HR Plays a Central Role in Ethics Programs

We recently received a call from a friend and associate who has enjoyed a long career in human resources. Formerly a human resources manager in a division of a large national company, she just accepted a challenging position as vice president of human resources at a smaller but rapidly growing firm.

“The CEO hired me because he knew I could professionalize the department and the company,” she said, “and one of the first things I noticed was the absence of any type of ethics or compliance initiative. It’s up to me to put one in place. Where do I start?”

Before giving her our specific advice on how to start, we assured her this was an appropriate role for her position. Increasingly we’ve found that human resources managers are taking the lead in recognizing the need for such programs and in making them happen. The reason may be that, like our friend, those in leadership positions in human resources are highly respected within their organizations for integrity, have the ability to solve complex ethical dilemmas, understand the company’s culture and communicate well at all levels. These traits are good ingredients for leading a successful corporate ethics initiative.

“HR as the ethics office” isn’t an oxymoron. Indeed, a recent national survey of ethics officers by the 500-member Belmont, Massachusetts-based Ethics Officer Association revealed that the most frequently reported internal working interaction was with the human resources function, equaled only by the legal office. Furthermore, human resources managers were cited as more supportive than either the security or finance functions.

This message—that human resources managers were cited as supportive—bears repeating. Recently, we have seen a shift in employee sentiment that does not perceive human resources as being trustworthy or sympathetic to ethical issues. Perhaps this is because the human resources office—operating as a strategic business partner—is viewed as bottom-line oriented only and a tool of corporate management. It might also be a result of human resources still being perceived as having no clout and unable to influence corporate policy regarding core ethical issues. Or there’s the perception that the very compensation systems designed by human resources are the root cause of many corporate scandals and employee wrongdoing.

But reality is debunking this myth. In large companies that support a separate ethics/compliance function that reports directly to a senior vice president or the CEO, the ethics officer today is likely to boast an HR background. This group of professionals—which includes Jerry Guthrie, corporate ethics director for BellSouth; Liz Gusich, ethics program director at USAA; and Gretchen Winter, vice president of business practices at Baxter International—is proving that HR people are well-equipped to deal with the myriad issues that arise. Furthermore, they claim the vast majority of calls coming into an ethics “helpline” are personnel-related. Thus, even in smaller companies that don’t have the resources for a separate ethics function, ethics initiatives properly fit as part of the human resources department.

Decide if HR is the place for your ethics program. For these reasons, we advised our friend to seize the moment and be proactive in playing a major role in developing an ethics culture in her firm. We suggested she ask herself seven basic questions, which are adapted from recommendations by former NYNEX Ethics Officer Graydon Wood, to see if she would be an effective corporate ethics/compliance officer:

1. Do I hold an influential enough position in the company?
2. Do I have or can I get unrestricted access to the CEO and the board?
3. Do I have a high degree of trust and respect with my senior management team and with employees?
4. Can I assemble the resources for effecting internal procedural change and carrying out investigations?
5. Do I have or can I get access to information and support mechanisms that will provide monitoring, measuring, early warning and detection?
6. Can I be assured of being rewarded for proactively carrying out the ethics/compliance role?
7. Do I have the skills to operate effectively with the press, public forums and the legal process?

Once she affirmatively answered these questions, we helped her establish three objectives for her company’s ethics program: 1) establish standards and procedures reasonably capable of reducing the likelihood of criminal conduct; 2) promulgate and enforce the standards throughout the company; and 3) continually re-evaluate the program’s effectiveness and timeliness.

Lead the design of an ethics program. Once our friend determined her objectives, we cautioned her that although there are many good programs available as a model for her company, the most effective ones we have seen start with a blank-slate examination of the present operational culture. This includes a risk assessment of both the company itself and the business climate in which it operates. Industry practices and problems, the history of the company, geographic considerations and regulatory issues are all factors she will want to consider as she designs an ethics/ compliance program.

Finally, we suggested she begin by forging partnerships within the company to enlist support, share information and resources and drive the responsibility for an ethical culture to all parts of the organization. Whether the ethics function resides in HR or elsewhere within the company, the most effective ones are led by a committee of senior managers, including human resources, serving as a “kitchen cabinet” and a sounding board for the ethics/compliance officer. We believe this committee approach to instilling an ethical culture throughout the organization is essential if all facets of the business operation are to claim ownership of the values and standards articulated in the program.

Successful programs increase employee morale and foster a corporate culture that values honesty and integrity. Says Nicholas G. Moore, chairman and CEO of New York City-based Coopers & Lybrand LLP, “We have 70,000 people worldwide. A values program is the ‘glue’ that holds widespread organizations together.”

Workforce, April 1998, Vol. 77, No. 4, pp. 121-123.