Doing the Right Thing: Why it's worth motivating employees to behave ethically
By Martha C. White
Business values are getting a lot of attention these days. Companies are realizing that a code of ethics may look great hanging on a wall, but for it to make a difference, employees have to embrace it. For example, how can a corporation make values like “speak with truth and candor,” “respect others and succeed together” and “win with diversity and inclusion” relevant to workers?
For Purchase, N.Y.–based beverage giant PepsiCo, this was no hypothetical question. “We had multiple divisions with different sets of value statements because we were a company of acquisitions. We wanted to get people on one values system,” explains Andrea Ferrara, vice president of corporate human resources. After surveying thousands of workers at all levels to find out what ethics meant to them, Pepsi developed a set of core values and guiding principles, including the three above.
Pepsi’s not alone in its focus on a values system. Enron fallout, combined with the 2002 implementation of the Sarbanes-Oxley Act, has companies scrambling to find ways to communicate and instill core values in rank-and-file workers. The Sarbanes-Oxley Act, or SOX, mandates that as of May 2005, all NASDAQ-traded companies are required to have codes of conduct in place, as well as systems to make sure the stipulated regulations are followed.
Unfortunately, even in an era when corporate ethics breaches are regular news fodder, many executives see ethics training as a money pit, or even a potential liability. Employee cynicism can be another hurdle, since staff buy-in is key to success. As Pepsi and other companies are finding out, though, it’s worthwhile to surmount these challenges, since corporate values are crucial to a company’s health.
“Ethics are largely perceived as a cost without any business benefit,” says Brad Matthews, president and CEO of San Francisco–based consultancy CHANGEase. In reality, however, ethics boost the bottom line in a number of ways.
For example, Matthews says, a well-implemented values system can be a boon for business by making employees more satisfied and productive. He points to recent research conducted by the Forum for People Performance Management and Measurement at Northwestern University that correlates employee engagement and the bottom line. “An organization’s culture [and] behavioral norms enables or disables bottom-line success vis-à-vis customer satisfaction.” An ethical culture is bound to be more constructive, and this drives business results, Matthews says.
Bringing in Pros
To help employees put the Pepsi values system into practice, the company contracted with Naples, Fla.–based Odyssey Experiences to create an imaginative, hands-on program for more than 2,300 U.S. corporate employees at a trio of Pepsi campuses in the 2004-2005 period.
This investment helped employees recognize that they and their values are important to Pepsi. That’s likely to pay off in the area of hiring and retention, as well as engagement. Ethical companies will have a leg up in an accelerating race for talent, says consultant Kate Nelson, who notes that during the financial service scandals of the late 1980s, some companies saw whole trading desks leave all at once. “When it hits the fan, the very best people leave,” she says.
The best way to retain ethical people is to be ethical, Nelson adds, so employees don’t feel as if they have to compartmentalize their own values. “They have to feel they can bring their whole selves to work. Nobody wants to work for a scoundrel,” she points out.
Employees Appreciate ‘Line in the Sand’
“Being ethical” can be an amorphous concept, especially for a corporate entity. That’s why it’s important to make values concrete and applicable to your industry. And this brings an added benefit: Employees feel better when they have the parameters of what’s acceptable and what’s not spelled out for them, says Helen T. Cooke, managing director of Cooke Consulting Group LLC in Haddon Heights, N.J. If they’re tempted by an offer or opportunity that falls into a gray area, it helps them to be able to refer to concrete definitions and boundaries.
“One of the things that can make a true difference, which ties to leadership by example, has to do with a desire to create a ‘right bright line,’” Cooke says. If the parameters of what’s right and wrong are fuzzy, sometimes employees will get their toe over the line without even realizing it. “Think and communicate in terms of not even getting close to the line. Don’t [present] it as a vague line but as a bright line.”
To make Pepsi’s values clear and concrete, Odyssey created an outdoor training course for Pepsi that combined team building and theater, with backdrops that looked as if they had come off the set of an Indiana Jones movie.
The adventure included a quest Odyssey created involving mysteries and riddles that had to be solved in order to acquire and decipher a coded manuscript, which turned out to be the core values and guiding principles.
“We wanted to make people aware of the values and get them comfortable with them in memorable way, which was the impetus behind partnering with Odyssey,” Ferrara says, adding that if Pepsi had only distributed printouts of the values or just introduced them in a classroom setting, the impact wouldn’t have been as great.
“Experiential training is the way to go because you retain 90 percent of what you practice versus what you learn in a classroom environment,” adds Fred Cannan of Odyssey. “When you can drive home [a principle] with a memorable exercise, it stays with the person and they buy into it.”
