Building a more ethical culture is easier said than done. As supply chain leaders, the pressure is always on to make tight deadlines. Throw in supply chain disruptions and labor shortages, and it’s even more difficult to bring intentional focus on building a better workplace culture.
Across the supply chain, workers are often dispersed in offices, remote locations, warehouses, production floors, or on the road traveling around the country to deliver goods. This makes the task of educating team members about policies, regulations, and doing the right thing more challenging than in other industries. However, new research shows three key areas of opportunity for supply chain leaders to build stronger workplace cultures in 2022. Organizations that leverage these opportunities will be better positioned to create environments that inspire ethical behavior, which leads to greater employee loyalty, customer satisfaction, and even growth.
Our organization, LRN, recently released a Benchmark of Ethical Culture report that provides insights into why ethical culture is critical to organizational success. It’s part of a multi-year collaborative effort surveying nearly 8,000 employees—from frontline workers to management—across 14 countries and 17 industries. We used a proprietary research model called the Ethical Performance Model to define more than a dozen components of ethical culture that, individually and collectively, drive business performance. Drilling into the manufacturing industry, we identified three dimensions that present an opportunity for manufacturing and supply chain leadership to further enhance ethical conduct.
But is there really value in focusing on culture and ethics?
In a word, yes.
LRN’s report indicates a telling truth about ethical culture: It pays dividends. Companies with the strongest ethical culture outperform their peers by 40% across essential measures of business performance, including levels of customer satisfaction, employee loyalty, innovation, adaptability, and growth – not to mention greater levels of ethical conduct, too. The cost to comply with regulations can be steep across the supply chain, so focusing on ethics and compliance in 2022 can help organizations avoid pitfalls down the road.
With that in mind, here are three areas of opportunity for supply chain management to focus on as they aim to build stronger, more ethical cultures this year.
Click here to hear more about ethics in the supply chain:
1. Drive performance – the right way
Recent supply chain issues, rising material costs, international conflicts, and ongoing COVID-19 considerations make this an extremely challenging time for managing employees across the supply chain. There is more pressure than ever on management, production, and logistics teams. Members of manufacturing organizations tend to score the lowest on the dimension of “Performance Under Pressure,” revealing a broader tension that employees feel when tasked with achieving business objectives. Further, frontline workers tend to feel far more pressure than management. When asked if they “do not feel pressure to achieve short-term objectives if it means acting unethically,” 72% of management answered yes, compared to only 58% of production employees. This indicates a risk exposure as employees may feel pressure to “cut corners” or worse in order to meet deadlines and targets. As a leader in the supply chain, ask yourself questions such as:
- Have we demonstrated, in word and action, that achieving business goals should never come at the expense of our ethical standards and values?
- Does our training provide tangible, ethical decision-making guidance to common challenges in all aspects of our business?
- Do we have accessible materials that reinforce company values and outlets to raise concerns for employees on the go?
Clarity and consistency when discussing behavioral expectations helps organizations uphold ethical standards, making it easier to deal with the inevitable pressures that come with producing goods and moving items from Point A to Point Z along the supply chain.
2. Encourage employees to speak up about misconduct
Nobody hopes for misconduct, but it is inevitable. In the category of manufacturing, nearly one out of three employees observed employee misconduct or unethical behavior over the last 12 months. Of those who observed misconduct or unethical behavior, 81% reported their observations to management, another person with authority, or a company hotline. Among the 19% that did not report their observations, the top three reasons that influenced their decision were:
- Fear of retaliation
- Thinking their company wouldn’t do anything about the concern
- Fear of reporting the person involved because they were more senior
It’s not enough to have a hotline or zero retaliation stance. Organizations should have a clear-cut reporting and investigation process for when issues arise and concerns are raised that is communicated to employees in simple language. Employees need to know that concerns raised in good faith are welcomed, even celebrated. And, they need to know what happens after concerns are raised. Publishing statistics of cases investigated and substantiated as well as types of disciplinary action taken, or sharing sanitized stories, goes a long way to demonstrating your organization walks the talk when it comes to procedural justice.
Your leaders and managers are another crucial lever to make positive change in this area. Set the expectation that leaders talk about the importance of doing the right thing and speaking up – and support them in this endeavor. In a perfect world, leaders are both holding team members accountable and leading by example. And, ensure your leaders are appropriately trained on how to handle employee concerns.
LRN research shows that when organizations foster trust and maintains a sense of fairness, more people are likely to speak out about misconduct. Knowing what’s wrong so you can make it right helps build a strong culture for your organization, as well as protect your reputation and bottom line.
3. Reward and recognize good ethical behavior
A common theme from employees we surveyed was that they are less likely to view the people receiving promotions as role models of company values and ethical behavior. This rang true broadly in manufacturing and might warrant an examination into how organizations promote, whether you’re manufacturing products or in another part of the supply chain. In an encouraging sign, we’re seeing more and more organizations explicitly emphasize ethical conduct as a requirement in performance management, hiring, promotions, and bonus awards.
In addition to educating and encouraging employees about when and how to speak up about misconduct, embrace it when they do the right thing. That is, think of ways management and leadership can recognize and reward ethical behavior more directly and frequently. This could include shout-outs at team meetings, or notes to workers when they start or end their shift. For example, one organization in the supply chain created a feature in their intranet that allows fellow employees to reward each other for great behavior. Employees can cash in those positive points for gift cards and other prizes that function as literal rewards for going above and beyond in their daily work.
In a moment in which we are dealing with continued supply chain disruptions, worker shortages—particularly among frontline workers—and the Great Resignation, it’s an optimal time to lean into culture in your organization. Rather than make ethics and compliance training a box to check, build a culture around embracing and rewarding good employee behavior. Putting culture first—and measuring it—pays off. The data shows just that.