Monday, February 11, 2008

The Ethical Health of our Organizations - 2007 National Business Ethics Survey

Today I finally read the Ethics Resource Center's 2007 National Business Ethics Survey.

Don't read it at bedtime. It's scary!

Interviews with 2,000 employees suggest that the state of business ethics is back to where it was before Enron and Sarbanes-Oxley. Here are some of the disturbing findings:

* 56% had seen violations of company ethics standards, policies, or the law, in the past year.

* This is up from 52% in 2005 and 46% in 2003, & back to the pre-Enron level of 55%.

* More than 2 in 5 (42%) of those who observed misconduct chose not to report it within the company.

* The main reason for not reporting (54%) was feeling that reporting would accomplish nothing, so why bother?

* The second reason for not reporting (36%) was fear of retaliation.

* Only 9% of companies have what the Ethics Resource Center calls a "strong ethical cutlure."

The report does not differentiate industry sectors. I would guess, and hope, that hospitals and group practices rate better than the overall average. I would guess, and fear, that many key participants in health care - insurance companies, pharma, medical device companies, home health services, etc - are closer to the mean.

The church sexual abuse scandals tell us that the fact that health care, like the ministry, is a calling, isn't enough of a safeguard.

The strength an organization's culture of ethics was the strongest predictor of ethical performance. Strong cultures had 75% fewer incidents of misconduct than weak cultures.

Employees identified four components of strong organizational ethical cultures:

1. Top leadership sets an ethical tone and is trusted to do the right thing.

2. The level just above the employee in the heirarchy sets a good example and encourages ethical behavior.

3. The peer group encourages its members to "do the right thing."

4. Informal communications channels complement and are consistent with the organization's official values.

These four factors aren't rocket science. An attentive board can encourage top leadership to set the right tone. Review systems can focus on the example mid-level managers set and the behaviors they encourage. Higher ups can recognize peer leaders and listen to them. And, actions like Memorial Sloan Kettering eschewing commercial CME sponsorship and St. Mary's Hospital/Duluth Clinic chucking out cups and pens with product labels show us what "informal communication" means.

So if it doesn't require rocket scientists to build strong ethical cultures, why do only 9% of companies have them?

In health care we know that incentives are often screwed up. Like rewarding clinicians for what they do to patients rather than for talking with them, and paying hospitals more for fixing errors than for getting things right the first time around.

But we can't just blame incentives for the sorry national state of organizational ethics. Organizations (and our culture) like glitz and speed. The four factors employees identified as key for a culture of ethics are mundane and slow.

I'm especially interested in comments from readers. In your experience, what are the important on-the-groud factors that promote good ethics in the organizations you have seen?

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