As CEO of Ethics and Compliance Initiative (ECI), Pat Harned is a true thought leader when it comes to empowering organizations to build and sustain high-quality ethics and compliance programs.
Today she joins Cindy Moehring, founder and executive chair of the Business Integrity Leadership Initiative, to talk about the insights from the new Global Business Ethics Survey. Global, Harned shares her findings from this year’s survey trends involving company culture, employee pressure, and fear of retaliation. Which trends increased dramatically? Which plateaued? And why?
Podcast:
Episode Transcript:
0:00:15.7 Cindy Moehring: Hi, everybody. Welcome back for another episode of The BIS, The Business Integrity School, and I am super excited today to tell you that I have with us ECI's Chief Executive Officer, Pat Harned. Welcome Pat.
0:00:29.8 Pat Harned: Thank you for having me, Cindy. It's great to see you.
0:00:32.4 Cindy Moehring: It's great to see you too. Pat and I go back a ways, but let me tell the rest of the audience a little bit about Pat, so you can get to know her as well. So as I mentioned, she is the CEO of ECI, which is the Ethics and Compliance Initiative, and the ECI is an industry organization whose mission it is to empower organizations to build and sustain high quality ethics and compliance programs. And as the CEO, Pat oversees all of ECI strategy and operations. She also directs outreach efforts to policy makers and federal enforcement agencies in Washington DC, and she speaks and writes frequently as an expert on ethics in the workplace, corporate governance, and global integrity. Pat chaired the ECI's Blue Ribbon Panel on high quality ethics and compliance programs, which established a new industry standard for effective ethics and compliance efforts in organizations.
0:01:24.1 Cindy Moehring: She's testified before Congress and the US Sentencing Commission, and she's provided briefings to the US Secretary of Defense and the OSHA whistleblower protection Advisory Committee. Pat's also been featured, as recently as just yesterday, given the day of my recording in the Wall Street Journal, which was great to see in the op-ed page, The Washington Post, USA Today and CNN. Pat holds a bachelor of science degree in Education from Elizabethtown College in Pennsylvania, Masters of Education degree from Indiana University and a doctorate in philosophy Education from the University of Pittsburgh. Quite an accomplished resume there, Pat and again, thank you so much for joining us today.
0:02:07.6 Pat Harned: Well, it's my pleasure to be here.
0:02:10.4 Cindy Moehring: I am excited. Pat and I, when I mentioned in the intro that we go way back, Pat has been the CEO of ECI for quite a while, and I had the great fortune of serving on the Board of ECI for many, many years, and we got to work a lot together in that capacity, and I still am a big fan of ECI's work and conferences, and that's one of the reasons that we are hosting the podcast today, is because ECI has just released some very interesting research, which they do every couple of years, I think, and have been for the last 20 years. It's called, The Global Business Ethics Survey, and you've been doing it since '94. This year, you're able to share with the audience some insights in the US from over 20 years, and we did make it global a few years back, about five years now. So we also have some global insights, and it covers I think about 10 countries, but share just a little bit more, Pat, for our audience who may not be familiar with this really significant research project, what it really is, what countries you're in and what it's all about?
0:03:23.0 Pat Harned: So I know that I'm talking to an academic audience, which is always fun, 'cause I get to lean a little more on some of the statistics of this study. This is a longitudinal, cross-sectional study of employees in workplaces around the world. When it was first created in 1994 and actually through to about 2016, it was actually only a US survey and that was largely because of ECI's methodologies ability to sample, ability to have access to more global panel methodologies. So starting in 2016, we switched to a global survey, which means that this time around, as you mentioned, Cindy, it's in 10 different countries, Mexico, Brazil, France, Germany, Spain, the UK, China, India, and Russia and the United States. So it's done by panel. We surveyed, this time, 1,400 employees, representing those countries, and they represent the business workforce in each of those countries. And to be able to qualify to be a part of the survey, you had to be at least 18 years old, and working at least 20 hours a week in a business organization, and those organizations had to have at least two employees. We do over sample to represent large organizations, and that's largely, because the audiences that tend to rely on this research, come from medium and large size organizations. So we over sample to represent them, but when you look at how people are spread across the panels, it actually is a very good representation of what business looks like around the world.
