Detail from a poster by Eric Frazer, for the Post Office Savings Bank, 1942 (Source: Wikimedia Commons)
Ideas for Leaders #379

How a Culture of Integrity Boosts the Bottom Line

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Key Concept

A culture of integrity adds value to the firm. Research shows that the more employees perceive top managers as trustworthy and ethical, the better the financial performance of the firm and the more attractive the firm to potential employees. 

Idea Summary

The true measure of integrity in a firm is not comforting slogans on the home page of the company website, but how employees feel about whether top management, through its actions and behaviours, is living up to the promise. A culture of integrity exists when employees perceive top managers as trustworthy and ethical.

"The higher the measure of integrity, the better the firm performance."

For that reason, the Trust Index Employee Survey (TIES) conducted annually by the Great Place to Work Institute (GPTWI) offers an accurate measure of a company’s level of integrity. Through its 58 statements (to which respondents agree or disagree on a 1 to 5 scale), the TIES survey covers a broad range of topics, such as job satisfaction or fairness in the workplace, that capture the employee’s level of trust in management. Two statements in particular focus on integrity: “Management’s actions match its words,” and “Management is honest and ethical in its business practices.”

GPTWI, a global organization conducting surveys on workplace satisfaction in 45 countries, also compiles its Culture Audit Survey (CAS), which is submitted by a company representative and provides information about pay and benefits programs, corporate practices and any other relevant information.

With access to five years of data from TIES and CAS surveys of American companies, representing results from more than 400,000 employees, a research team measured the culture of integrity in 679 American firms, both public and private. Using a variety of sources, the team then compared the results of their integrity research to the financial performance of the firms, as measured by return on sales (ROS) and Tobin’s Q (which indicates whether a firm’s stock is over- or under-valued).

The results were unequivocal. The higher the measure of integrity, the better the firm performance. Using other sources of data, such as statistics on unionization and an annual survey that asks students which companies they hoped to work for, the research showed other positive outcomes of integrity:

  • Companies with cultures of integrity were more likely to be chosen by students as desirable places to work. Company statistics on job applications and positions filled, indicating the pent-up demand for jobs in those companies, further prove the desirability of high-integrity firms.
  • Companies with cultures of integrity had lower average levels of unionization. Unionization is often an indicator of job dissatisfaction or mistrust in management: when promises are not kept, unionization is a possible response. The negative correlation between integrity and unionization would thus indicate that companies with a high level of integrity were more likely to have satisfied and trusting employees.

Business Application

How do you create a culture of integrity?

The results show a statistically significant positive impact in results for firms that measure high on culture of integrity — positive results not only in terms of profitability, but also in terms of higher productivity, better industrial relations, and higher level of attractiveness to prospective job applicants.

How do you create a culture of integrity?

1. Identify and communicate your values.

1. Identify and communicate your values. The first step is to clearly identify the firm’s core values and communicate them across the organization. Let your employees, customers and other stakeholders know which values you’ve identified as most important. Integrity should be at the top of the list.

2. Live the values. One of the simpler exercises in business is to declare or advertise a certain culture for the organization. One of the most complex is to implement that culture. Integrity and trustworthiness are often featured in company advertisements and materials, but research shows that there is little correlation between advertised and actual integrity. A PR campaign focused on integrity might be just that: a PR campaign.

2. Live the values.

Thus, once you’ve identified your values, and communicated them to the firm’s stakeholders, the next step is for top management to live those values, every hour of every day. Top management actions, policies, and behaviours must be consistently aligned with the declared values; any deviance destroys the credibility of the message.

3. Don’t fool yourself: Are the values real?

3. Don’t fool yourself: Are the values real? To determine whether you have a culture of integrity, don’t read the marketing copy. Instead, ask yourself:

  • Do we have more job applicants than available positions?
  • Do we have to fend off repeated attempts at unionization?
  • How well do we rank on Great Places to Work and job satisfaction lists?

The measure of a culture is not in the directions from the top but in the perceptions from the employees. They are the final arbiter on whether or not a true culture of integrity has been instilled. 

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Authors

Institutions

Source

Idea conceived

  • September 2013

Idea posted

  • May 2014

DOI number

10.13007/379

Subject

Real Time Analytics