Meredith Niles looks at a new paper considering the role of behavioural science in designing and implementing more effective compliance and ethics programmes, and considers how the learnings could be applied to fundraising.
An exploration of the intersection of compliance and ethics programmes and behavioural science may not immediately strike you as a top candidate for your summer reading list –especially a fundraising reading list – but it would be a mistake to miss out on this new paper from Ethical Systems, a research collaboration led by renowned US social psychologist Jonathan Haidt that aims to bridge the gap between academic research and business practice by bringing “behaviourally informed advice” to professionals responsible for compliance and ethics programmes within their organisations. Their highly readable paper is structured as a dialogue between Jeff Kaplan and Azish Filabi, two of the foremost thought leaders in the field of applied business ethics. It contains a trove of relevant behavioural science research boiled down into plain English that make for interesting reading on its own merit. More importantly, I think there are many valuable takeaways for fundraisers.
The most important insight from behavioural science is that people frequently don’t behave in the manner we would expect if they were simply applying rationality and logic. Anyone who is looking to shift behaviour needs to take account of how our unconscious minds influence our behaviours. Within an organisation, we need to be particularly aware of how institutional dynamics can shape our behaviours, consciously and unconsciously.
The starting premise of ethical systems design is to consider how often-conflicting incentives, messages, norms and pressures interplay to create environments where ethical behaviour is more likely to thrive. It’s not enough to hire ‘good’ people, hand them a set of rules, and hope for the best; we must actively create the conditions for ethical practice to flourish, and we are more likely to succeed if we take account of how we know people actually behave under particular conditions.
As the paper is an exploration of applied ethics, it covers territory that is outside the scope of much of Rogare’s existing work on ethics in fundraising, which has focused primarily on normative questions, in particular how the rights of beneficiaries ought to be balanced with the rights of donors. This paper should be read in the context of how a charity can design its culture, training, and risk management practices to increase compliance with professional ethical standards, such as the Code of Fundraising Practice in the UK the International Statement on Ethical Principles in Fundraising from the USA.
The paper begins with a brief history of the development of corporate compliance and ethics programmes. Although the paper is written primarily for a for-profit audience in the US, the learnings transcend organisational type and culture. The researchers note that as regulators placed a greater emphasis on corporate ethical compliance, an increased focus on the role of corporate culture in promoting ethical behaviour emerged, along with a requirement to demonstrate adequate supervision of employees. This will be familiar territory for anyone conversant in the recent adjudications by the Fundraising Regulator, where organisational culture and a lack of appropriate oversight were key considerations in the F-Reg’s ultimate decisions.
Next, the paper describes some seminal psychological studies (the Stanford prison experiment by Philip Zimbardo, the Stanley Milgram experiment, and the Princeton Good Samaritan Study), each of which demonstrates how people can, relatively easily, be influenced to act against their better ethical instincts, whether that is because they have been put into a position of perceived authority, have been given ‘orders’ that conflict with their own beliefs, or because they are simply under stress. All of these are conditions that are present within organisations – there are natural hierarchies, we face pressure to meet demanding targets – and we would be foolish not to take these into account when designing compliance systems.
The paper then examines several areas – from risk management, to how oversight is designed and managed, to how standards of ethical conduct are communicated and how employees can raise concerns – essential to building a functional ethical system and how insights from behavioural research can be used to design these to promote greater adherence to accepted standards. These lessons have considerable relevance for fundraisers interested in increasing their organisational ethical compliance, and I’ll address the highlights below.
Risk identification and overconfidence
The paper cites research demonstrating that when it comes to ethical predictions, we tend to be more overconfident in our assessments of our own likely future moral behaviour than we are of that of others (dubbed the ‘holier than thou’ effect). In experimental conditions, participants consistently judged themselves to be more likely behave in a virtuous manner but were more accurate in their predictions of others – but we know that only in Lake Wobegon is everyone above average. Thus, when we are assessing the likelihood of an ethical breach, it is better to ask team members to think about the likelihood of othersfailing to comply rather than questioning them about their own behaviour, which is harder for us to judge objectively.
