ETHICS / The influence of national culture values on ethical culture in organizations

Excerpt from session:

Our national cultures relates to our deeply held values. Differences between national cultures are mainly found in the deep rooted values of the respective cultures. National cultural values are learned early, held deeply and change slowly over the course of generations. These cultural values can shape how people expect companies to be run, and how relationships between leaders and followers should be. Ideally, these expectations are balanced between the employer and the employee, but many times the cultural distance results in great differences that can cause problems for the management of the company.

Company’s culture, on the other hand, is comprised of broad guidelines which are rooted in organizational practices learned on the job. Building, maintaining and changing organizational ethics culture is difficult and takes time. What is often overlooked or at least underestimated is how the underlying personal values of employees impact how they perceive the ethics culture change efforts. A person can learn to adapt to processes and priorities, and a person can be persuaded to follow the exemplar ethical behaviors of leaders in an organization. But if these priorities and leadership traits go against the deeply held national cultural values of employees, corporate values (processes and practices) will be undermined. And, when it comes to multicultural working environment or international mergers, what is appropriate in one setting is wholly offensive in another. What is rational in one person is wholly irrational in another.

Then, how to build high performance ethical culture despite various cultural norms?

Main Takeaways:

  • How national culture predict corporate culture?
  • Importance of harmonizing local corporate practices to different cultural norms
  • Unifying corporate culture by strenghtening the socialization process

Speakers corner / Preface to session

ZEC 2018: Why compliance professionals need to better account for the importance of national culture when developing, managing, and implementing ethics and compliance programs?

Hristo: I like a quote by Peter Drucker very much (although it seems that it is not proven that it is his statement): “Culture eats strategy for breakfast”. The compliance program is indeed a strategic item and it needs to reflect the risk profile of the organization and its risk appetite. Its design and implementation, on the other side, must be flexible enough to finetune and align to the local culture in the country. This is a must because loyalty and sense of meaning are crucial to its success. People are loyal to culture, not to strategy. People find meaning in culture, not in strategy. It is somehow self-evident, but we tend not to think about this very often, and apply it even more rarely. The global trend to standardization, efficiency, LEAN-ness, agility etc., although quite profitable, has a negative effect on the ability of organizations to be culturally adaptive.
Another important aspect is that the environment, in which an organization exists, is usually much more influential at the capability of the organization to act, that the organization itself. And culture spreads not only to the organization, but to the whole market, or the society, in which it exists and operates. Therefore, national culture is influencing the organizations both from the inside, and from the outside, shaping the relationships with customers, employees, shareholders, governments and the public.

ZEC 2018: What’s the relevance of national culture in terms of ethics vs. compliance? Where and what culture affects the most?

Hristo: On a large scale, national culture is the basis on which groups of people decide what is the right and thing to do. Single group members may have their own ethical compass, but the social scientists have proven quite solidly that the individual differences tend to be absorbed by the group and brought towards the common average. So, in terms of ethics per se, the relevance is huge. I have not researched if the separation between ethics and compliance is a cultural phenomenon, but this is quite probable.
National culture, or the difference to other cultures, does not manifest itself constantly. One can expect that people look in their culture for refuge, when a crisis occurs, stress rises or others conduct themselves in an improper manner.

ZEC 2018: How much you think culture matters in creating speak-up culture?

Hristo: Very much, without a doubt. However, two factors are very important.
Firstly, in organizations elements of national culture may block the speak-up culture, if not handled properly, but the reverse seems not to be the case. Therefore, organizations must not rely on national culture to do their job, if they want to have a speak-up culture in place. The logic goes like this – honesty is a value in most cultures in the world, but who decides what is right differs. For example, collectivistic cultures are less prone to speak-up (Netherlands are quite individualistic, South Korea is quire collectivistic). This happens not because they have different perception of right or wrong, but because it is not considered culturally appropriate to speak up if the reporter herself is not a side in the story.
In addition to all that, the speak-up culture is highly sensitive to the age-profile of organizations. This is well illustrated in Central and Eastern Europe, where by default anonymous reporting is associated negatively with the former communist security surveillance. The speak-up policy and tools are disliked regardless of the guarantees of non-retaliation, given by management or the corporate headquarters. However, companies with predominantly younger employees, who have not lived in a conscious age before 1989, seem to easily and more efficiently adopt the speak-up attitude and people feel no anxiety to report.