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HR’s Key to Unveiling the True Ethical Fabric of Organizations

Compliance professionals understand the importance of fully operationalizing compliance and embedding it into the fabric of a business. How can your Human Resources (HR) function help to both create and maintain an ethical culture at your organization? It turns out in a variety of ways. Obviously significance of incentives in driving ethical behavior cannot be forsaken but there are other areas to consider such as the impact of cross-cultural differences on ethical behavior. HR can play a role in the importance of creating a speak-up culture where employees feel comfortable reporting ethical concerns without fear of retaliation.

In a world where ethics are paramount, HR professionals hold the key to creating an ethical culture within organizations. But what happens when change is pushed too quickly, compensation drives behavior, and cross-cultural differences come into play? Discover the challenges and secrets to success in this thrilling journey of HR’s quest for an ethical culture…

In the pursuit of understanding the vital role of HR in establishing an ethical culture, I stumbled upon an unexpected revelation that shook the very foundation of my beliefs. It was a twist that challenged my assumptions and left me with a burning question: Can change truly be achieved without sacrificing ethical values? As I ventured deeper into this journey, I uncovered unsettling truths about the underlying ethos of corporations and the detrimental impact of short-term targets. But what I discovered next was even more astonishing, a revelation that would forever alter my perspective on the role of HR in creating an ethical culture…

If you are feeling frustrated and overwhelmed because your efforts to create an ethical culture are being undermined by inconsistent enforcement and lack of accountability, then you are not alone! Despite implementing compliance programs and promoting ethical values, you may find that employees still engage in unethical behavior due to a lack of consequences or clear guidelines. This can lead to a sense of disillusionment and hinder the progress towards an ethical work environment.

HR significantly contributes to embedding ethical behavior within the organizational culture. By creating a conducive environment that promotes honesty and integrity, HR can foster a culture that this significantly resistant to unethical practices. It’s primarily up to HR to ensure that employees feel comfortable voicing concerns without fear of retaliation, helping to enhance the ethical culture within organizations.

The path to cultivating an ethical culture is often met with significant roadblocks such as too much rapid change, reward-driven behaviors, and cross-cultural conflicts. These elements can create an environment where unethical behavior thrives, impacting organizational growth and success. For a moral culture to strive, these challenges should be identified and effectively addressed, paving the way for a workplace that values ethical conduct.

Understanding the underlying organizational dynamics is crucial in establishing and maintaining an ethical culture. It’s not enough just to have a written code of conduct; the actual behaviors within the organization need to be assessed and aligned with these ethical guidelines. HR plays a crucial role in comprehending these dynamics, ensuring that metrics used to reward employees promote ethical conduct rather than encouraging unethical short-term success.

Have you ever heard these myths about the role of HR in creating an ethical culture? First myth: HR is solely responsible for ethical behavior. Second myth: Creating an ethical culture is too time-consuming and costly. Third myth: HR can’t effectively enforce ethical standards. But what if I told you that these myths are far from the truth? Some key points are:

  • How HR can be the key instigator in shaping an ethically driven business culture.
  • Recognizing the potential roadblocks that could obstruct the path to ethical behavior in organizations and how to overcome them.
  • Appreciate the crucial interplay between organizational dynamics and ethics.
  • Perceive the nuanced impact of incentives on ethics and how it can steer the moral compass in corporate environments.
  • Master the art of endorsing.