0:05:09.9 Cindy Moehring: Yeah, well, it has certainly become, I would say, something that people, in the industry, wait for every two years to see what some of the new trends are, and I love the fact that now we can talk about 20 years worth of trends in the US and five internationally. So let's dive in, now, to some of the main findings and what the trends have shown. The first one, I think, is around strength of companies, cultures. And I guess my question is, I think everybody can assume, it's good to have a strong culture, but have you seen that in this year's study? Did it go up or did it go down from previous years and what insights did you draw from that?
0:05:53.2 Pat Harned: Sure, and just to add one other point of information about the survey, so we actually... And Cindy, you're correct, for many, many years, we surveyed every other year, but starting in 2016, we started to survey every year. However, we only do an update on trends with those questions every other year. So we have not actually reported on trends since 2017, so this has been a little bit longer this time in the update. All that said, you are correct, one of the... There are generally a couple of metrics that we gauge every time when we wanna update what is the state of ethics in workplaces around the world, and culture is a very important one. For us, it's a roll-up of a series of questions that we ask, and of course, in the ethics and compliance industry, it's one we care about a great deal because we know culture has such a huge impact on people's conduct. And so we always hope that we will see an uptick when we're looking at how many people say they work in organizations with a strong ethical culture. This time we actually saw it plateau. So in 2017, about one in five people said they worked in a strong culture. It remained exactly the same in the US this time around.
0:07:17.0 Pat Harned: And so we do report both globally and based on the US data. Because we have more data and longer data in the US, we tend to drill down a little more in that. So it's not the highest we've ever seen. The highest we ever saw it was in 2009 when 24% of people said they worked in strong cultures. So a little bit of a dip, but not as much as you might think, given all that has been going on when we were fielding this survey. We fielded it in the middle of the COVID crisis.
0:07:49.9 Cindy Moehring: Oh, goodness.
0:07:51.9 Pat Harned: And we actually delayed it this time because we ask a lot of questions about what have you observed in the last 12 months, and we wanted to be able to ask people about the difference in the COVID environment versus before the COVID environment.
0:08:07.1 Cindy Moehring: Yeah, very interesting. So it plateaued. And is that trend just a US plateau that you saw, or was it a global plateau?
0:08:16.7 Pat Harned: It's actually a global plateau. It's a global plateau. And what's interesting is that if you look at individual countries, of course, there are some significant differences. In India, 28% of people said they worked in a strong culture, 25% in Brazil, which is an interesting finding, but when you look at year over year for all of those countries, it tends to be fairly consistent, and I think the hard thing about that is that only one in five people say they work in a strong ethical culture, which is a worrying finding. We want it to be more.
0:08:54.2 Cindy Moehring: Yeah, so why do we want it to be more? Why is it so important for employees to feel like they're working in a company with a strong ethical culture?
0:09:05.5 Pat Harned: The last... Well, I think it was 2016, we leveraged the GBES research to try to look at what is the impact of an ethics and compliance program, but also what is the impact of a culture on conduct in an organization? And the findings were really striking. One of the things we learned is that when employees work in a strong culture, they are 546% more likely to say that they're seeing certain really positive outcomes, they're not seeing as much misconduct. If they are, they're willing to report it. They believe their leadership is committed to the core values and standards of their organization. The amount of retaliation dropped significantly, so there's a huge benefit for organizations if they can reach a place where employees say, "Ethics really matters here, our values really matter here, the standards are important, and people are held accountable."
0:10:08.3 Cindy Moehring: So yeah, it's 546% increase over... That is huge?
0:10:13.1 Pat Harned: It is huge, it is huge.
