From the November/December 2010 issue of Ethikos
Xerox CEO Seeks ‘Unfiltered’ Discussions With Employees
In few corporate areas does “setting an example” matter quite as much as it does in ethics. No single person's example is more critical than the CEO's.
At Xerox Corporation (Norwalk, CT), the company expects its senior management to “live” its values, “and we expect our employees to witness that,” says Patricia M. Nazemetz, corporate vice president and the company's chief ethics officer.
‘I'm here and I'm listening’
Along these lines, Xerox CEO Ursula Burns works hard to set an example, Nazemetz asserts. Burns makes herself accessible to employees—as did Anne Mulcahy, CEO before her. She holds town meetings and roundtables, and she eats lunch with employees in the company cafeteria—actions that lead to “unfiltered” face-to-face discussions with employees. The implicit message: “I'm here, and I'm listening, and you can tell me anything.”
At smaller organizations, this may not be so unusual, but at companies the size of Xerox—a $22 billion business process and document management company with 130,000 employees in some 160 countries—the CEO often subsists in a kind of bubble.
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His or her corner office becomes an inner sanctum. When the CEO does “go out,” the leader is often managed by “handlers.” Just as people don't just walk up to the president of the United States for a casual chat, people don't approach big-time corporate CEOs informally. Town meetings are one way that Burns “keeps in touch,” notes Nazemetz.
There are other ways the senior management team seeks to set an example with regard to ethics and compliance. Senior managers undergo code of conduct training before the rest of the company. The message here: Senior management signed up for it, they've done it, and they have a plan to “cascade” it through the company. They are the first to sign code certification forms.
“It's an accountability thing,” says Nazemetz. “People really do take that seriously. There are not many instances where we require people to sign their names.”
It has to be clear that “these are not just rules for little people,” a common belief at some large organizations, Nazemetz notes.
The seven ‘elements’
At Xerox Corporation, the current ethics and compliance program has been in place since 2001. It is built around the “seven elements” of an effective ethics and compliance program as outlined in the U.S. Sentencing Guidelines for Organizations in 1991 and amended in 2004. (See sidebar on page three.)
Does that make the company compliance-based or values-based? “You have to have both,” answers Nazemetz, who headed Xerox's human resources department for more than a decade; she became the firm's ethics officer in 2007.
“You have to get the signatures” certifying that employees have received and read the organization's code of business conduct (compliance), for instance. A lot of this, after all, is about process, consistency, complying with rules and regulations. In a company of 130,000 employees, you can't just talk to each person individually. You have to have systems in place.
That said, compliance is “necessary but not sufficient,” adds Nazemetz. Compliance itself won't create an ethical environment. To get there, you need to “appeal to people's higher self” (ethics), she says.
Business Ethics & Compliance Board
Xerox has an internal ethics and compliance review board—the Business Ethics & Compliance Governance Board. It is comprised of 20 top managers from its operating units and functional offices. The board reviews ethics and compliance trend data, survey results, case activity, and employee input.
Who serves? Senior managers from the operating units, mostly. Some are heads of human resources, and they can be quite effective: they know the players and understand the “people aspect” of things. Other times they are top financial executives within the operating units.
Nazemetz recently went to Lynn Blodgett, president of ACS (the data entry firm that Xerox acquired in February 2010 for $6.4 billion), and told him: “ I need two or three people from your organization” to serve on the board. They had to be responsible, “ fully deputized,” from the senior management level. They would be called upon to inform their business units about ethics and compliance changes at the company. One person selected was ACS's former ethics officer.
The review board meets for about three hours each fiscal quarter. These are usually “virtual meetings” that make broad use of video conferencing. This allows people dispersed around the world to participate, from places like London, England; Dallas, Texas; and Rochester, New York, among others.
What do they discuss? They might discuss discipline. If they are going to change the guidance with regard to discipline, moving directly from a formal warning to dismissal for an ethics or compliance violation, say, they might ponder the consequences: “Can your organization live with this? Can your organization follow these guidelines?”
Someone might answer: “If you do this in my business in my part of the world, you're going to have to fire every fourth person.” That might give them pause.
