flevyblog

Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.
MANAGEMENT & LEADERSHIP STRATEGY, MARKETING, SALES OPERATIONS & SUPPLY CHAIN ORGANIZATION & CHANGE IT/MIS Other

Corporate Compliance: Ending Unethical Behavior

Editor's Note: Take a look at our featured best practice, Digital Transformation Ethics - Implementation Toolkit (Excel workbook). The Digital Transformation Ethics Toolkit includes a set of best-practice templates, step-by-step workplans, and maturity diagnostics for any Digital Transformation Ethics related project. Please note the above partial preview is ONLY of the Self Assessment Excel Dashboard, referenced in steps 1 [read more]

* * * *

Corporate non-compliance is a major issue across the world.  Highly public cases involving major corporations point to the fact that the usual descriptions of why business employees perform illegal acts are misdirected.

No Compliance Program can completely eradicate unwanted conduct by a few employees.  Behaviorally aware programs, however, show potential of realizing the main goals of Compliance i.e., reduction in unethical and illegal behavior within the company.

To this end, cognizance of employee behavior is vital, of which Decision-making is the most important part.  Humans make decisions using 2 ways:

  1. Intuitive—referred to by psychologists as System 1—This Decision-making happens by associative memory and habit, which hampers control or alteration. Rapid associations are offered by the mind, idea after idea, all associated effortlessly.
  1. Reasoning—referred to by psychologists as System 2—This Decision-making is employed using thought in an ordered way e.g., to answer complicated math problems, to compose a paragraph, or consider multidimensional decisions.

Since System 2 takes more mental effort, humans tend to rely mostly on System 1 for most of the Decision-making.  The problem with that is people tend to use System 2 to justify decisions made using System 1 instead of judging their decisions by it.

Although Behavioral Ethics Research is the foundation for studying System 2’s failure to prevent Unethical Behavior, it does not completely explain it.  Criminology helps us go further in this regard.

Criminologist point at fulfilment of 3 conditions for an unethical act to occur:

  • A non-shareable problem.
  • Problem has to be solved by violating trust.
  • Verbalization has to occur.

Effective methods for compliance pay attention not on the way government regulators respond to compliance initiatives rather on how employees—the actual users—will be affected.

Behavioral Strategy in conjunction with criminological insights suggests the following 3 cost-effective steps that companies can take to steer away from the innate behavior of serving self-interest that results in compliance violations:

  1. Appoint Behavioral Expert.
  2. Eliminate the root-cause via best practices.
  3. Employ inducements to direct behavior.

These 3 simple steps aid in improving the behavioral implications of the Compliance Program, overpowering employee rationalizations that end up in violations.

Let us delve a little deeper into some details of the 3 steps.

Appoint Behavioral Expert

Objective of this step is to apply various theories like dual system of thinking, rationalization, and behavioral ethics—which have been in existence for quite some time—to the business particularly to compliance related issues in a holistic fashion.  Companies are just starting to realize the significance and effectiveness of this practice.

Hiring an expert externally or developing someone internally, to stay informed of the different fields and their growing insights into ethical business decision making, is the 1st step in ensuring compliance with ethical behavior.

Eliminate the root-cause via best practices

The next step involves employing best practices—motivated by Behavioral Science which is at the core of criminology and behavioral ethics, such as nipping violation risk in the bud through preliminary declarations, having moderated conversations among employees, sharing success stories—to stamp out the root cause of unethical behavior.  Compliance Programs should have the objective of eradicating rationalizations, if they are deemed to be the cause and root of employee misconduct. 

Employ inducements to direct behavior

The last step entails deploying appropriate reward and incentive structures—monetary, otherwise, or in combination—to positively influence the way compliance is viewed by employees within an organization.

Research suggests that in case of significant corporate trust violations, the main reason, frequently, pertains less with a rogue employee and more with sections of the organization that are dysfunctional, conflicting, or incongruent.

Interested in learning more about Ending Non-compliance and Unethical Behavior in companies?  You can download an editable PowerPoint on Corporate Compliance: Ending Unethical Behavior here on the Flevy documents marketplace.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library.  FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.  Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market.  They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.  I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power.  For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients.  In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over!  The quality of the decks available allows me to punch way above my weight–it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

21-slide PowerPoint presentation
Corporate Social Responsibility (CSR) is an organization's commitment to produce an overall positive impact on society. CSR encompasses sustainability, social and economic impact, and business ethics. It makes a company socially accountable of its operations, stakeholders, and to the [read more]

Readers of This Article Are Interested in These Resources


Excel workbook
The Artificial Intelligence (AI) Ethics Toolkit includes a set of best-practice templates, step-by-step workplans, and maturity diagnostics for any AI Ethics related project. Please note the above partial preview is ONLY of the Self Assessment Excel Dashboard, referenced in steps 1 and 2 [read more]


 
54-slide PowerPoint presentation
 
 
29-slide PowerPoint presentation

About Mark Bridges

Mark Bridges is a Senior Director of Strategy at Flevy. Flevy is your go-to resource for best practices in business management, covering management topics from Strategic Planning to Operational Excellence to Digital Transformation (view full list here). Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.

, , , , , , ,





Complimentary Business Training Guides


Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]

  This 48-page whitepaper, authored by consultancy Envisioning, provides the frameworks, tools, and insights needed to manage serious Change—under the backdrop of the business lifecycle. These lifecycle stages are each marked by distinct attributes, challenges, and behaviors. [Learn more]

We've developed a very comprehensive collection of Strategy & Transformation PowerPoint templates for you to use in your own business presentations, spanning topics from Growth Strategy to Brand Development to Innovation to Customer Experience to Strategic Management. [Learn more]

  We have compiled a collection of 10 Lean Six Sigma templates (Excel) and Operational Excellence guides (PowerPoint) by a multitude of LSS experts. These tools cover topics including 8 Disciplines (8D), 5 Why's, 7 Wastes, Value Stream Mapping (VSM), and DMAIC. [Learn more]
Recent Articles by Corporate Function

  

  

  

  

  


The Flevy Business Blog (https://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most of our articles are authored by management consultants and industry executives with over 20 years of experience.

Flevy (https://flevy.com) is the marketplace for business best practices, such as management frameworks, presentation templates, and financial models. Our best practice documents are of the same caliber as those produced by top-tier consulting firms (like McKinsey, Bain, Accenture, BCG, and Deloitte) and used by Fortune 100 organizations. Learn more about Flevy here.


Connect with Flevy:

     
  


About Flevy.com   /   Terms   /   Privacy Policy
© . Flevy LLC. All Rights Reserved.