How to dismantle a culture of impunity–and find the real superstars…

Strong company culture has become a top priority for employees. Amplified over the past two years by competitive hiring markets, employees demand to work for organizations with high integrity that hold frontline workers and leadership teams to equally high standards.

While this seems like a feasible goal for almost any functioning organization, cultures of impunity–and failures to hold key people accountable–remain strong at too many companies today.

In 2021, we continued to see efforts attempting to address cultures of impunity. For example, the U.S Securities and Exchange Commission (SEC) gave its highest number of awards–both in terms of award volume and dollars–in any given year to date. We have yet to see the results of the record number of whistleblower tips the SEC received in FY 2021, some 12,000+.

While this may feel like we’re moving in the right direction, it’s more likely a sign that employees feel more comfortable voicing their workplace concerns externally, rather than internally to their own management–an indication of a poor compliance program and a weak corporate culture.

The real superstars

The primary reason that drives employees not to report misconduct internally is fearing retaliation or believing that no action will be taken. Indeed, inaction is the root cause of cultures of impunity and is one of the hardest organizational mindsets to break without firm proof that consequences exist for everyone.

When thinking about addressing these mindsets, consider how organizations could categorize employees into four groups based on their level of performance and alignment to organizational values.

First, there are the “superstar” employees–those who show both high organizational values and high performance. Second, there are the employees who align with high organizational values but need to be coached to improve their performance. These two groups are the sweet spots, and these employees support a strong corporate culture.

Then, there are the employees who show low performance and lack of alignment to business values, most of whom are exited from the business as a result. Hopefully, this outcome is a “no-brainer.” Yet, unfortunately, there are instances where organizations tolerate these individuals for a variety of reasons leading to a toxic culture and workplace.

The final group represents those who are operating with impunity: The employees who have stellar performance but questionable business values and who often break the rules to meet business objectives. How these employees are managed defines whether an organization will be known for a culture of impunity or a culture of integrity.

What many organizations don’t realize is that with these individuals, things may not always be as they seem. If they are willing to break the rules in one area, can organizations trust their results in other areas? For example, if the “superstar” is cheating on their expense report, what other financial data has been manipulated? In the end, trusting these individuals can be risky.

If these employees are not held to account for inappropriate and/or unethical behavior, cynicism grows within the organization and fuels the belief by employees that their concerns don’t matter.

Businesses then set a precedent that the bottom line is superior to standards and values. Further, the organization’s compliance program will be seen as a joke. Given the current intense competition for strong talent, a culture of impunity will drive the true superstars away, ultimately impacting business success.

Actions speak louder than words

Creating a no-tolerance policy for wrongdoing is one thing, but enforcing it consistently is another. Not only do organizations need a thorough reporting system in place, but they need to be explicit in how they investigate reports, determine consequences, and most importantly, act when wrongdoing is found.

Training and communications play a major role as employees need to know protocols and options when it comes to reporting concerns. This training is especially important for first and second-level management teams as they need to know how to escalate concerns from employees while assuring them that they are heard and valued.

Company-wide communication and transparency is another critical component. Employees need to see that when reports are made, they are taken seriously.

This is often easier said than done because disciplinary action may be unnoticeable to fellow employees. For example, a punishable offense may result in a revoked bonus, but this action would not be visible to other employees.

To enhance visibility, organizations should regularly communicate the total reports received within a given timeframe, the percent investigated, and the percentage acted upon. While specific details can remain anonymous, employees will see reports being investigated thoroughly and punishment being handed, helping to dismantle fear of retaliation or inaction.

Responding to internal reports is crucial to instilling trust in the workforce, but proactivity is what helps determine the root causes.

Seek to understand what causes employees to act (or think they can act) with impunity.

Oftentimes, employees succumb to internal pressures to meet or exceed financial targets. The onus is on the leadership team to ensure realistic goals and expectations are set so employees don’t feel the need to act wrongfully to get ahead. Boards of directors play a critical role here in setting financial targets that are reasonably achievable and don’t drive good people to do bad things.

A business with a culture of impunity–no matter how successful by financial metrics–will be unsuccessful in creating a safe workspace. Dismantling a culture of impunity is most successful when initiated and enforced by leaders. It requires transparency, proactivity, and follow-through.

By empowering employees to act with integrity, businesses can build a speak-up culture that attracts and retains a growing class of superstars.

Carrie Penman is Chief Risk & Compliance Officer at NAVEX.