From the May/June 2010 issue of Ethikos
In Promoting Ethics, Tyco International Said:
‘Let's Keep It Simple’
About a year and a half ago, Tyco International, Ltd. conducted a cultural diagnostic survey to assess what its employees were thinking about ethics and compliance.
There was good news and bad news. At the top of the company—e.g., senior managers—there was strong support for ethics and compliance, recalls Matthew O. Tanzer, the company’s vice president and chief compliance counsel.
But in the lower reaches, things were different. While “not terrible,” support for ethics and compliance was softer.
That survey, developed by the Corporate Executive Board, served as a “wake-up call,” recalls Tanzer.
Tyco specializes in security and protection devices and has U.S. headquarters in Princeton, N.J.
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The company, which gained notoriety during the early 2000s (former Tyco CEO Dennis Kozlowski, it may be recalled, threw a $2.1 million birthday party for his wife on the island of Sardinia, charging half of the tab to the company,among other misdeeds), has undergone major changes since that time. It still has some 100,000 employees worldwide, but that’s a drop from the 240,000 employed at the time of the scandal.
Admittedly, one might find this sort of ethics gap at many companies. But Tyco wanted to do better with its middle managers, supervisors, and “ground-level” employees.
Tanzer, who came to the company in October 2006 from General Electric, gathered his compliance team and brainstormed: How do we reach this audience?
They brought in outside vendors to make presentations. Those firms presented board games that could be played to reinforce the ethics message. They offered up card games and other learning devices. These alternatives were quite expensive. Tanzer and his group weren’t overly impressed.
‘Toolbox talks’
In the end, they said, “Let’s keep it simple.” They settled on a model borrowed from the corporate safety area, “toolbox talks.”
In some organizations, managers deliver a safety talk about a specific subject at the beginning of the work shift. These can be done in a variety of ways, but they typically encompass a brief (two- to five-minute) interactive discussion.
“Toolbox Topics are used to cover a variety of short safety training subjects and to remind employees each day before they go to work, the importance of being safe.”
With Tyco’s ethics initiative, managers would choose from pre-developed scenarios to generate discussion on various compliance topics like expense-report fraud or conflicts of interest.
First, though, they had to get internal buy-in for the initiative from human resources (HR) and the operating businesses, among others. They identified managers who should give the talks.
They built a website where the managers could pick up the materials (e.g., scenarios and facilitators’ guide, including “talking points”). They made it clear that this was a requirement, a goal in managers’ “fiscal year 2010 documented goals and objectives.” Every quarter, managers would pick up one scenario from the website (“Vital Values Ethics Reflections Website”) and have a conversation with their team—during a regular, planned meeting, not a special “compliance meeting.”
Topics in the Ethical Reflections program, as the initiative was called, included the following: conflicts of interest, expense report fraud, anti-bribery, harassment [and] bullying, violence-free workplace, antitrust, and sexual harassment.
One of the conflicts-of-interest scenarios, for instance, centers on an ADT installer (ADT, which develops electronic security systems, is Tyco’s largest subsidiary) who decides to earn extra money on the weekends repairing and installing security systems. He uses the company’s van and tools but purchases “off-the-rack” cameras, key pads, and door and window sensors himself.
This scenario is typically read aloud by the Tyco manager. In this case it might be an ADT supervisor reading to a group of technicians at the beginning of the work day. He is supplied with “speaking points.” To wit:
“Remind employees that:
- a conflict of interest is any interest that conflicts with the purpose, policies, or operations of their service with Tyco;
- the appearance of a conflict is what a reasonable person might view as a potential conflict; and
- employees must manage all business relationships they have with their Tyco responsibilities in mind.”
Overall, the supervisor and technicians might spend 10 minutes reading and discussing the scenario.
The groups that have discussed such cases are small. Many had only one to five people; others had six to 10 or 11 to 15. A few had 26-plus, according to data from 428 different sessions that Tanzer had in hand in April.
As noted, the managers themselves selected the scenarios they would discuss. Which scenarios were most popular? A total of 205 managers selected “conflicts of interest” for discussion, the most popular topic by far. A total of 98 picked “expense report fraud,” second most popular. Forty-four opted for the “anti-bribery” scenario. Thirty-seven selected “harassment, bullying”; 19 picked “violence-free workplace”; eight selected “antitrust,” and only seven chose “sexual harassment,” admittedly a relatively difficult, touchy subject in some places where the company operates, such as Asia and South America.
When they completed their “talks,” the managers entered data on the “training validation” page on the Vital Values Ethical Reflections Website. This included the number of participants (six to10 was fairly common), their business unit (e.g., Tyco Safety Products), their sub-business (e.g., Tyco Products Australia), the scenario selected (e.g., “expense report fraud”), session rating on a 1-5 scale (most were 4 and 5, the most positive), and any comments or feedback (e.g., “Held during sales meeting. Lively, open discussion”).
