Damien Walsh, Global Head of Ethics and Compliance at National Grid, explains why a strong ethical culture creates the platform for success.
Standing out for all the right reasons
"By being open and transparent we can more effectively engage employees in the discussion, demonstrating that we care and live by our values."
Damien Walsh, Global Head of Ethics and Compliance, National Grid.
In the UK, a team of four leads on ethics and compliance, supported by 48 champions.
Source: Damien Walsh, Global Head of Ethics and Compliance, National Grid.
Ethics is increasingly being viewed as a crucial business issue by UK plc. In construction, safety has been top of the agenda for many years. Accident rates are falling due to improved regulations, site safety standards and product innovations. Crucially, however, it’s the cultural shift which is arguably most significant.
Site staff are encouraged and feel empowered to speak up if they see something which is potentially dangerous or witness an unsafe act. Quite simply not speaking up is seen as the wrong thing to do.
Not many organisations can say the same principles and approach applies to ethics. National Grid, however, is doing something about it.
“Ethics is where it needs to be – right at the top of the board’s agenda,” says Damien Walsh, Global Head of Ethics and Compliance at National Grid. “Acting ethically is about how we do things and, through being front and centre, it has the right focus. It means our ethical standards can be turned into concrete actions that permeate the organisation.”
Defining business ethics
So, what is meant by ‘business ethics’? The Institute of Business Ethics defines it as being relevant to the conduct of individuals and organisations as a whole. They outline how it applies to all aspects of business conduct, from boardroom strategies to the way in which companies treat their employees and suppliers.
But it goes a step further. The Institute of Business Ethics states that: “Ethics goes beyond the legal requirements for a company and is, therefore, about discretionary decisions and behaviour guided by the right kind of values.”
It’s an important differentiator recognised by Damien Walsh: “Ethical behaviour isn’t about legal compliance – just because you have a legal right to do something, it doesn’t mean that it is the right thing to do. Often acting in accordance with National Grid’s values will mean doing more than the legal minimum,” he explains. “Understanding the importance and value that an ethical culture brings and translating that meaningfully to employees helps to set organisations apart for all the right reasons.”
Learning from the past
An employment lawyer, Walsh has been with National Grid since 2001. In 2008 he was asked to become Head of Business Conduct in the UK, spending three days a week in the role. In 2010 the ethics function was centralised globally and he took it on in a full-time capacity.
The move coincided with two instructive cases, one in the USA and another in the UK.
In 2012, National Grid was fined $1.7 million in the USA for its approach to corporate entertainment covering the period 2002 to 2010, where employees from the New York Public Services Commission were taken out to golf and dinner. In the UK, in 2011, National Grid was fined £8 million by Ofgem for the misreporting of information related to works completed on the gas mains replacement programme from 2005 to 2008.
“They were very different cases but each important in their own way,” comments Walsh. “In the US the employees involved didn’t know what they were doing was wrong. They openly declared their expenses and they were approved.
“New York has very strict rules on entertaining public officials though, so we were acting unlawfully. It was a case where National Grid had failed to train its employees appropriately to comply with the law. So we didn’t discipline the employees involved, rather we accepted that the company needed to up its game and make sure that in future we equipped our employees to meet their compliance obligations.
“In the UK case, people did know that they were acting unethically. Interestingly no-one was making a personal gain from misreporting information, but employees felt under pressure to hit targets and didn’t feel that failure was an option.
“It was instructive because some employees felt they could not have a conversation with management to the effect that ‘we don’t think we can hit these targets, how can we resolve it?’ That was conspicuously missing and we had inadvertently created a culture so focused on performance that some employees preferred to misreport than have that conversation.
“The cases illustrate the importance of training the workforce on their legal compliance obligations (which are often not obvious) and creating an ethical culture where people understand that doing the right thing comes first – even if that means missing targets, extra cost or questioning an instruction from your manager.
“Following both incidents we went out to the workforce, because we wanted to explain what had happened, why and what was going to change as a result. By being open and transparent we can more effectively engage employees in the discussion, demonstrating that we care and live by our values.
“Organisations can be reluctant to talk and communicate mistakes. We want to show that we do take ethics seriously and there will be consequences, including dismissals, where there is wrong-doing, but equally that we won’t scapegoat people where the company is at fault.”
Small steps, big difference
The objective now for National Grid is to truly live and breathe ethics, making it a part of the organisation’s DNA. Globally and nationally there are ethics and compliance committees, with reports going to the board committees every six months. These set out in detail what the company is doing to develop an ethical culture, reviewing specific outputs and assessing the direction of travel.
In the UK a team of four leads on ethics and compliance, supported by 48 champions.
“The champions are impressively committed given they are supporting our ethical approach as part of their day-to-day work,” adds Walsh. “They have a free hand and have really got into it, for example customer operations have created their own internal website.
“It’s great because it enables conversations to take place on a peer to peer level, meaning it’s not just perceived as a management initiative. It also takes account of cultural differences, with communications better tailored to meet individual needs. Being on site is quite different to life in the head office environment.”
Walsh points out there is a clear sense that the organisation is now in a very different place.
“Our Chief Executive, Steve Holliday, and Chairman, Sir Peter Gershon, make it clear that doing the right thing underpins everything we do. Employees know that we are serious about ethics and that if anyone reports a concern they will be supported by the management team.
“The right approach to ethics creates a better all-round culture. That’s good for our relationship with the regulator, employees and supply chain partners.
“It creates a more positive working culture, where employees are more productive and feel supported. It’s a place where people feel comfortable being and know they will be treated with respect.
“It makes us stand out for all the right reasons.”
This article was originally published in Skanska’s Upfront magazine and is reproduced here with the company’s permission.