0:10:16.3 Cindy Moehring: And unfortunately, the plateau this year which, again, remember, it's only one in five, and so there's a lot of room to still grow here for companies, I think is the main take away.
0:10:25.3 Pat Harned: Absolutely.
0:10:28.2 Cindy Moehring: And I wonder if COVID actually may have had an impact on that with respect to maybe not making any for forward progress, which is a whole another topic [chuckle] about how do you maintain a strong culture when you can't all be together, and so much of that, I think is human and personal interactions.
0:10:48.9 Pat Harned: I think you're probably right. I also... One of the things that we do know is that the more an organization does to invest in an ethics and compliance program, the more likely their employees are to say they work in a strong culture, and I think it's probably fair to say that most organizations didn't jettison their ethics and compliance programs because we had a COVID crisis, but because there were economic challenges, we did start to see companies really having to figure out how to do you more with less, and making changes in their workforce. And it could be that part of the reason we saw culture plateau is that programs are plateauing, but it's hard to know.
0:11:29.6 Cindy Moehring: It's hard to know. Yeah. We'll have to watch that one. Excited now for the next survey.
0:11:34.1 Pat Harned: That's right. It's a trend to watch.
[laughter]
0:11:36.4 Cindy Moehring: That's right. So let's turn to another trend and finding that's really important as well as culture is pressure that employees may feel to skirt around an organization's ethical standards. So what did your survey this year find on employee pressure? Has that increased or decreased?
0:12:04.0 Pat Harned: It's increased, and it's increased significantly. In the history of this study, pressure has always been one of those metrics that sort of... It doesn't change a whole lot. If we see a six or seven percentage point change, we think we get excited 'cause we think that's a lot. This time, there was actually a 14 percentage point difference, which doing the math, that's a 47% increase in the number of employees who said they feel pressure to compromise standards to do their jobs. And the reason we worry about that is that there's a very high connection between the extent to which people feel pressure and the extent to which misconduct actually happens in their workplace. 96% of employees who feel pressure also say, "I've observed some kind of wrong doing happening around me." So in other words, it's kind of a where there's smoke, there's fire." Where there's pressure, there's misconduct. So the fact that we're seeing so many people, 30% of employees, a third of the workforce said, "I feel like I have to cut corners to do my job right now," which is a troubling finding.
0:13:17.0 Cindy Moehring: It is. So let we ask you, is it the same in the US as it was globally, that trend?
0:13:23.5 Pat Harned: So the trend actually, it did go up globally, and again, there are differences by country. Some countries saw far more than others did, but almost across the board, yes. Globally, the workforce, everywhere in the world is feeling this pressure.
0:13:41.3 Cindy Moehring: What does the rate of observed misconduct really mean, and why is that important?
0:13:47.8 Pat Harned: So we asked people, "In the last 12 months, have you observed something that you consider to be a violation of your company's standards or a violation of the law?" And then we actually will ask a series of questions about types of wrong-doing that people are observing, and we calculate based on... When you ask the question outright, "Have you observed misconduct in the last year?" about half as many people say yes to the question, but if you come at it from a different angle and say, "Have you observed environmental violations, or somebody who's fudging the financial statements, or abusive behavior in the workplace?" the numbers go up exponentially.
0:14:29.5 Pat Harned: So this year, almost half of employees, 49% of employees, said they've observed some kind of behavior that constitutes misconduct, a violation of standards, a violation of the law. And the reason, of course every business leader out there is worried about some type of wrong-doing happening out there in operations that they're not aware of, not being reported, that's not being tended to, that will eventually blow up in their face, and so that is why this measure of misconduct is an important one. What's interesting is that when we look at the trends over time, misconduct didn't change much in the last couple of... It has not moved a whole lot. And it's hard to know what do we make of that, but I do think it is, it's still troubling. Half of all people every year will say, "I've seen something that my business leaders probably would be worried about."
