Lessons from Penn State | Idaho Business Review

by Denise McClure
Published: August 29,2012
Time posted: 2:55 pm

Louis Freeh?s report, recently made public in the media, highlighted a series of failures at Penn State that led to a cover up of Jerry Sandusky?s sexual abuse.

Freeh cites numerous individual failings, along with ?weaknesses of the university?s culture, governance, administration, compliance policies and procedures for protecting children.?

What Penn State lacked more than anything was a culture of accountability. Penn State?s president hid problems from the board of trustees. Penn State didn?t put policies in place for complying with laws and regulations for reporting violence and sexual abuse. Penn State didn?t train employees on how and when to report abuse. The administration?s casual attitude toward procedures, safety, compliance and accountability precipitated its fall from grace.

Penn State?s shortcomings stemmed from its ?insular and complacent culture.? Neither the trustees nor top officials valued accountability or transparency. The president didn?t even inform the trustees of the potential criminal investigation after testifying before a grand jury regarding the allegations swirling around Sandusky.

When I do an internal control risk assessment, the first step is evaluating the ?tone at the top.? Does the organization value a culture of integrity and accountability? Is there a ?real? code of ethics, or is it just a list of values employees are required to sign? Are the organization?s values any more than a pretty poster hanging on the wall? Do leaders walk the walk, or do they just talk the talk?

The collective actions of all top officials set the tone for an organization and define its culture. What do your actions say about the culture of your organization?

What you say only matters if it is reflected in your behavior. No matter how articulate you are at ?talking the talk,? it is your actions that send a message to employees, customers, donors and other stakeholders.

Whether it?s embezzlement, safety, regulatory compliance or abuse, your employees know what you stand for. They know whether you stand for accountability and integrity, or complacency and moral ambiguity.

Here are a few tips for creating a culture of accountability:

1. Develop a code of ethics. Public companies are required to have a code of conduct or ethics, so you can find an abundance of examples with a simple Internet search. Beware the three-page code of conduct typed in 8-pitch font. Its message is that you care more about catching people doing something wrong than behaving ethically. Keep it simple. Make it memorable. Use it to guide decisions.

2. Demand accountability during the hiring process. Check references and verify relevant credentials. Make hiring contingent on broad background and criminal history checks. Do you want to hire a driver with four DUIs? Dou you want to hire a convicted embezzler to manage your finances?

3. Subscribe to a hotline service so your employees, vendors and other interested parties can let you know if they see a safety, compliance or process violation. A hotline (also known as an anonymous incident reporting service) can be instrumental in identifying wayward behaviors in the early stages. It?s important that tips be provided anonymously so fear of retribution doesn?t inhibit reporting.

4. Accept mistakes. Penn State perpetrated a coverup because, in their cultural world, bad publicity was to be avoided at all costs ? even at the expense of children being victimized. It?s better to admit mistakes, take corrective actions and learn from them.

Penn State leaders should have sat in on a business ethics course at the university. Two popular business ethics and public relations case studies involve the Ford Pinto?s exploding fuel tank and Johnson & Johnson?s reaction to Tylenol tampering deaths in the late ?70s and early ?80s.

Ford placed more value on trunk space than safety. Ford knew of the fuel tank design flaw before production, but decided it would be cheaper to pay off lawsuits than to resolve the problem with an $11 part. Ford paid punitive & compensatory damages in lawsuits, and is still the target of negative publicity for its decision to put profits before people.

Compare Ford?s decisions to Johnson & Johnson?s actions when seven people in the Chicago area died after ingesting cyanide laced Tylenol capsules. J&J issued a nationwide recall of more than 31 million bottles, costing the company $100 million. This sense of corporate responsibility is part of the J&J credo, penned by Robert Wood Johnson in the 1940s before the company went public. The J&J credo puts the people who use their products first, followed by employees and their communities; stockholders are last.

J&J was applauded for its honesty and openness in dealing with the crisis. Its leaders? decisions were guided by its ?people before profit? philosophy, and it remains a respected company today.

Penn State put reputation before safety and responsibility. Let?s hope Penn State and similarly complacent organizations learn from their mistakes.

Trust, but verify.

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Source: http://idahobusinessreview.com/2012/08/29/lessons-from-penn-state/

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