Another cognitive blind spot when it comes to risk assessment is that we tend to take greater account of the probability of a negative event than of its impact. Therefore, we must be careful when conducting risk assessments to ensure that we have really road-tested the assumptions around the impact of negative events, taking account of the fact that we are pre-dispositioned to understate these. What if instead of merely assigning an impact score to a risk, we asked the team to imagine an ethical breach has occurred, prompting an investigation by F-Reg and a story on the front page of an unfriendly newspaper? And then we asked the team to think about the specific steps that they would need to take:
- What would the crisis communications plan look like?
- Who would be responsible for informing the trustees and how would that conversation go?
- What would a conversation with an understandably upset donor sound like?
- What kind of resource would be involved in a protracted investigation by the Fundraising Regulator?
Truly imagining the scenario has occurred might inspire a greater appreciation of the salience of the impact, therefore leading to less overly optimistic scoring.
“Otherwise ethically-intentioned fundraisers could be more likely to treat donors unfairly this if they perceive them to be less ‘like us’ than members of the fundraising team.”
Another area explored in the paper is the tendency towards conformity bias, whereby we are more likely to behave as others around us, particularly those who we feel most like and/or aspire to be like. The paper cites research from the American team of Gino, Ayal and Ariely that shows that we are more likely to behave unethically if we perceive others are doing it as well, and we are particularly disposed to behave unethically if we perceive that the ‘victims’ of our unethical behaviour are part of an ‘out-group’ as opposed to being more ‘like us’. Leaving aside the Rogare normative view of fundraising ethics, where the needs of the beneficiary ought to be considered, in the applied ethical domain, the ‘victim’ of unethical fundraising behaviour would be a donor or other member of the public who is taken advantage of through poor fundraising practice. The research suggests that otherwise ethically-intentioned fundraisers could be more likely to treat donors unfairly this if they perceive them to be less ‘like us’ than members of the fundraising team.
Think about how we speak about donors: when we use dehumanising language like ‘acquisition’ and ‘target segments’ – how does this influence the way we perceive them? Can we do more to ensure that we refer to donors in respectful terms that make it more likely for us to consistently view them as the vital partners in achieving our shared objectives that they are? If a donor were dropped into one of our team meetings, would she recognise and appreciate the way we were speaking about her? And even if we are respectful about our existing donors, do we treat the general public with the same consideration? These are not trivial questions; rather there is empirical evidence to demonstrate that our framing can influence our behaviour and adopting appropriate frames can help lead us towards more ethical behaviour.
Slippery slope and whistleblowing
The same research cited above shows that people are more accepting of unethical behaviour that develops over time than they would be if it were introduced suddenly. One way to combat this is to ensure that behaviour is continually assessed for small shifts that could lead to a deterioration of compliance. But this will only be successful if team members feel confident in speaking up when they notice changes, and the paper cites further research that highlights some of the difficulties associated with whistleblowing, in particular the fear that demonstrating a lack of loyalty (a strongly held value) conflicts the duty to promote fairness, creating an ethical conundrum that may suppress reporting of poor behaviour.
The researchers suggest one way out of this is to help frame organisational loyalty in a broader sense: calling out bad behaviour may be ‘disloyal’ to one or more colleagues, but what happens to the organisation if it isn’t squelched in time? If an organisation suffers from a reputational lapse, it means less money is raised for beneficiaries, to whom we owe considerable loyalty; moreover, other employees could lose their jobs. Helping team members to keep in mind their broader loyalty can help create an environment more conducive to speaking out. Creating confidence that reporting a small lapse will be treated as an opportunity not to punish but to learn can also remove the fear of being seen to have acted disloyally, which can also promote addressing concerns before they escalate into serious infractions.
Another interesting study explored in the paper demonstrates that simply priming people to think about money increases their propensity to behave unethically. In a series of experiments, the researchers showed that asking participants to read descriptions about money as opposed to neutral primes increased the likelihood that they would display unethical intentions, and that money primes increase the likelihood of a ‘business frame’ which in turn led to a greater likelihood of unethical intentions and behaviour. This insight is particularly relevant for fundraisers, whose performance is, rightly, assessed largely in terms of the financial results they deliver. We talk about income constantly, but our conversations about compliance often take place on a separate cycle, sometimes with a different group of stakeholders represented. Introducing a more holistic ‘balanced scorecard’ method of reporting on performance, where financial measures are only ever discussed in conjunction with ‘softer’ measures of performance and vice versa, could mitigate against this.
