- Tips to prevent corrupt and dangerous practices published today at 9am.
- Global organisations such as VW, Tesco, FIFA and athletics’ IAAF recently humiliated due to corporate malpractice and wrongdoing.
- Share value and corporate reputation can be damaged due to financial malpractice.
New tips, show how businesses can prevent corrupt and dangerous practices.
VW, Tesco, FIFA and athletics’ IAAF are amongst the global organisations recently humiliated due to corporate malpractice and wrongdoing. Their exposure has led business leaders the world over to question whether their own organisations are hiding similar practices. On 16 February leading consultants Organisation Effectiveness Cambridge (OE Cam) will unveil six practical methods for senior management to use to reduce the risk of corruption within their businesses.
Financial malpractice and the falsification of key operational data can damage corporate reputation – and kill share value – overnight. But poor business practice also puts lives at risk, as BP found in its notorious Deepwater Horizon oil spill – an incident which the White House blamed on a series of corporate cost-cutting decisions and an insufficient safety system. Issues of this magnitude often seem to erupt without warning, leaving senior management teams, and industry observers, to wonder if warning signs were missed, or if every company is at risk from ‘corporate killers’ hidden in its ranks.
Backed by their experience in advising blue chip firms on how to build integrity into an organisation, the team at OE Cam has defined the key requirements for reducing the risk of corporate failure or corruption. Applicable to companies large and small, they counterbalance the sometimes blinkered drive for ‘profit by any means’, by embedding attitudes and putting measures in place to guard against the growth of dangerous company cultures.
In new guidelines, to be published on 16 February, OE Cam recommends that all businesses:
1. Set out your expectations of everyone’s behaviour: Make sure that your values and ethics are made real: a company’s principles of practice need to be lived and breathed in order for them to become the norm. Be explicit about how you expect employees and team members to conduct themselves. All businesses have grey areas that test the true meaning of ethics on a daily basis, for example, loose and flexible interpretation of work in progress, stock levels, and time allocation to clients. These help us to identify the ‘thin end of the wedge’.
The VW emissions reports fail to explain why the development teams felt the use of so called ‘defeat devices’ was acceptable. It remains unclear whether this was deliberate, or an accumulation of flexible interpretations of requirements set against the need to meet performance targets.
2. Lead by example and set the tone at the top: Conspicuous consumption by senior members of staff can set the wrong tone, while a clearly stated business direction and defined roles give a sense of purpose to both the individual and the team. Leaders have the ability to strongly influence their corporate culture. Ensure that you are perceived as open and honest by living by the expectations that you set for others.
3. Find out what is going on in your business: Track organisational health and triangulate! Individuals need to feel confident that they can ‘speak out’ about unacceptable behaviour without fear of reproach. Be suspicious of the universal positivism and praise that often gets given to leaders – is it really so good? You can find out by testing views and opinions from employees as well as external customers and suppliers. You can also get external opinions through internal audits and anonymous third-party comment.
Use your full ingenuity to work out how your less scrupulous colleagues can game your incentive plans and performance management. All such plans have unintended consequences if individuals focus solely on maximising the measure rather than the business. So, be sure to assess, for yourself, unintended actions and consequences of these plans.
For example, did delaying payment to Tesco’s suppliers improve individual measures of performance and incentive pay-outs? If we hear something from one source then we should listen and act, two sources and we should be concerned, and from three sources, urgent action may be required.
4. Set up robust systems of internal control using both hard and soft measures: Broaden the remit of the audit committee to include culture and behaviour as well as systems, processes and compliance.
5. Psychological profiling: This can reduce risk by assessing and understanding an individual’s propensity to break rules, take risks, and give an indication of their concern for ethics. This, combined with understanding the extent of their desire and ambition, enables firms to mitigate costly hiring mistakes.
6. Review regularly: Ask yourselves whether you are seeing and hearing outside your own echo-chamber. Regular feedback on progress with respect to outcomes and associated behaviour is also essential as it provides a productive framework for improvement and success. Constructive reviews ensure all employees are clear on their own, and the company’s, goals.
