LRN’s new ethical culture benchmark measures real impact of culture

Culture is something we hear organizations talk about often. They want to foster one; they want to improve theirs; they want to build on a culture that’s working.

But is culture something that can be measured? Does it actually drive key business metrics? In a word, yes.

The 2021 LRN Benchmark of Ethical Culture offers proof from a comprehensive survey of thousands of employees at corporations around the world. A multi-year, collaborative research effort, the report builds on three decades of work and supporting research proving ethical culture both protects corporate reputations and propels the bottom line.

The findings reveal that in an era of stakeholder capitalism with eyes on environmental, social, and corporate governance (ESG), culture is the key to authentic or inauthentic expression of a company’s commitment to purpose, values, people, society, and planet.

Here are some of the key takeaways:

● Companies with the strongest ethical cultures outperform others by 40%. Across all measures of business performance—including customer satisfaction, employee loyalty, innovation, adaptability, and growth.

● There is a need to shape ethical culture globally, but some industries outperform others significantly. Data from the survey show a pervasive and consistent need to improve ethical culture in all regions, regardless of company size. Information technology, entertainment and hospitality, and marketing and media had the highest average ethical culture scores, while chemical, education, not-for-profit, and the automotive and transportation industries ranked the lowest.

● There is a leadership disconnect. Senior leaders report more favorable perceptions of the state of their organization’s culture. Middle management reports average and individual contributors and those on the front lines report the lowest perception of culture.

● Some aspects of culture have an outsized influence on achieving ethical behavior. There are strong correlations between Cultural Catalysts and demonstrated ethical behavior. For example, companies that foster trust and maintain a sense of fairness—meaning they score high marks on Trust and Organizational Justice—experience lower levels of misconduct as well as more people speaking out when they see it.

● Black Americans and people who identify as female observe unequal treatment in the workplace. While companies have made commitments to diversity, equity, and inclusion, there is a wide gap in the perception of equality at an organization. African, Black, Afro-Caribbean, and African Americans report a less positive experience of cultural dimensions, while people identifying as female report less than those identifying as male.  

● Employee loyalty is notably higher in environments characterized by high trust. Employees are more loyal to companies that are ethical and purpose-driven with a clear commitment to diversity, equity, and inclusion.

● There’s a Pandemic Paradox with frontline workers. Even though frontline workers were heralded publicly as heroes for keeping the economy running early on during the pandemic, they gave their organization the lowest scores across the various dimensions of culture. There seems to be a disconnect between what a company says are its values and the real-life experience of employees.

“How business defines and achieves performance has evolved,” said LRN Chief Advisory Officer Ty Francis MBE.

“We’re proud to introduce a new model for achieving ethical performance and a new benchmark for an ethical corporate culture that explores the values and needs of all stakeholders.” Said lead author Emily Miner, Senior Ethics & Compliance Advisor, LRN.

“The data prove that prioritizing ethical culture isn’t just the right thing to do it is the smart thing to do. And yet, even the best performing companies, the Cultural Catalysts, have work to do to ensure values resonate at every level of the organization.”

The LRN Benchmark of Ethical Culture is based on comprehensive data collected from nearly 8,000 employees worldwide, ranging from frontline employees to the C-suite, and representing 17 industries. It offers a unique view of ethical culture and its impact on ethical conduct and business performance.

LRN, a pioneer in the ethics and compliance space, helps more than 30 million learners each year across 1,000+ companies worldwide.