0:15:32.3 Cindy Moehring: Yeah, and just because they've seen it, doesn't mean that they're reporting it, so back to that's why it's really important to get a sense of how many people are saying they've observed it, and then companies can go and look at, "Well, what percentage of our employees are we hearing from about observed misconduct? What's the delta kind of between those two? And then what can we do to improve it?" Okay, one more, the fourth, and I think really important kind of trend to watch is retaliation, and whether or not employees are fearful of retaliation when they do report. So we talked about observed misconduct, we know not everybody reports, there's a big delta between that, and so then you gotta look at why. And one of the questions, and one of the main reasons for not reporting is concern over retaliation. So what did this year's report say about employees concerned for retaliation. Is that up or down?
0:16:26.1 Pat Harned: It is way up. And in fact, if anything, it followed the pattern of pressure. So we saw a 44% increase in the number of people who said they saw wrong-doing, reported it somehow to management, and then experienced retaliation for having done so. So 79% of employees who reported some kind of observed misconduct experienced retaliation for having come forward, which is alarming. It is alarming. One of the things... Our center, we've done some research around this, but there's also been a number of other research studies that have shown that retaliation is actually sort of a leading indicator of what direction your culture is heading, and once you start to have an environment where employees feel like I can't come forward and report wrong-doing, suddenly everything starts to change. So that increase is huge and it is very, very worrisome.
0:17:27.2 Cindy Moehring: Yeah, it's an early indicator of not having what people would refer to as a speak-up culture, where they feel like they can just speak up without any concern. Wow! Okay, so increase in pressure, increase in concerns for retaliation, both of those are important signals, I think, for us to watch, because the other two just plateaued in terms of observed misconduct and strong ethical cultures, so...
0:17:54.4 Pat Harned: Correct, yes, yes. Globally, so there are some countries where the retaliation numbers were even more alarming. In India, for example, 90% of employees who reported wrong-doing said that they experienced retaliation for it, 90%, which is unbelievable. In Germany, 73%. So there are some countries that really stand out as having had significant shifts, and again, it's a common pattern around the world that retaliation is on the rise, and it is worrisome.
0:18:35.6 Cindy Moehring: Do you happen to know how much of an increase that was in India over the last time? 90% is really high.
0:18:40.4 Pat Harned: So actually in 2019, it was 86%, so not as big a jump, but in 2015, 74%... I was about to say only 74%.
[laughter]
0:18:55.9 Pat Harned: 74% is not great. So, yeah, an alarming number.
0:18:56.6 Cindy Moehring: Definitely moving in the wrong direction. Wow! Okay, so with all of that as background, all of that great research, and your background as an educator, I would like to know what you think are some of the most important things that business schools should be focusing on with their young students who are soon to be business managers in what I would call a very turbulent business world, and one that I don't think is gonna change in that regard. What are some of the most important things for business schools to focus on to prepare their students?
0:19:37.1 Pat Harned: So the first thing that I would say is, it's very important for students to be focusing on, first of all, how frequently misconduct is taking place in the business world, because...
0:19:51.9 Pat Harned: It's not that you might encounter, at some point in your career, a problem where you might need to worry about is violation, it's a matter of when. [chuckle] And every student in a business school will eventually experience or observe some type of wrongdoing in their job, no matter... And for a lot of us, the longer we're in our careers and moving to different businesses, it's not just once, it's multiple times. Throughout your career ethics issues, they're going to be a part of your professional life. And so I think it's critical for business schools to be helping students to recognize violations, to understand the importance of them, the impact. Not just in terms of fines and legal issues for companies, but the impact on culture, on employee engagement. And then I think the other part of it, too, there's been some great research by folks, I think, whom you've even interviewed, Cindy, in your series, like Mary Gentile and others, who have talked a lot about the more students, while they're in school, can be focusing on "How do I learn to voice my concerns? How do I practice reporting?" The more likely, when you're in that instance, you'll be able to handle it effectively.