All along the way, puzzles focused tightly on the Pepsi code of ethics, with every aspect designed to reinforce one of the guiding principles.
For example, to emphasize inclusiveness and diversity, some of the clues were in different languages, so teams had to collaborate and seek the assistance of bilingual employees to translate. (Odyssey powwowed with Pepsi HR beforehand to find out what other languages were spoken by its work force.)
“Participants have to be able to see how scenarios relate to their jobs,” says Michael Poncin, lead facilitator and executive sales representative at Odyssey. “Every decision they made on the course related to their core values, [which] was why it was successful.”
Teamwork and Leaders
To drive home the guiding principle “respect others and succeed together,” exercises emphasized the importance of working as a team. Each small group was given a series of tasks, to be completed by the team members individually. Afterward, employees would pool the results of their completed assignments to reach the next level. Without everyone’s participation, the group couldn’t move on.
Although teamwork was critical, Pepsi execs were also interested to know who stepped up to lead the teams. Over the course of the daylong adventure, employees were divided into groups and then subdivided into smaller groups several times. This meant that every time a group was redivided, someone had to assume a leadership role.
The Odyssey facilitators and Pepsi execs kept a close eye on who rose to the challenge of managing his or her fellow teammates. As Cannan explains, it has helped Pepsi to identify potential leaders within their ranks.
Communication Is Key
Ferrara says Pepsi got employees to really tune in by listening to them, then giving them values they could identify with. “Values are aspirational in nature, so it’s a process to get people to internalize and live them,” she says. Consultant Kate Nelson adds that companies should only include values that are representative of the company culture and business realities. For instance, don’t try to force a value like “teamwork” on a company that thrives on individually managed projects.
For communication to be truly successful, though, it has to be a two-way street. Putting a system in place to facilitate dialogue is motivational because employees want to be able to voice their opinions. But companies also need to offer employees a place to take any ethical concerns that arise, Nelson says.
“When people feel safe raising issues, you can diffuse them at a low level before they blow up,” she says, pointing out that many of the ethics scandals that have brought down executives and sometimes entire companies have been smaller issues that snowballed when they were covered up. Hot lines, both phone- and Web-based, are a growing option, says Nelson (see sidebar, page 22). Companies are implementing them to give would-be whistleblowers a neutral place to take their concerns.
Measure and Reward for Long-Term Compliance
Training and communication are just two pieces of the ethical values puzzle. Companies that want their core values to resonate at the ground level need to select behaviors that can be measured, then find ways to measure those behaviors. Pat Schafer, founding principal at Talent Strategy Partners, says it’s important to define the values in clear behavioral terms. “If you want someone to avoid conflicts of interest, for example, you have to define what that looks like,” she says. “Something that’s clear to the employee and is observable is the key.”
Schafer says a company interested in getting employees to internalize values needs to look at two kinds of performance: The first is the result itself, but the one that pertains to ethics is how the employee achieved that result.
Recognizing how employees reach goals can, and should, be incorporated into a formal incentive program, Schafer says, adding that noncash awards are ideal for reinforcing values. Also, handling the infrastructure of a proper incentive program keeps ethics on managers’ radar.
Peer Support
In Pepsi’s case, the company has implemented a peer-to-peer recognition program that acknowledges employees who go above and beyond in ways that embody the core values. For example, says Andrea Ferrara, “Did they have the courage to raise a concern? Did they mentor an employee?”
Employees are free to nominate any of their colleagues for the Presidential Star Award. Pepsi top brass goes through the nominations and gives out the awards at quarterly town hall meetings. Although the award itself is nominal—a letter of commendation and a symbolic compass—Ferrara says employees really appreciate the acknowledgment.
As Ferrara and her team at Pepsi discovered, investing in a core values campaign sends a strong message to employees, showing that the company is not just paying lip service and motivating employees to buy in.
In follow-up quizzes and surveys, Pepsi is finding that employees are responding to the values and incorporating them in their day-to-day work. “When you make it a big event, employees take it seriously,” acknowledges Cooke of Cooke Consulting.
More companies may soon be joining Pepsi in realizing the benefits of values training, especially NASDAQ companies who have procrastinated until the eleventh hour in putting ethics guidelines in place. But even for companies not subject to the May 2005 SOX compliance deadline that is upon us, it makes good business sense across the board, says CHANGEase’s Matthews—so much so that Matthews and other experts are seeing companies that don’t have to conform to SOX adopting its guidelines anyway to instill best practices in accounting, reporting and other areas of business.
“With SOX’s emphasis on ethical culture, people are paying more attention,” Matthews says. “We see an intensified discussion of ethics in business and the need to clearly define accountability in terms of ethical behavior.”
