Does “Tone at the Top” Really Matter?

You’ve probably heard about the ethics issues at Uber and Fox News. News reports and dinner conversations chalk it all up to the “Tone at the Top” that allowed those issues to occur. So what does that phrase, “Tone at the Top”, really mean? Who sets the tone, and how?


Leadership – the Board, CEO, CFO, or COO – sets an organization’s “tone” regarding ethical culture. Leaders determine which actions and behaviors are rewarded, and which actions are not tolerated. Leaders demonstrate commitment to openness, honesty, integrity, and ethical behavior – or they do not.


Inappropriate Tone at the Top is exhibited by showing disdain for policies and rules, paying lip service to compliance, emphasizing profits over ethics, and deflecting accountability. Fraud cases litigated against Enron and WorldCom used “poor Tone at the Top” as evidence in those successful prosecutions.


Leaders can promote an ethical culture and avoid the risks related to “Tone at the Top” by taking these four actions:


  1. Communicate expectations.Organizations must clearly state that they will not tolerate unethical conduct. Give examples and define terms to eliminate ambiguity. Clear policies convey the organization’s values and expected behaviors. Reinforce the policy with a written code of ethics and an ethics training program.


  1. Lead by example.Leaders must set an example and act in line with all expectations, whether they are formally defined or just common practice. Employees, volunteers, and others are more likely to follow the organization’s code of ethics when they see that leaders are actively following it. Walking the Talk matters.


  1. Support and reward integrity.Leaders should support a culture of doing the right thing by recognizing individuals for ethical behavior. Recognition could be a monetary incentive program, or some other special acknowledgement or reward. Celebrating instances of behavior that you want more of makes for a memorable team experience.


  1. Implement confidential reporting.Confidential tips are how many frauds and other inappropriate activities are detected. Reporting real or suspected fraudulent behavior or ethical violations without fear of retaliation is essential.


These actions alone do not guarantee that everyone in the organization will act in an ethical manner. They are the first steps to setting an appropriate Tone at the Top to direct and support your organization.

Looking to Outsource?

Whoever said, “If you want something done right, you have to do it yourself,” wasn’t a business owner. It’s impossible for a business owner to do everything herself. Sure, at the beginning, limited cash flow means DIY for some tasks. But as soon as possible, it’s time to outsource tasks that don’t make money, or are best left to a pro, like IT and accounting.


When you start looking to outsource, your business needs reliable vendors that address your business needs, deliver as promised, and don’t create headaches. So where are those reliable vendors, and how do you find them?


Follow these four steps to get the right vendor and stop the DIY:


  1. Check and Compare

Talk to other business owners about vendors that they use. Look on industry association and Chamber of Commerce websites for preferred or endorsed vendors. Selecting a vendor based on the lowest cost could end up costing more. Develop a Vendor Selection Scorecard to help compare terms, services, and other performance factors. Consider checking on prospective vendors’ financial soundness to make sure they will still be in business when you need them.


  1. Define Expectations

Documenting expectations helps to hold the vendor accountable and avoid misunderstandings. Agreements should include how the vendor will address deadlines, quality, and other essential success factors for your business. Be sure to document your business’ responsibilities, too, such as providing necessary information and approving deliverables. Nailing all this down can also help you figure out all the details you might not have thought through before.


  1. Get Updates

Vendors should provide periodic work status updates or statements so you can track their progress against the agreement, budget, or project plan. Vendor invoices are another update opportunity. Invoices should include enough details to show what was being billed, the price, and any other terms that impact the total amount. Verify that purchased goods and services were received as expected before paying the invoice.


  1. Track Performance

Use agreement terms to develop a simple Vendor Performance Scorecard. Follow-up if performance starts to trend below acceptable limits. Status updates and scorecards don’t replace direct communication. If something changes or doesn’t seem “right”, ask what’s going on and why. Follow-up if the answer doesn’t make sense. Ignoring red flags could cost you money and your reputation.


Tired of DIY and looking to outsource? These four steps will get your business on track to find reliable vendors to address its needs, without the headaches.


Achieve Goals by Tracking Progress

Your organization’s goals are spelled out in budget and planning documents. Those goals are usually established at the beginning of the year. At the end of the year, you see if the goals were achieved. Do you really want to wait until the year-end?


Probably not. Year-end is too late to find out whether goals were met.


Tracking established goals is the best approach to manage your organization’s progress and avoid getting knocked off course. Organizations achieve their goals with tracking mechanisms that address these four areas:


  1. Result Areas – Think about what “success” looks like for your organization. Identify the outcomes, roles, and processes that are essential to achieving success. Result Areas may be specific to your industry or market. They can be financial, operational, or programmatic. Examples include achieving specific profit margins, quality standards, or market share.


  1. Indicators and Attributes – Select the outcomes, roles, and processes that are necessary to achieve the established goals. There’s a lot going on in your organization, and you can’t track all of it. Focus on the essential activities that MUST work for each goal to be achieved. Identify the information needed to get a view of what’s going on, and whether things are working well or not, such as financial, production, and employee reports.


  1. Collect and Report Data – Standard processes for collecting, tracking and reporting data helps ensure that information is reliable. Automation generally increases accuracy and makes it easier to obtain. Define “normal” profits, volumes, transactions, etc., to help recognize results that are abnormal, or “exceptions” that require more attention. Include all applicable stakeholders in defining normal vs. exception results.


  1. Analyze and Act – Review tracking reports and interpret them based on circumstances and established goals. Analyzing trends can help organizations see an issue early, before it grows to a crisis. Exception results should be assessed in an effort to understand what is causing the exception. Knowing the cause of the exception helps to identify corrective actions help get things back on course.


Don’t wait until year-end to see of your organization’s goals were achieved. Use these four tracking mechanisms to manage your organization’s progress and stay on course.

Manage your Organization with your Budget

Every year, your organization puts together a budget. Then what happens with it? If you’re not using your budget to manage your organization, you’re missing out on a powerful tool to help achieve your goals.


Leveraging the power of your budget starts with deciding what information to collect and track to monitor progress toward achieving specific objectives. Next, you need to make decisions about managing and reporting information, otherwise known as the financial statements.


That’s a lot of setting up and deciding to do before you’ve got a powerful management tool. So where do you start?


Manage your Organization with your Budget by performing these three actions:


  1. Set Performance Parameters


Establish a formal financial oversight process to stress its importance and to set clear information requirements, actions, and time frames. Ensure that all responsible parties are aware of obligations, accountabilities, expectations, and authorized activities. Define expected financial outcomes related to strategic and operational goals. Ensure that financial reports address progress toward meeting those goals.


  1. Identify Critical Areas


It’s not necessary to review every financial line item. Only significant items that relate to performance results should be assessed to get to the root cause of variances or unexpected results. Explaining the root cause often helps you identify the corrective action that is needed to stay on course and meet budget and operational goals. Common financial assessments include variance analysis of planned vs. actual performance for significant line items and ratio analysis to assess financial health (e.g., liquidity and debt).


  1. Focus on Objectives


Stay laser focused on progress in meeting your short, medium, and long term objectives. Documenting the review and resulting decisions and actions help to track progress throughout the year. Promote discussion about balancing the organization’s immediate and mid-term needs with long-term goals. Think beyond the day-to-day. Needs too large to fund from current operations require decisions about postponing or incurring debt.


Leveraging the power of your budget by performing these three actions will help you Manage your Organization, and achieve your strategic, financial and operational goals.