This applies to the broader ecosystem in which fundraisers operate, not just to their own organisations. When we meet with our agency partners to discuss campaign objectives and results, are we equally clear about the non-financial measures of success, such as positive conversations with non-donors and situations with potentially vulnerable donors that are handled with sensitivity? Do we not only name these non-financial objectives but also measure and reward their achievement? Remembering that we are predisposed to move away from our better ethical instincts once money is introduced into the conversation and designing active measures to keep us on the straight and narrow could help us raise our standards.
The Gino, Ayal and Ariely research cited above also demonstrates another important learning, which is that increasing the salience of ethics can lead to improved compliance. In experimental conditions, simply asking the question “is cheating allowed?” made participants less likely to cheat by increasing their awareness of their behaviour at the start of the experiment. An additional experiment by the same researchers showed that asking participants to sign a form attesting to the truthfulness of their disclosure before submitting it increased their honesty. It’s a lesson that is applied to positive effect in many universities, where students are asked to sign an honour pledge before handing in exams. Are there similar ‘just-in-time’ nudges that we can build into our everyday practice that will gently serve as constant reminders of the importance of good behaviour?
Avoiding a tick-box culture
It is important, through all of this organisational design, to ensure that employees perceive the commitment to ethics as genuine and strongly held throughout all levels of the organisation. When compliance is seen as mere window dressing or ‘compliance for compliance’s sake’. it can lead to employees taking it less seriously. The researchers cite the example of a financial services organisation that sought to reduce “churn” (selling products to clients that they don’t need purely to earn a commission) by monitoring compliance within a 90-day window. This well-intentioned plan led to an increase in sales immediately after the 90-day window. If we focus too much on particular measures, are we doing enough to communicate the importance of the overall aims? This was a concern that was raised in the recent consultation by the Fundraising Regulator around what is known as the “three-ask rule” in telephone fundraising. The Institute of Fundraising, in its response to the consultation, noted:
“It is absolutely vital that individuals are not placed under undue pressure when a fundraiser asks for support. Giving a maximum number of asks that can be made over the telephone provides a safety net which can provide reassurance to donors and the public as well as provide fundraisers with a clear understanding of what is acceptable. However, the ultimate focus should always be on ensuring that all individuals are never put under undue pressure to make a donation. A limit on fundraising asks should be thought of as one way of achieving this outcome, but not the only way.”
This is a good example of the focus on ultimate objectives as well as formal compliance. There are other ways for organisations to signal the importance they place on ethical compliance, such as:
- building managerial accountability into job descriptions and performance reviews
- publicising (appropriately) remedial or other disciplinary actions that have been taken as a result of breaches to increase confidence that the organisation takes compliance and justice seriously
- making ethical compliance a part of everyone’s induction and ongoing training.
Keeping communications around compliance interesting and engaging (including by mixing up the approach to monitoring so it doesn’t become staid and even referencing some of this behavioural research!) can help guard against complacence. Who delivers the messages about ethical compliance is also important: ensuring that the CEO and trustees are as concerned with ethics as they are the bottom line – and that they respect that short-term financial gains at the expense of ethical standards are ultimately self-defeating and so do not put undue pressure on teams to meet unrealistic targets – is absolutely essential.
Are you behaving ethically? Oops – wrong answer!
In short, I would recommend this paper to anyone interested in how behavioural insights can be harnessed to design more effective ethical compliance functions. It was an entertaining and thought-provoking read, and while the conclusions are largely intuitive, knowing that they were based on sound research made them even more impactful. This research represents a valuable contribution to the body of knowledge in applied ethics.
- Meredith Niles is an experienced fundraiser and charity trustee. She is a member of the Rogare International Advisory Panel and a member of the Institute of Fundraising’s Standards Advisory Board.