NovaLearn: sales success and a weakening speak-up culture
NovaLearn is a privately held education-technology company with 600 employees and revenue growth of 40% a year. Its sales director has exceeded targets for six consecutive quarters and is credited with 30% of new business. An internal review has found that 70% of contracts signed in the last year contain an automatic renewal clause that many school customers say they did not agree to; two customers have complained to a regulator. The whistleblowing hotline has received two reports in three years, both anonymised and both closed without investigation. The annual engagement survey reports that 48% of staff agree with the statement 'I can raise a concern without fear of retaliation', down from 71% two years ago. The board reviews conduct once a year as a standing agenda item. The CEO proposes promoting the sales director to chief revenue officer, saying the renewal clause was a 'legal drafting issue'. The board chair is a personal friend of the CEO and has served for nine years.
1. What do the culture indicators suggest about NovaLearn's ethical environment? Distinguish symptoms from root causes.
Read the worked answer
Symptoms. The renewal-clause complaints, the two regulator complaints and the low hotline usage are visible symptoms. The drop in the speak-up score from 71% to 48% is also a symptom, but a leading one: it suggests the environment is becoming less safe before the full ethical consequences appear.
Root causes. The likely causes are incentive design that rewards revenue without quality or compliance, a leadership narrative that reframes a customer-consent problem as 'legal drafting', weak investigation capacity, and board oversight that touches conduct only once a year. The chair's nine-year tenure and friendship with the CEO weaken independent challenge. Two hotline reports in three years is not evidence of a healthy culture; in a 600-person sales-driven company it more likely indicates distrust of the mechanism. Closing both reports without investigation is a serious control failure.
Interpretation. The pattern is consistent with a culture where sales performance is protected and concerns are risky to raise. ISO 37000's ethical-behaviour principle expects the governing body to set the tone, require integrity, protect speak-up and hold people accountable. NovaLearn is not there. The board should treat the combination of growth pressure, low speak-up and weak investigations as a culture risk, not a series of isolated incidents.
2. Advise the board on how to investigate the renewal-clause allegations and whether the proposed promotion can proceed.
Read the worked answer
Investigation. Commission an independent investigation reporting to the board or a committee chaired by an independent director. Scope it to contract drafting, sales practices, customer consent, regulator communications and the handling of the two hotline reports. Preserve documents, interview customers and staff, and protect anyone who raises concerns. Legal privilege should be considered, but privilege must not be used to withhold findings from the board. If regulatory breaches are possible, take external legal advice on notification.
Promotion. The promotion should not proceed while the investigation is open. Promoting the sales director to chief revenue officer would signal that revenue protects people from scrutiny and would undermine the investigation. The decision should be made by the board or remuneration committee, not by the CEO alone, and the chair should recuse if their friendship creates a conflict. If the investigation substantiates customer-consent failures, the board should consider disciplinary action, clawback of incentives where available, and a review of the sales director's fitness for a senior control role.
Governance. The board should also address the chair's tenure and relationship with the CEO. A nine-year chair who is a personal friend of the CEO cannot credibly lead an investigation into the CEO's judgement. Appoint an independent director to chair the investigation and consider a lead independent director or chair succession. The board should minute its reasoning so that the decision is defensible to customers and the regulator.
3. Recommend three measurable changes to strengthen ethical culture and explain how the board should monitor them.
Read the worked answer
1. Rebalance sales incentives. Introduce a scorecard that weights customer consent, complaint rates and contract quality alongside revenue. Measure the percentage of contracts subject to independent quality review and the number of customer-consent disputes. The board should approve the scorecard and receive a quarterly report showing whether renewal clauses and complaints are falling.
2. Rebuild the speak-up system. Replace or overhaul the hotline, publish a non-retaliation policy, train managers, and report investigation outcomes in aggregate. Measure hotline reports per 100 employees, substantiation rates, time to close, and the speak-up survey score. A rise in reports can be a healthy sign if investigations are timely and fair. The board should see trends, not just counts.
3. Make conduct a standing board item. Move conduct from an annual item to a quarterly dashboard covering investigations, regulatory complaints, exit-interview themes, disciplinary cases and culture-survey results. Assign a board committee to oversee it and require management to present root-cause analysis, not just incident lists.
Monitoring. The board should set targets, for example restoring the speak-up score above 65% within 18 months and reducing consent-related complaints by half. It should also commission an independent culture review after 12 months. The chair and CEO should be assessed on culture outcomes, not only revenue. Without measurement, the changes become slogans.