In today’s rapidly evolving business landscape, shaped by economic uncertainty and ever-changing regulations, embedding ethical practices and behavior is critical for an organization’s long-term success. According to the LRN Benchmark of Ethical Culture report, companies that prioritize ethical culture outperform their peers by 40% in key business metrics such as employee retention, customer satisfaction, adaptability, innovation, and growth.

While ethics and compliance (E&C) training may seem burdensome to many startups and small businesses, often perceived as a concern only for larger, established companies, the consequences of neglecting it can be severe. High-profile examples like Theranos and Thinx have shown how failing to establish sound ethical guidelines and compliance programs can result in long-term damage to an organization’s reputation and viability.

Implementing a foundational E&C training program offers significant advantages. It helps businesses navigate legal and regulatory challenges, preventing costly fines and penalties. Additionally, it fosters an ethical workplace culture that aligns with shared values, enabling both the business and its people to thrive. With external challenges such as trade sanctions, staffing shortages, and supply chain disruptions, having an effective E&C training system becomes even more crucial for maintaining a strong, values-driven organization.

For businesses under scrutiny, the U.S. Department of Justice places considerable importance on the effectiveness of an organization’s E&C program. The U.S. Sentencing Commission’s guidelines emphasize this, showing that an active, measured E&C program can influence how an organization is viewed in cases of potential violations. As companies scale, building and continually refining an E&C program is essential to ensure compliance and ethical decision-making at every level.

Beyond just setting up an E&C training program, measuring its impact on workplace culture is equally important. Ethical culture refers to the values, behaviors, and attitudes that shape decision-making in an organization. To measure the effectiveness of your E&C efforts, focus on qualitative key performance indicators (KPIs), such as behavior change and employee engagement. This allows you to assess the alignment of the organization’s practices with its stated values and identify areas for improvement.

An effective E&C training program will evolve with an organization’s growth and specific challenges. However, there are several core elements every company must include in their program.

Establish a Clear Code of Conduct

A well-defined code of conduct is fundamental to a successful E&C program. It should reflect the organization’s mission, vision, and values, while outlining expected behaviors and policies on issues such as anti-discrimination, harassment, and data privacy. This document serves as a roadmap for employees, guiding ethical decision-making across all levels of the company.

To be effective, the code of conduct must be easily accessible, engaging, and user-friendly. Consider making it available in multiple formats (such as web-based or mobile-enabled) to ensure employees can consult it whenever needed. It should be a practical reference for employees to check policies on issues like conflicts of interest or report misconduct via the appropriate channels.

Leadership plays a crucial role in promoting ethical culture, and this starts with demonstrating the right behaviors at the top. A commitment to integrity, respect, and values-based decision-making should be modeled by leadership and embedded in the company’s code of conduct.

Identify and Address Cultural Barriers

The rise of Gen Z in the workforce is prompting companies to pay closer attention to their values and how they are perceived. This generation, in particular, seeks employers whose values align with their own. As a result, organizations should prioritize ethical values in hiring practices and consider how well potential employees’ values align with the company’s mission.

During the hiring process, ask questions that reveal a candidate’s ethical perspective. Evaluate not only their qualifications and experience but also their potential to contribute to a positive and inclusive workplace. Examine the language and approach used throughout your hiring process to ensure they reflect the core values of your organization.

Strengthen Reporting Mechanisms and Measure Ethical Culture

As companies grow, they must prioritize transparency and accountability to stakeholders, including investors, employees, and customers. Government regulations now demand that organizations demonstrate not only compliance with laws but also a culture of compliance throughout the organization. Environmental, social, and governance (ESG) metrics are now closely monitored, alongside financial performance, to assess the overall health of a business.

Regularly measuring and improving ethical culture should be a key priority. To assess the effectiveness of your E&C program, integrate teams from human resources, legal, compliance, risk, and IT to monitor progress. Tools like gamified compliance training, pulse surveys, and sentiment tracking can provide valuable insights into employee engagement, behavior change, and areas requiring attention.

Although creating a robust and measurable E&C training program can be a challenge, especially for startups and small businesses, the investment pays off. It protects the organization from legal and reputational risks, fosters sustainable growth, and builds resilience. By implementing a thoughtful and data-driven E&C program, businesses can ensure that they operate ethically, making it possible to thrive in today’s complex and competitive environment.