such as doctors, judges and community leaders) commit wrongdoings; similarly, we expect that our human resources or legal departments uphold certain ethical standards. However, the nature of a sales function means that there are pressures from customers and opportunities for wrongdoing, hence we may be less surprised to find more incidences of unethical behaviour amongst salespeople.
Therefore, when looking at a member of executive management and working out their Stance on Integrity™, it should be observed in the context of their job and function. Is this an incident of individualised behaviour or does it point to something more widespread? Answering this question makes it easier to prioritise the next steps.
Stance on Integrity™
Where to focus your time
Ethical Leaders: There is a classic management approach that says to focus on your top performers and the rest will ultimately fall in to place; however, applying this adage to the Stance on Integrity™ might not be the best approach. The Ethical Leaders are unlikely to become “unethical” or fall below that level, no matter what is put in front of them by way of a potentially corrupt deal, a kickback or some form of conflict of interest. For these people, giving reminders about the benefits of compliance, and encouraging them to educate their staff about these benefits, is the best approach.
Go-Betweeners: There is a higher level of risk with the Go-Betweeners, who, when faced with a certain situation, may fall “below the ethical line”. The Go-Betweeners are certainly the employees to focus on to make ensure they know right from wrong and don’t stray into unethical behaviour. Showing the Go-Betweeners how gaps in integrity could lead to bad results is unlikely to be effective as they are not likely to believe the rhetoric that they “might go to jail”. With Go-Betweeners the focus should be on showing them the positives of integrity – they need to see the value and what’s in it for them.
What to do with someone with a Stance on Integrity™ that is lower than Level 5
With people that rate as less than Level 5 on the Stance on Integrity™ it is unlikely that you will be able to move them to above Level 5 with any form of training or the traditional “carrot-and-stick” approach. With these people you are far better off using the standard compliance approach: making it harder for them to do the wrong thing and easier to do the right thing. At the end of the day, chances are that these people have done very well in their careers and in a growing economy will be able to capitalise on their lack of integrity and grow their revenue base. The people in the lower levels of the Stance on Integrity™ should be watched closely and should be the subject of reviews and assessments, with their deals closely analysed, expenses assessed and general ethical values frequently reviewed. Employees at these levels are most likely to be the subject of an investigation and are also likely to jump from company to company.
Can you move someone from one level to another with training?
Classic compliance training (simple “awareness” training, which is not really training but simply increasing the awareness that laws and policies exist and of where to go to get help) will not typically help someone who is below a Level 5. In our view, it would be very difficult to make an unethical person ethical. Through awareness and training you may be able to slightly improve an employee’s stance, perhaps from a Level 6 to a Level 7, or from a Level 5 to a Level 6. It is very rare to move someone from a Level 2 to a Level 10 or even from a Level 5 to a Level 9.
Typical compliance training, where every employee has to do the same standard 45-minute training session on ethics, does not help a Level 5 or below. Targeted training which has been customised for each different function and Stance on Integrity™ level might be more effective.
Training for people in the Ethical Leaders categories should be more about leadership training: helping them explain ethics and integrity to their staff, providing examples and direction on the benefits of being a person of high integrity in business. The training should focus on keeping them in the Ethical Leaders section of the Stance on Integrity™.
Are certain functions more likely to fall into certain categories?
When you observe your organisation you might find it possible to categorise certain functions as having certain levels within the Stance on Integrity™. For example, as mentioned previously, sales might be expected to fall into lower levels, and HR might be expected to fall into higher levels. While it is likely that every department will have at least one person with a lower level, these expectations can be used as a guide. When looking at the guide, keep in mind that the functions with the largest amount of Ethical Leaders should be the ones where we, as compliance officers, invest the most time to capitalise on that leadership and lift the Go-Betweeners up to a higher level. The functions with the highest percentage of the Low Rangers should be the focus of heightened controls, more reviews, assessments and greater scrutiny.
Engineering: Engineers are well rated in the Stance on Integrity™. They are focused on engineering products that are safe and innovative and will lead to great success. They generally view their work with pride and are also happy to contribute a better product for the benefit of the public.
