Bad communication leads to employee misconduct
The research shows failing to tell employees in advance about organisational changes – such as a change in senior leadership – increases misconduct by 42%.Companies that communicate with employees ahead of new initiatives and those which consistently reiterate the importance of ethical behaviour will see the smallest increases in misconduct when implementing change.
The research found reducing pay and benefits is the most dangerous form of change – almost one in ten employees reportedly commit misconduct as a result of changes to employee pay packages. Reduced pay and benefits also almost triples the risk of bullying, discrimination and abuse of alcohol or drugs.
Reducing variable pay such as bonuses is most likely to lead to data privacy violations, while asking employees to take on new roles and responsibilities more than doubles the risk of insider trading.
Three key ways senior managers can help minimise risk resulting from corporate change were identified:
- Understand, prioritise and address the most dangerous types of change
- Integrate and reinforce ethics when managing change
- Enable managers to intervene to support ethical behaviour on their teams.
In the current economic climate it is not surprising that 84% of workers have experienced a recent shift in their businesses operations. Multiple changes, from management moves, employee layoffs and significant senior leadership overhauls, are common in today’s work environment.
84% of companies have experienced significant change in the last two years, creating a significant and widespread risk of growing levels of misconduct. This means the costs of failing to properly communicate with employees is potentially huge. Companies that communicate effectively with their employees provide shareholder returns of 7.9%, while companies without effective communication deliver just 2.1%.
"The employees participating in our survey work at global companies across industries, position levels and functions," said Maarten Westermann, Senior Director, CEB. "What we found was that, independent of industry or size company, employees experienced a lot of change in the past years—on average, two massive change 'moments', such as layoffs, reorganizations, leadership changes or big mergers. Without intervention, these changes have significant impact on employee morale, engagement and motivation, which affects a company’s productivity and retention. Worse, these changes went hand in hand with increases observations of misconduct as well as decreased perception of integrity."
"A good example of mitigating the harsh effects of change is proper communication and guidance, for example, we learned that communicating change before it happens, not just by the top executives, but especially by middle managers, highlighting in their message the importance of integrity, has a great positive impact on employees’ morale and ability to cope with the change."
Maximizing Integrity at Key Career Moments
This mission is hard and faces many daily challenges, including aggressive growth targets, changing operating processes, cultural differences, unpredictable behaviors, and a natural employee resistance to change. Frequent (and recent) corporate compliance scandals attest to these challenges.
Most compliance programmes have less than five hours of employees’ time each year for dedicated compliance and ethics training (or barely a minute per day). So, how do we shape employee behavior while allowing for the strategic freedom, entrepreneurial spirit, and on-the-job innovation that drive corporate success?
We’ve been asking the wrong question - it’s not what, it’s when
To create the right conditions, compliance and ethics officers currently create a variety of policies, training, controls, incentives and the like. Some of this effort is required and much is helpful. But if we really want to drive the right behaviors, we should not start by asking what activities and inputs (policies, training, etc.) we provide. Instead, we should ask when and how we can most inflect employee behavior.
Corporate change and the career moments that matter
To understand how employees experience corporate change, the CELC launched an exhaustive employee survey. The survey tested 16 career moments to understand their specific impact on employee misconduct, reporting, engagement and receptivity to training and communications.
CELC’s research finds that specific career moments represent key times when established patterns of employee behavior are disrupted and subject to change. A failure to respond effectively at a career moment leads to significantly higher rates of misconduct while an effective response can improve employee behaviors and productivity. Career moments represent the times when compliance and ethics can have maximum impact on future employee behavior.
- Frequent change is the rule of the day: On average, employees experience 2.2 significant career moments per year. In fact, 83% of employees experience a significant career moment (corporate changes, compensation changes, promotions and role changes) in a given year.
- Regular change doubles misconduct: Career moments have significant implications on employee behavior, impacting everything from misconduct rates to retention to productivity. n fact, employees experiencing two career moments in a given year observe twice-as-much misconduct as other employees.
- Change drives risk: Specific types of change significantly impact compliance risk. For instance, employees experiencing a corporate layoff observe 3x as much bribery, 3.5 times as much insider fraud and 4 times as much insider trading as unaffected employees.
- All is not lost: Compliance and ethics can substantially mitigate the impact of key career moments on observations of misconduct and perceptions of integrity. But, the current peanut butter approach (ie. spread a little outreach everywhere) underperforms.
- The ideal intervention: Taking a career moments-based approach can improve employee perceptions of integrity by 40%, reduce observed misconduct by almost 67% and increase employee engagement by 23%. In fact, an 'ideal' intervention can actually improve employee perceptions of integrity above their pre-moment level.
- Right time, right channel and right message: CELC’s research helps companies target the right employees with the right message at the most critical times. Companies can now specifically target employee messages for maximum impact.
A better way forward: the career moments-based approach
Leading companies are already building compliance systems more responsive to career moments. Strong functional partnerships and effective use of technology allow compliance and ethics officers to move from standard (and often expensive) compliance training that is 'customized to company' to a more cost-effective, 'mass customization' approach.
Importantly, the focus is not on building ever more elaborate learning management systems, but instead on building internal capabilities for real-time response to moments.
Call to action – 'Monday morning to-dos
- Build plans that drive results: Schedule time with HR and line management to share benefits of communicating with employees before key career moments with messages about integrity and organizational justice.
- Minimise exposure to risk: Understand the compliance and ethics risks of specific corporate changes.
- Save time and money: Deliver targeted outreach before and during employee onboarding to impart a commitment to integrity before negative behaviors set in.
To read a copy of the report, visit: Managing misconduct during career moments