‘A worthy subject’
Tanzer expects to provide this messaging on the importance of ethics and compliance every quarter to ground-level employees. (Only one has been conducted so far.) Between five to10 new scenarios would be developed each quarter. Much of the burden obviously falls on the managers who have to lead the discussion, but so far most of the comments have been positive. One said the subject of expense reporting fraud was “a worthy subject to revisit,” for example.
As of mid-April 2010, 1,300 managers had conducted sessions with their employees.
Were there any surprises? “Only in how well it was received,” Tanzer answers. “Normally we have complaints like crazy.” Employees have complained about the company’s 30-minute online compliance training, for instance, as being “too dry” or “too boring.”
Can they sustain the “talks” quarter by quarter, though? “It may get old after a few quarters,” Tanzer concedes. Overall, though, feedback has been “remarkably good.”
Tanzer was asked if it was easier getting things like this done in a company that has had a brush with scandal. Ethics and compliance programs are sometimes heavily supported at companies that have experienced public ridicule and censure because of past misdeeds.
His answer: Yes. “There was definitely a need for change.” Ed Breen, who succeeded Kozlowski as CEO in the summer of 2002, fired 300 senior managers and pushed out all the company’s directors soon after taking over. During the Kozlowski era, “there was no real compliance at all,” says Tanzer.
His predecessor, Janice Innis-Thompson, now chief compliance officer at TIAA-CREF, worked hard to implement basic compliance and ethics training, no easy task at a company that then had 200,000 employees. This process alone required several years. Much of that training was done online.
In its rush to get basic training in place, though, the company didn’t do much in the way of tracking or data mining. It knew which senior managers had taken ethics and compliance training, but that was about it.
This changed with the arrival of Tanzer in October 2006. He arrived from General Electric where “everything was about measuring things.” Tyco began tracking its ethics and compliance training completion rates.
Completion rates were about 50-60 percent in mid-decade. By 2009, however, they had climbed to 101.98 percent for the ethics awareness training. The company’s ADT Worldwide subsidiary had a 102.42 percent completion rate.
How does one achieve a 100 percent-plus completion rate? It’s “due to new hires that committed after the 2009 GEC [Guide to Ethical Conduct] Process commencement date and are not included within the original commitment head count,” according to Tanzer.
Tanzer and his group developed charts that document overall company completion rates, as well as completion rates by business units, something that is scrutinized closely by business unit presidents. They are keen to see how their peers are doing. This tends to get their competitive juices flowing. They did something similar at GE, too.
“It’s incredible how it’s driven improvements.”
An ombudsman
Tyco has an ombudsman (its preferred term), Lora Lonsdale, who is part of Tanzer’s compliance team.
The ombuds role was created by Eric M. Pillmore, named Tyco’s senior vice president of corporate governance in the aftermath of the Kozlowski scandal.
Pillmore was looking to instill trust with investors. He, too, had worked previously at GE. GE has long had a prominent ombuds office and that may have encouraged Pillmore to build such an office at Tyco, from which he retired in 2007.
On Lonsdale: “She’s like an ambassador,” says Tanzer. She travels around the world visiting employees in places like South Africa, Asia, and South America. “She’s very visible.” Lonsdale spends about 50 percent of her time on the road, says Tanzer.
When Lonsdale meets with line employees, she is alone; no managers are present.
As a result of these meetings, she’s uncovered some real problems. In one overseas location, Tanzer recalls, management was acting in a particularly heavy-handed manner, “oppressive; brow-beating employees.” Based on her interviews, the company followed up with an investigation. In the end, managers left the company.
The traveling around and mixing with employees is of relatively new vintage, however—starting about three years ago. It was the idea of Tyco’s audit committee, says Tanzer.
He was asked why more companies have not established ombuds offices.
“Some companies don’t want to know.” Tanzer recently interviewed a job candidate who had worked previously for a consumer products company. He asked about that company’s hotline. How many calls did they get annually?
“About eight,” the job candidate answered.
Eight calls? In an entire year? Comments Tanzer: “They just didn’t want to know.”
For its part, Tyco gets about 950 calls annually on its hotline. “We like that,” says Tanzer, who thinks ‘the more the better’ when it comes to hotlines, all things being equal.
Tanzer spent five years working at GE’s Corporate Environmental Programs. He learned much there that is applicable to his current work with compliance and ethics.
Environmental regulations are vast and complex, he explains. With environmental regulations and rules, “you have to convey concepts in a very simple way.” You also have to repeat things so that people remember them. The same applies with regard to business conduct and compliance issues.
As for the Ethical Reflections initiative, the next step is to conduct the cultural diagnostic survey again in the summer. (As noted, the survey, with about 20 fixed questions, was developed by the Corporate Executive Board's Compliance and Ethics Leadership Council.)
Does he think he will see improvement? “Hopefully we’ll see the gap narrow,” though he doesn’t expect it to vanish altogether. Not yet.
His overall goal with regard to the training is to “get at the culture” of the company and its 100,000 employees. The Ethical Reflections initiative meshes well with the company’s existing culture, in his view, but none of this will work without support from senior management.
Why? “People respond most to their direct managers. If the senior people don’t support it, that comes through—and people won’t pay attention,” Tanzer says.
— Andrew Singer