In general, “there has to be ownership” with regard to ethics and compliance, and the Business Ethics & Compliance Governance Board helps promote that goal, Nazemetz suggests.
The ethics and compliance board also gets into some fairly technical areas, things like acquisitions and leases. Even the accountants may weigh in. If Xerox is to take on a new organization, the acquired firm has to realize that in certain areas, and despite so-called culture differences, there may be “no flexibility” with regard to breaking the rules.
One recent example dealt with “side letters”—those separate agreements that can modify the terms of a sales agreement. A side letter might say, for instance, “We'll make sure you get your supplies overnight at no extra charge.”
Side letters that commit the company to a penalty or a revenue drain are “totally unacceptable” at Xerox, notes Nazemetz. While other companies may allow sales reps some flexibility in this area, at Xerox, side letters will lead to “termination.”
Dealing with nuisance calls
An organization should be comfortable with more information flowing through its lines, suggests Nazemetz. The attitude should be, “Thank you for sharing your concerns with us.” This may require some forbearance.
After Nazemetz gave a speech recently, another ethics officer approached her to ask about “nuisance calls” on company hotlines. Is there a way to stop them?
“I don't know how you do that without creating a chilling effect,” Nazemetz answered. “We want concerns raised,” after all. Constant vigilance is the price you pay to maintain your commitment to integrity.
Money well-invested
Xerox's helpline is managed by a third party. There is a certain cost built in. It is roughly equivalent to a full-time, mid-level person, maybe $75,000 to $100,000 a year.
But how much could a single accounting fraud hurt the company—not only in penalties and fines, but possible litigation and reputational costs? Nazemetz asks: Isn't $75,000 to $100,000 a small price to pay to ensure potential wrongdoing is being reported in a timely manner—to forestall some act of malfeasance before it “craters the reputation” of the company? (How much would it have been worth to BP to receive an internal report that averted its April oil spill in the Gulf of Mexico?)
Yes, there are nuisance calls. Some employees see misbehavior everywhere. A group of employees smoking cigarettes outside the building can even be a cause for suspicion in some minds. The employee thinks “everyone is stealing from the company.” They call the company hotline.
But this “can also be a learning moment,” says Nazemetz. The ethics manager can instruct that employee: —You're leaping to conclusions,” and explain why. One doesn't even need to be so delicate if the employee is indulging in these kinds of reports repeatedly. They can be chided: “You shouldn't be doing that. Your actions have consequences, and your behavior will put you in the hot seat.”
Says Nazemetz: “If you have a moment in someone's work history, and can say, ‘Here is what is wrong with this picture,’” something will happen in that moment when you have their undivided attention. That employee will grasp the point—or not. But it will often come to a head. “Either you create a convert, or they say, ‘I disagree, and I'm out of here.’”
A master's degree in philosophy
Nazemetz joined Xerox Corporation in 1979 as a benefits operations manager and held a variety of assignments in human resources. She was named vice president of human resources in 1999. She joined the business world after receiving a Bachelor of Arts degree in mathematics and a Master of Arts degree in philosophy from Fordham University.
Mathematics and philosophy are not exactly the typical background of an ethics officer these days—law is more usual—but these subjects have their advantages. Mathematics and philosophy are related on a certain level—both require disciplined reasoning. Philosophy encourages a person to think through all sides of an issue. That, coupled with some hands-on human resources experience, prepares one to recognize shades of gray, encourages a certain flexibility.
Philosophy also encourages a rigorous sort of thinking that drives one toward a conclusion—despite the shades of gray. Not everything is relative. “Some things, like values, are absolute.” One tends to eschew rationalizations, refrain from little white lies—recognizing these all put you on the proverbial slippery slope.
Dignity and respect
It takes time to build awareness in a company with 130,000 employees—especially with new employees coming on board all the time, she notes. At some point, however, the employees themselves have to take ownership for ethics. They need to assume individual responsibility, saying to themselves, “[I] don't want to be the person that causes the company's reputation to be tarnished.”
Nazemetz was asked about the ‘key’ to building an ethical culture in a large organization. “Treating people with dignity and respect,” she answers—employees, customers, suppliers, other stakeholders—“all the people, all the time, repeatedly and pervasively.”
— Andrew Singer