My journey into understanding the vital role of human resources in establishing an ethical culture within an organization started with a deep dive into the role of HR and how those roles could that shed light on a fundamental dilemma for compliance. This dilemma was not about right and wrong, but about navigating clashing interests, misaligned incentives, and conflicting cultures. I learned that pushing too much change from the top, too quickly and too frequently can warp a company’s ethical climate. This realization led me to critically analyze the compensation plans in various organizations. The stark reality that people do what they are rewarded to do underlyes ethos of many corporations. This means that short-term targets often overshadowed long-term success, leading to a detrimental impact on the ethical culture. As I delved deeper into the concept of ethical culture, I realized that the essence of this term is far more profound and complex than it seems on the surface. This is not just about formal corporate governance documents or written codes of conduct. It is about understanding and adopting your organization’s underlying culture. It is also about self-awareness, organizational awareness, and the courage to speak up. One problem is that too many leaders tended to seek advice from their like-minded peers rather than embracing diverse opinions. This convinced me about the importance of fostering a speak up culture, and most crucially, a culture devoid of retaliation. This exploration underscored the pivotal role of HR in championing ethical norms, thereby establishing a robust and effective compliance program.

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31 Days to More Effective Compliance Programs

One Month to More Effective HR in Compliance: Day 4 – The Reference Check

Hiring the right people for your team is critical to the success of any organization. Unfortunately, it can also be a costly endeavor if the wrong hire is made. According to a survey of 2500 companies, one bad hire can cost an organization more than $25,000 in lost productivity, low morale, and other associated costs. In some cases, the cost can be even higher, with one energy service company estimating the cost of a bad hire at $400,000.

With these staggering costs in mind, it’s clear that companies need to invest in the hiring process to ensure they get the right people. Reference checks are an important part of this process, yet they are often overlooked. This was discussed in a recent episode of One Month More Effective Compliance Program. The episode featured Kevin Ryan, who believes that reference checks are an underutilized part of the hiring process and a key internal control for human resources.

Reference checks are the only way to learn things about prospective employees that can’t be found on a resume. Unfortunately, companies often can’t or won’t give out much more information than confirming dates of employment. To get a more robust appraisal, one should dig up people who will speak candidly about the candidate. Search firms are particularly good at this, and companies should emulate this practice. Asking direct questions to acquaintances can provide direct responses 75% of the time.

The Department of Justice has recognized hiring as a best practice for compliance programs since 2004. According to Kevin Ryan, companies should take the time to get to know the candidate and ask questions that will reveal their values, beliefs, and motivations, as well as their ability to work with others, take direction, and think critically. He recommends that companies take three steps in the hiring process: resume review, in person interview, and reference checks. While the resume is good for establishing the basic qualifications for the job, it doesn’t provide much else.

The hiring process is the first step in operationalizing a compliance program. Reference checks are an important part of this process, as they can help to ensure that the candidate is a good fit for the company. Investing in the hiring process is essential to ensure that the right people are brought on board and to avoid costly mistakes. The Department of Justice has recognized hiring as a best practice for compliance programs since 2004, and reference checks are an underutilized part of the hiring process and a key internal control for human resources.

Three key takeaways:

  1. The hiring process is the first step in operationalizing your compliance program.
  2. The DOJ spoke to hiring as part of a best practices compliance program as far back as 2004.
  3. Reference checks are an underutilized part of the hiring process and a key internal HR control.

For more information, check out The Compliance Handbook, 4th edition, available on LexisNexis.com.

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31 Days to More Effective Compliance Programs

One Month to More Effective HR in Compliance: Day 2 – The Role of HR in Creating an Ethical Culture

Welcome to the August edition of One Month to a More Effective Compliance Program. In the month of August, 2023 we will consider the role of Human Resources in a best practices compliance program.

Creating an ethical culture in the workplace is essential for any business. Not only does it ensure that employees are making the right decisions, but it also helps to protect the company from potential legal and financial repercussions. But how do you create an ethical environment?

HR can play a key role in this process. They can provide employees with the tools and resources they need to make ethical decisions, such as a personal network for informal guidance and the opportunity to consult with advisory functions. Additionally, HR should support employees who want to do the right thing and ensure that those who speak up are not discriminated against or held back from promotion.

Written protocols are also important for the detection and prevention of unethical behavior. Companies should consider if their compensation system is based on performance or something else, and ensure that incentives are not driving behaviors that are counter to long-term success. Bonus payments and executive share schemes should not be based on short-term business metrics, and cross-cultural differences should be taken into account.