0:21:13.2 Pat Harned: So I would just... I would say that those are probably two very critical things, but also I know people in business schools, you wanna be... You're not just trying to get a job and do something related to business, you wanna be a leader, you wanna be in the C-Suite or CEO. And there are an awful lot of CEOs out there now who have not fully grasped the importance of culture, and tone at the top the actions of managers and the impact that has on their organization. And so the ability for students to come out of school and be able to be articulate about that, that it's not just about, "I wanna be a successful leader and driving performance in my business, but I wanna help build a strong ethical culture." And knowing how you do that, those are great skills to be learning now.
0:22:04.6 Cindy Moehring: Yeah, I would have to agree that those are. And you know, there was some recent findings, actually, in "The Financial Times." There was a recent opinion piece by a former McKinsey partner who talked about, still, that business schools aren't focusing enough on those kinds of skills to complement the hard skills like the finance, and the accounting, and the marketing, but knowing how to operate effectively in the workplace to grow strong ethical cultures is really important.
0:22:35.4 Pat Harned: But it's been hard. I, in one of my past lives, was in higher education, and I know how difficult it is to weave those kinds of things into the curriculum, because they're soft skills. Nobody really... You do need to know accounting, you need to know finance, you need to know all sorts of things, but how to actually incentivize people to care about integrity? How to be communicating your commitment to core values? What core values... Those are things that if we don't figure out how to integrate them across the business school curriculum, we're gonna continue to see the same problems, very talented business leaders who were great at driving their business from the performance perspective, but struggling a bit when it comes to "How do I get my arms around the culture and why things are happening the way they are?"
0:23:24.5 Cindy Moehring: Yeah. So they're very good at what they're doing, but how they're doing it isn't as strong, and both need to be equally, equally strong.
0:23:31.5 Pat Harned: Yeah, I agree.
0:23:33.6 Cindy Moehring: Alright, so let me ask you one other question, because you have been an educator in your past life, and you've been involved in the ethics and compliance industry for many, many years now, and you've seen a lot of the changes, many for the positive, I would say in our industry, as it continues to grow and has grown over the last 20, 25 years. So if you had a crystal ball and you're able to look into the future and predict what you think the future of business ethics is and should be, what would the three words be that you would use to describe the future of business ethics?
0:24:12.0 Pat Harned: Three words. So I would say central to a business, or maybe better word, would be essential. I continue to think that business ethics is going to be challenging for businesses, and I'll come back to why I am using that word, 'cause it feels like an easy way out with a word. But also diverse, at least I hope it will be diverse. So in looking at 20 years of research, partially for this report, in 1994 when we were doing this study, we defined an ethics and compliance program as having a code, having a helpline, and doing some training on values, somehow. And when you think about now, what goes into an ethic compliance program... If only it were that simple. Not only because the regulatory and enforcement environment has gotten so involved in defining what a program should look like for risk identification to everything else, but I actually think looking forward, the movement that's happening right now in ESG investing, the conversation about investors and even now, internally, in businesses, the need for businesses to not only think about what are the products we're making or the services we're providing?
0:25:46.2 Pat Harned: But what is our impact environmentally, socially, and in terms of how we're doing it from a governance perspective? I think that is going to reshape business ethics because so much of it is also grounded in people's willingness to comply with expectations about how we're going to be carrying out the business. And so that's why I was thinking essential is an appropriate word.
0:26:13.3 Pat Harned: I also think... I want to say that business ethics is going to be more diverse, both in its breadth, in terms of not just focusing on employee conduct, but also, probably, increasingly, actually communicating with shareholders, because they're paying attention to what businesses are doing in this whole space. But I also hope that, as an industry, as a profession, we'll be more diverse in the people who are rising up in our field, who are becoming thought leaders. I think our profession is a little bit... We have a ways to go in really representing multiple perspectives, multiple backgrounds, multiple cultures and countries. So I'm looking into my crystal ball. I hope that that's something that will really happen for us.
