January 24, 2019 Articles

Kimberly-Clark: Integrity Culture and Performance Metrics

K-C employees describe how the company drives an integrity culture through company-wide performance metrics.

By Jeff Melucci and Kurt Drake

Kimberly-Clark (K-C), founded in 1872, has a proud tradition of integrity and values-based leadership. Our code of conduct opens with our CEO, Tom Falk, observing that the core values of accountability, authenticity, caring, and innovativeness have guided the company for nearly 150 years. He continues, “Every day, we are dedicated to living these values.”

Our values provide an indispensable foundation on which to build an ethics and compliance program and to manage enterprise risks, but there is more to do. As with virtually all companies, especially those with a global footprint, the challenge is sustaining these values and driving integrity behavior from location to location and culture to culture. For example, how can we ensure that a new employee in Shanghai, China, understands the values of a company that was founded in Neenah, Wisconsin? Or how can we ensure that the values stay relevant and applicable for employees who are new to the workforce as well as those who have been at the company for decades? These questions are not unique to K-C, nor is there a single answer to them.

The key is driving accountability throughout the organization from the most senior executives to individual contributors. The approach that we took involves driving an integrity culture through company-wide performance metrics.

K-C Metrics

Each year, K-C establishes company-wide performance metrics that impact both short-term and long-term incentives. These measures include financial goals—net sales, earnings per share, and operating profit—as well as other business goals related to market performance and quality of earnings. All of these goals drive accountability for financial performance—in other words, what K-C achieves. To drive accountability for behaviors and how K-C achieves these results, we also include an integrity-related metric.

Beginning in 2015, K-C conducted an all-employee engagement survey, including seven statements/questions related to ethics and compliance. One of the statements on that survey was, “I feel comfortable reporting unethical behavior without fear of retaliation.” The ethics and compliance research literature unanimously affirms that when employees feel safe to speak up, reporting rates are higher and levels of misconduct are lower. The 2015 survey results became an important benchmark for measuring behaviors and driving our ethics and compliance program strategy.

K-C ran that survey again in 2017. With support from executive leadership, the 2017 results not only were used to measure improvements year after year and to drive work plans but also were used as a company-wide performance metric, with a direct impact on bonuses and long-term incentives for senior leaders.

By including a company-wide integrity metric on leaders’ performance scorecards, we have seen a number of early, positive results. First, it effectively raises (and reinforces) awareness across the leadership ranks that integrity is as much a business goal as any financial metric. It establishes a strong signal value, and it helps set expectations for anyone who is new to the company about what matters at K-C. Second, leaders have special responsibilities not only as role models but also as culture and tone setters. Comfort speaking up is less about an individual’s behavior and more about the environment and climate in which people work. Leaders drive that culture through their actions and words. By holding leaders accountable through performance metrics, we are better able to drive consistency across the organization. Third, by fostering and incenting a speak-up culture, we learn of problems sooner and are better able to address them. In effect, we are improving our risk-management capabilities because we can get in front of issues more easily and act proactively.

Ethics and Compliance: Continuing Accountability

When we next survey employees in 2019, we will again include a company-wide integrity performance metric. Our hope is that we continue to see improvements in our results and positive impacts on our integrity culture.

Jeff Melucci serves as senior vice president and general counsel for Kimberly-Clark Corporation in Dallas, Texas, and has direct responsibility for all legal and governmental affairs for the company. Kurt Drake serves as vice president and chief ethics and compliance officer for Kimberly-Clark Corporation.

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