Tone At The Top

 The Tone at the Top refers to management’s leadership, commitment and
enforcement
of openness, integrity, honesty, fairness, and ethical behavior in the
organization. It also refers to the ethical atmosphere that is created, and sustained,
by an organization’s leaders. It plays a pivotal role in the control environment of the
organization and is set and reinforced by all levels of management. From there, it
cascades throughout the organization affecting all employees.
This process begins with the definition and institutionalization of the expected
behaviors within the organization. Management should clearly communicate its
ethics, values, and expectations throughout the area they manage, starting at the top
and extending throughout the entire organization. These values and expectations
can be communicated formally through codes of conduct, policies, staff meetings,
memos, e-mails or informally during their daily activities. These elements
play an
important role in shaping and building the organizational culture.
Congruence between words and actions is pivotal to ensure consistency and
prevent the dilution or distortion of the tone set at the top. Management, at all
levels, should lead by example. Similarly, if senior manager’s words and actions
are similar, it is more likely that employees will hold and practice the same values.
The concept of Tone at the Top may then be complemented with the concept of
Tone from the Top.
This process begins when employees are hired and should be part of the
onboarding process. In some organizations, onboarding is well-organized, going
beyond the signing of a myriad forms, and including sessions covering the organization’s
history, values, leadership style, expectations for proper conduct, recourse if
unacceptable behaviors are witnessed in the organization, avenues for socialization
with colleagues, and promotion and career advancement practices.
Another important element related to the tone at the top is the creation and
support of mechanisms to train employees. Some industries require mandatory

training, such as ethics, sexual harassment, and safety classes. Other topics that
support the creation of a strong tone within organizations include team building,
conflict resolution, communications, and leadership training. These subjects
increase employees’ capacity to work effectively in pursuit of the organization’s
mission,
vision, and values.
◾◾ Teamwork: It enhances the bond among employees, who will be better
equipped to support each other, promote positive peer pressure, treat each
other with mutual respect, and acquire a sense of belonging.
◾◾ Conflict Resolution: This training prepares employees to handle incidents
responsibly and in accordance with expectations.
◾◾ Critical Thinking and Problem Solving: While these programs typically focus
on ways to think in a disciplined way, analyze problems, foster creativity, and
implement innovative ideas in a practical way, what is sometimes overlooked
is that this type of training also promotes transparency, fact-based decisionmaking,
planning, and accountability. All of these attributes are essential for
a healthy organizational culture.
◾◾ Communication: Effective verbal and written communications are essential
to promote better relationships and reduce barriers among employees, and
with vendors, suppliers, and other stakeholders. This will help reduce confusion,
misunderstandings, and other operational issues.
◾◾ Leadership and Management: Organizations perpetuate the existing culture,
or transform it if necessary, through the actions of their leaders. Leadership
training helps organizations identify, develop, and place capable leaders in
positions where they can influence their organizations positively. Developing
leadership capacity is essential for the organization’s cultural sustainability
and the protection of the proper tone and culture.
Organizations should provide employees who witness unethical behaviors a mechanism
to report such behavior. This typically includes an ethics or whistleblowing
hotline. Management should explain to employees that they have an obligation to
report unethical behavior and should reassure them so they feel safe from retaliation
while doing so.
The tone set within an organization will have a cascading effect on its employees.
If the tone promotes ethics, integrity, and fair treatment of others, employees will be
more likely to support and replicate these same values. However, if the organization’s
leaders do not appear interested in ethics, focusing exclusively on revenues, profits
and market share (i.e., the bottom line), employees will be more likely to commit
fraud because they will assume that ethical conduct is not a priority within the
organization. Employees follow their leaders, so if these leaders pay scant attention
to, discuss, measure, promote, or support ethical conduct, employees won’t either.
Given the number of financial shenanigans who have destroyed organizations,
wiped out stockholder investments and squandered taxpayer resources, it is essential

that leaders send the message that success is measured as much by what is achieved
as by how it is achieved. In the extreme cases, management’s focus, rewards and
lack of disciplinary measures could result in fraud being seen as acceptable as long
as it makes the organization profitable.
Summary
1. Tone at the Top describes the behavioral, performance, and ethical expectations
set at the highest levels of the organization. The board and senior
management
set the tone at the top of the organization.
2. The term Tone from the Top is important and while the difference appears
to be subtle, it is significant because it implies that the tone set at the tone
cascades downward throughout the entire organization without dilution,
distortion,
or gaps. In some organizations the messages and example set at
the tone are not replicated equally throughout the enterprise.
3. Internal auditors are often tasked with reviewing the Tone at the Top in their
organizations, because it impacts many aspects of the control environment
and the performance of internal controls.