0:27:08.0 Cindy Moehring: Yeah, I think that's great. And the reason why I think those are really three great words for the future of business ethics is, there's both this micro view of business ethics. A lot of what the global business ethics survey and those findings talk about, like the individual, in the moment, in the business, trying to work effectively. And then there's this macro view, which is the whole... And bringing both of those together and thinking 20, 25 years ago, we were focused on a very basic level of just this micro view. And now we've made some progress there, is still room to go, but there's this whole macro view as well, that has really come into focus, that I think companies have really... Are beginning to understand and embrace in a different way and put kind of business ethics on a whole different platform, in terms of what's gonna be expected in the future.
0:27:57.8 Pat Harned: Agreed and it's exciting. I think, when I think about all the years of conferences we've had, you and I, we've been to lots of industry conferences in our time, in our careers, it's exciting to see the conversation move from, what is the Department of Justice emphasizing in their enforcement practices, to, how do we demonstrate that we are genuinely committed to what we're doing to the environment and how we're investing in communities, and how does that play out in what we're telling our employees their role is in that. To me, that takes the work we do in ethics and compliance, and it puts it in a whole new plane, in the way it wasn't probably, initially, intended.
0:28:42.6 Cindy Moehring: I would agree and it's really moving it from being this reactive, what do we need to do to stay out of the cross-hairs to those proactive stance. Which, if you get in front of it, which is always what we've talked about, getting in front of issues. If you get there, you're actually really speaking to the heart, I would say, for a lot of people, in terms of things that they care about, and then you can also work on the head part of it and explaining the whys, but when you capture both, it's a homerun.
0:29:10.7 Pat Harned: Yep. Agreed.
0:29:14.2 Cindy Moehring: Great findings in the report. Thank you for sharing those with us and thank you for talking about the future of business ethics and looking into your crystal ball. I always like to end these on three kind of fun questions. We've all been spending a lot more time indoors lately with covid. So we've had a little more time on our hands to either read fun things or watch fun things or listen to some fun, interesting things. So what have you spent your time listening to, reading or watching, or maybe one of all three for fun, but that you find also have this really interesting ethical dilemma to them?
0:29:50.0 Pat Harned: So I am... I'm not sure this is a great commentary about myself, but there have been a number of TV series that, when the rest of the world was binge watching them, I wasn't paying attention. So I've been catching up on my binge watching.
0:30:05.7 Cindy Moehring: As have a lot of us.
0:30:07.1 Pat Harned: Which is always fun. But I also... One of the things that I have wanted to do for quite a while, I really like photography, and I'm really interested in macro photography, which is where you take pictures of objects and nature and flowers and things, very close up. And so, I've been challenging myself, once a week, to get out my camera and take pictures of things using my macro lens to try to get better at that skill, and then editing and other things, and it's always just so interesting. There's a little ethics element to it, because when you look at, even the simplest object, from a very different perspective, you see it so completely differently. You understand it so much better. And so... I don't wanna draw it too far, but it is always interesting, to me, when you think back to situations and look at them from a different perspective, how you see values and the conduct and other things differently. So that's been sort of my little ethics element of Covid.
0:31:11.1 Cindy Moehring: Yeah, that's kind of been your Covid hobby to get back into.
0:31:15.6 Pat Harned: That's right and eventually I'm gonna launch a website that just has my pictures, 'cause somebody needs to see them, now that I've taken so many.
0:31:26.0 Cindy Moehring: That's great. Well, Pat, thank you so much for your time, for your insights today and for sharing it with the audience. Really appreciate it, and it's been great to see you again.
0:31:36.1 Pat Harned: My pleasure. Thanks for having me. It's great to see you too, Cindy.
0:31:39.5 Cindy Moehring: Alright, talk soon, and that's a wrap for another episode of The BIS, join us next week, when we will be interviewing and talking with another guest and we look forward to seeing you back then. Bye-bye.
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