Fostering Ethical Conduct Through Psychological Safety: Part 3 – Fixing an Unsafe Workplace | Thomas Fox – Compliance Evangelist

Bill J. Allen died last week. Not familiar with the name? Then check out his New York Times (NYT) obituary. Perhaps outside of Illinois or Ohio, he ran one of the most brazen state legislature corruption schemes around, in the state of Alaska. His power and influence were so great that he was the cooperating witness who brought down a sitting Senator, Ted Stevens, although the Indictment was withdrawn after conviction but before sentencing due to prosecutorial misconduct.

Allen held court at a suite at the Westmark Baranof, a luxury Art Deco hotel four blocks from the State Capitol in Juneau, where he and his cronies “dished out money and told their visitors what they wanted in return. Mr. Allen and his circle seemed to revel in their shamelessness. He and Mr. Smith always booked Suite 604, and Mr. Allen always sat in the same chair. He bragged that he kept $100 bills in his front pocket, the easier to dole them out to friendly politicians. The girlfriend of one politician even had hats embroidered with the letters CBC, for “Corrupt Bastards Club.””

Allen and his brazen corruption schemes seem like a good way to introduce the concluding Part 3 of my series on fostering an ethical culture through psychological safety. This series is based on a recent article in the MIT Sloan Management Review, Summer edition, entitled “Fostering Ethical Conduct Through Psychological Safety” by Antoine Ferrère, Chris Rider, Baiba Renerte, and Amy Edmondson. In Part 1 we introduced the concept of psychological safety and why it is so important to creating an ethical culture in a business. In Part 2, we considered how to determine the state of psychological safety in your organization. Today in Part 3 we consider what happens in an organization where psychological safety is lacking and steps an organization can take to remedy this deficiency.

The authors believe that “when psychological safety is lacking, it may be a consequence of the employee having witnessed unethical behavior.” Moreover, the inversion of psychological safety “correlated to the quantity of unethical behavior noticed. Put simply, the more unethical behavior a person saw, the more likely they were to feel psychologically unsafe. This suggests that the experience of seeing more unethical behavior may diminish the psychological safety experienced by an employee.” Simply put if your bosses engage not only in corrupt behavior but simply unethical behavior, it will send a message throughout the organization that reporting unethical behavior will not be favored. One only need think of Jes Staley, former Chief Executive Officer (CEO) of Barclay’s who engaged in illegal behavior in attempting to unmask an internal whistleblower. In November 2021, Staley resigned amid a regulatory probe into whether he mischaracterized his relationship with the financier and sex offender Jeffrey Epstein. In many ways Barclays has never recovered.

The authors basically state the obvious when they write, “it makes intuitive sense that being in a work environment where unethical behavior is prevalent might diminish psychological safety.” Put another way “people are most reluctant to speak up in ethically troubled environments, where we most need them to do so.” This is an important issue for every Chief Compliance Officer (CCO) and business leader. To overcome such a deficiency, they found that “several other factors correlated with strong speak-up behavior, keeping everything else constant: moral engagement, moral attentiveness, and organizational justice combined with clarity of expectations.”

Moral engagement. As a CCO you should endeavor to create an atmosphere where ethical conduct matters, “so that when employees recognize a potentially unethical situation, they will be motivated to do what’s right.” At Novartis International AG, the authors noted the company “created a decision-making framework called the Decision Explorer to support associates in making ethical decisions. Rooted in the company’s code of ethics, the tool helps employees work through a situation to surface ethical considerations.”

Moral attentiveness. You can educate employees to recognize the ethical dimensions of situations. They point to the example at Novartis who “runs practical ethics training sessions that immerse employees in hypothetical scenarios where they must practice ethical decision-making. Another approach is to have managers highlight examples of ethical and unethical behavior with their teams and encourage dialogue on workplace ethics. Such grassroots employee contributions build trust and commitment by giving employees a role in strengthening the code of behavior by which they are expected to live.”

Organizational justice. Obviously talk is cheap and it is actions, not deeds, that matter. The Department of Justice (DOJ) has made clear in the Update to the Evaluation of Corporate Compliance Programs that the keeper and responsibility of institutional justice sits with the CCO and the authors find that this same concept “is vital to building a reputation of organizational justice.”

Clarity of expectations. CCOs must communicate a clear message to employees so that employees will have “an understanding of organizational standards and are clear about expectations.” Second, CCOs must act decisively in response to employee reports of misconduct to show that there are consequences for unethical behavior. To foster greater psychological safety, coach and empower line managers to create safe spaces for discussing ethical concerns, and help them react appropriately when such issues are raised.

The siloed nature of this issue must also be addressed. As previously noted, this issue touches multiple corporate disciplines including HR, ethics and integrity, risk management, legal and compliance. There must be a cross-functional approach in building a culture of ethics and performance. For example, Novartis created a cross-functional working group focused on the notion of ethical leadership.

The authors concluded, “Building a psychologically safe environment to facilitate speaking up about ethical conduct is relevant to both company reputation and long-term business performance. Unethical conduct can remain hidden for a time but is likely to be discovered eventually, causing far more harm than if it were caught and corrected early. Psychological safety thus can help organizations respond and improve quickly instead of allowing misconduct and unethical behavior to fester and further degrade workplace psychological safety, thus triggering a vicious cycle.” Every compliance professional should use the research from the authors study to craft a program to create or improve the psychological safety at your organization. The authors frankly state that organizations which have relied on speak-up channels or ombudspersons as mechanisms for reporting unethical behavior is no longer sufficient. “They need to be complemented by efforts to actively shape and promote an ethical climate in which managers are equipped to support employees’ ability to say what they think and react appropriately to what they hear.”

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