Surveys Show Ethics Problems Persist

By Verschoor, Curtis C. | Strategic Finance, October 2006 | Go to article overview

Surveys Show Ethics Problems Persist


Verschoor, Curtis C., Strategic Finance


Two organizations have completed their separate biannual analyses of the ethics environment in business and the fraudulent outcomes of unethical environments. The results they report are sobering.

The first organization, Walker Information, specializes in loyalty management and conducts periodic national studies of employee loyalty and ethics in the workplace. The second organization, the Association of Certified Fraud Examiners (ACFE), is an organization of 37,000 members with demonstrated knowledge in four areas: fraudulent financial transactions, fraud investigation, legal elements of fraud, and criminology and ethics.

The Walker Loyalty Report offers a view of the commitment and loyalty of workers and related behaviors. It also provides information about employee perceptions of company ethics and the ethical conduct of senior leaders. The survey is based on data collected from approximately 2,500 employees in business, not-for-profit, and governmental organizations having at least 50 employees.

The Walker Report notes that the percentage of employees committed to and having long-term loyalty to employers continues to improve. The latest study reports that 34% of workers are truly loyal, up from 30% two years ago and from 24% over the last six years. There's still a huge 60% of the workforce that falls into two groups--they are either high risk with plans to leave their employer within two years, or they feel trapped and believe they have no option except to stay. Thus, there is considerable room for improvement for employers to address workplace factors that drive loyalty, such as providing ample training and development opportunities and exhibiting a strong focus on employees. Just 41% of respondents said their organization treats employees as its most valuable asset.

According to Walker, the top five factors that affect employee loyalty based on experience in the workplace are: (1) care and concern for employees, (2) fairness at work, (3) day-to-day satisfaction, (4) feelings of accomplishment, and (5) compensation and benefits.

The top five attitude-based factors that drive employee loyalty are: (1) focus on employees, (2) opportunities to develop skills and advance, (3) job quality, (4) brand, and (5) reputation.

Walker shows that loyalty affects behavior. Only 35% of trapped or high-risk employees recommend their organization as a good place to work, compared to 95% of the truly loyal group. Of the truly loyal employees, 95% said they go above and beyond the call of duty, compared to only 62% of the high-risk and trapped employees.

As to ethics in the workplace, Walker reports that 64% of employees responded positively about the ethics climate in their organization, but only 58% thought their senior leaders were ethical. One-quarter of the respondents had knowledge of or suspected an ethics violation within the past two years. Of those, only 54% reported it, which, while low, is an improvement of 14 percentage points in two years. The most common reasons cited for not reporting wrongdoing were (1) fear of retaliation, (2) did not think the organization would respond, and (3) no anonymous/confidential way to report the behavior. These reasons underscore the importance of effective implementation of the Sarbanes-Oxley requirements for whistleblower protection.

Perhaps the most telling, yet understandable, finding of the Walker survey is that employees with the lowest level of tenure at their organization have the least loyalty to it. This confirms the considerable cost of high turnover. It simply takes time to totally assimilate a person into the structure and cultural environment of an organization so that they become truly loyal and most productive.

The biannual 2006 ACFE Report to the Nation on Occupational Fraud and Abuse had very similar findings to those reported in 2004. Occupational fraud and abuse continue to impose enormous costs on organizations of all sizes. …

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