How To Ensure Integrity

Proper Behavior Must Be Define And Measured.

January 1 2005 by Chief Executive


 

If you as a CEO truly believe that integrity matters, you should hold your people accountable for it. That means you must define what integrity means for your business in behavioral terms, measure it and then assess people’s compliance. Most CEOs neither translate integrity into such terms nor measure it. Consequently, it remains a hollow concept that is touted in annual reports and values statements yet open to interpretation.

To build integrity into an organization, top management must clearly outline the company’s core values. These values statements are often generated separately from strategy. This is a mistake. Often it seems as if values statements are created more to address employee morale than as a statement of both the company’s identity and a core component of its strategy. Done properly, companies can define their values and the behaviors that are acceptable.

Take bribery, for example. Assume that in one of your markets a shipment of important goods is being held in customs. It becomes clear the goods will be released only once the customs officer has received a kickback. Let’s also assume that bribery is a common practice in the country in question but not in yours. Your executive in charge of the goods is under pressure to achieve financial targets set by the head office. Should he “do as the Romans do,” or should he heed values of the head office? In the latter case, not giving in to bribery may protect your integrity but cost you money and market share; it also could prevent your executive from reaching his targets.

By complying with the letter of the law€¦quot;but no more€¦quot;within each country where your company operates, you keep costs low. Setting uniformly high standards in all operations could increase the overall costs of operations and diminish your competitive position if rivals don’t do the same. This could put your company out of business. Some skeptics may ask: What is our integrity worth if the company goes bankrupt?

Examples abound of the negative consequences of being seen as lacking integrity. In 1997, Nike’s image was tarnished by exposure of widespread labor abuses in its overseas plants. The ensuing public pressure had a negative financial effect on the company. Nike responded by, among other things, making a public commitment to respect the right to freedom of association as enshrined in the Universal Declaration of Human Rights. A more recent example involved the anti-sweatshop campaign against the Gap. A watchdog group revealed that the average age of women who worked in the Gap’s Central American apparel factories was 17 and that average shifts lasted over 16 hours, typically six days a week. In May 2004, the Gap admitted that many of its 3,000 factories in 50 nations still failed to comply with minimum labor conditions by U.S. standards. It will take years for the Gap to rebuild its reputation.

How could things go so wrong? When managers see that the main, or even only, gauge of effectiveness is whether, not how, you get the job done, they may indeed start giving bribes and only minimally comply with legal and regulatory requirements. I still see many companies where even direct violations of their stated values are overlooked as long as the numbers are strong.

Contrary to what some CEOs may believe, integrity can be articulated and measured. Nike, for example, has developed clear labor guidelines in terms of workers’ ages, hours and safety, and an external agency measures its compliance with them. CEOs who are serious about integrity add measures of appropriate behavior to 360-degree feedback reviews and survey customers on the basis of these criteria. Once you establish a way to measure integrity, employees who fail to abide by these values should face real consequences in terms of bonuses and promotions.

Integrity doesn’t have to be mysterious or intangible. Like so many other issues in the corporate world, it can be identified and measured. Once these behaviors are identified, they can provide clear guidelines for all stakeholders and contribute positively to the company’s image and brand.

Robert Hooijberg is a professor of organizational behavior at the International Institute for Management Development in Lausanne, Switzerland.