Research and development: Research and development teams are generally well rated on the Stance on Integrity™ and will have very few people who are Low Rangers. There might be a few in the Go-Betweeners category because they are driven to produce research that adds value to the business and may occasionally utilise loopholes to obtain budget and use company resources.
Procurement: This group generally has a higher number of staff falling into the Go-Betweeners or Low Rangers categories on the Stance on Integrity™. This is because there are opportunities for fraud and kickbacks combined with a substantial amount of personal decision making. For many companies, procurement groups involve significant expense, making it easier to cover unethical behaviour. This tends to attract people that could be swayed into a lower level on their Stance on Integrity™.
Sales: Sales people are motivated by money – or at least they should be. As a result they tend to have a much lower rating on the Stance on Integrity™. There will be a few aspirational sales people who will walk away from business, refuse to push forward a deal that has revenue recognition issues or refuse to do questionable things at the end of the financial year; however, the majority would still be either Go-Betweeners or Low Rangers. The sales group has the largest percentage of Low Rangers, and this group contains the highest risk of unethical behaviour.
Finance: Finance groups have the largest proportion of people with a high Stance on Integrity™. However, more often than not when a corporate crime is uncovered it turns out that people within finance teams have known about the illegal conduct, were complicit, or simply turned a blind eye. Finance people have the most access to cash, bank accounts, supplier details, margins and budgets, and know precisely when audits are being conducted and by whom. It is for this reason that a large percentage of finance staff fall outside the Ethical Leaders category on the Stance on Integrity™.
Human resources: This group is generally one of the highest rated on the Stance on Integrity™. In corrupt environments they are occasionally at risk when it comes to taking kickbacks from recruiters etc., but, broadly speaking, human resources teams understand right from wrong and generally work well to cultivate an environment where employees with strong ethical principles can strive.
Legal: Similar to human resources, legal teams are also generally highly rated on their Stance on Integrity™. There will always be some lawyers who are complicit in illegal dealings; however, this is more out of a need to please their business partners in order to try to be commercially minded rather than being motivated by personal gain. Lawyers in corporate practice tend to recognise their duty to the Court and the regulations imposed by their profession as significant, and therefore tend not to fall in the Low Rangers category of the Stance on Integrity™.
IT: Information technology groups generally have a good Stance on Integrity™. They will occasionally have some people who take advantage of their unique position to have ownership of all data, logins and passwords and financial systems for the company. Technology staff do maintain large budgets and procure hardware, software and services, often from technology vendors who are aggressive in their sales practices, but overall they are high on the Stance on Integrity™.
Country management: Country managers and their staff are often relatively junior, and in many cases are at country-level management purely because of the status of their positions. They may have been through some corporate training on integrity but see things very much from a country perspective, where the country needs to reach sales targets and growth expectations. Things may often happen faster in these countries as there is no manufacturing under their control or research and development – they are purely a marketing and sales office. For the offices that are in emerging markets country managers are seen as local gods. They have the power to control spend and run things under local customs and in local language and are far enough away from the corporate headquarters. It is for this reason that country managers are higher risk and therefore lower on the Stance on Integrity™.
Regional management: Regional management is generally at a European level or an Asia-Pacific level and the employees in this category generally aspire to be senior executives at a headquarters level (at least for regional managers of US-based multinational companies). As such, they tend to have a higher Stance on Integrity™ than country managers, and hopefully would have been through some ethical and integrity assessments to get to the regional level. They might fall below the overall standard of executive management’s Stance on Integrity™, as their integrity messaging might be short of what would be expected of someone at a high level of the Stance on Integrity™. Regional management may still have some country-level managers on their regional-level staff and some that have moved up the ranks from country-level sales, which tends to suggest the group still has some Low Rangers on the Stance on Integrity™.
Executive management: By the time that employees have reached this level their Stance on Integrity™ should fall within the Ethical Leaders categories. As such, the vast majority of people in this position should have high levels of integrity. “The system” should have worked any people with a lower level of integrity out of the company long before they reached this level of management. However, corporate scandals have confirmed that there are a percentage of people that are truly lacking in integrity and fall into the Low Ranger category, even at executive management levels. This is often because of the significant amount of power given to people in these positions, the lack of transparency and oversight from boards and regulators, and the significant amounts of money involved.