Leadership also plays an important role in creating an ethical culture. Senior leadership should set the tone from the top and reward ethical behavior, while also seeking out diverse opinions and breaking down silos in the corporate organization. Additionally, a speak-up culture should be encouraged to ensure that unethical behavior is not tolerated.

Finally, employees need to understand the organization’s underlying culture in order to make ethical decisions. Companies should ensure that employees have the tools and resources they need to make informed decisions, and that they are not pushed too much change from the top, too quickly and too frequently.

Creating an ethical culture in the workplace is essential for any business. By utilizing HR, written protocols, and leadership, companies can ensure that employees have the tools and resources they need to make ethical decisions. This will help to protect the company from potential legal and financial repercussions, while also creating an environment where employees feel supported and empowered to do the right thing.

Three key takeaways:

  1. Beware of the three obstacles to creating an ethical culture.
  2. What really matters in your company?
  3. A speak up culture will improve the operational performance of your business.

For more information, check out The Compliance Handbook, 4th edition, here.

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31 Days to More Effective Compliance Programs

One Month to More Effective HR in Compliance: Day 1 – The Role of HR in Compliance

When it comes to operationalizing a successful compliance program, HR is an essential part of the equation. HR has many touch points with employees, from interviews to onboarding, and can be used to connect the dots in many divergent elements of a compliance and ethics program. HR can take the lead in operationalizing compliance at each of these touch points, such as pre-employment screening and interviewing, onboarding training, annual assessments and reviews, and promotions to exit strategies.

The Compliance Podcast Network’s One Month to a More Effective Compliance Program provides four steps to ensure an effective compliance program. These steps include establishing a consistent application of disciplinary actions and incentives across the organization, utilizing an incentive system to incentivize compliance and ethical behavior, and providing examples of actions taken, such as promotions and awards denied as a result of compliance and ethical considerations. Additionally, it is important to determine who determines the compensation, including bonuses, as well as discipline and promotion of compliance personnel.

HR can help operationalize a compliance program by getting the message out through their distribution channel. They can also utilize their expertise and talent to more fully communicate compliance concepts. This could include ongoing communications with prospective, newly hired, and seasoned employees about the need for ethical dealings and compliance with company values. It is also important to have a shared commitment requirement found in the commitment of senior management as well as the requirements around incentives and discipline.

The 2023 guidance from the Department of Justice Evaluation of Corporate Compliance Programs listed several HR touch points as best practices for a successful compliance program. These include senior leaders and middle management stakeholders, such as business and operational managers, finance, procurement, legal, and human resources, demonstrating their commitment to compliance and remediation efforts. HR can be one of the linchpins in spreading a company’s commitment to doing business ethically and in compliance throughout the employee base.

Incentive and discipline processes should involve participants in making disciplinary decisions for the type of misconduct at issue. Reasons for discipline should be communicated to employees. Compliance should be operationalized into the very fabric of a business. Have a cup of coffee with the head of corporate HR to find out what they do, how they do it, and what they do on a daily basis. This will help you to better understand how HR can help operationalize your compliance program.

By following the four steps outlined in the Compliance Podcast Network’s One Month to a More Effective Compliance Program, you can ensure your compliance program is successful and that your employees are aware of their responsibilities. HR can be a powerful tool in operationalizing your compliance program, and by utilizing their expertise and talent, you can more effectively communicate compliance concepts and spread the company’s commitment to doing business ethically and in compliance throughout the employee base.

Three key takeaways:

  1. What are the HR-employee touchpoints at your company?
  2. HR professionals can bring new, dynamic and innovative techniques to compliance
  3. Go down and have a cup of coffee with the head of your corporate HR department. Find out what they do and how they do it.

For more information, check out The Compliance Handbook, 4th edition, here.