Ethics Reigns
From the king of the company on down, ethical standards have to be set by example.
By Sheryl Nance-Nash
If there’s ever a situation where it’s best to lead by example, it’s ethics.
In a perfect world, ethics starts at the top and trickles down to the lowest ranks. Corporate executives don’t just talk the talk; they live it.
“One mistake leaders make is believing that just because the company’s mission, values and goals are posted on the walls, employees see them, buy into them, and practice them in their daily activities,” says Karla Robertson, president of Shifting Gears, a business coaching and consulting company.
“Ethics must be lived, not just talked about. This starts at the top. If the rank and file don’t see the ethical standards that are expected of them demonstrated by their immediate supervisors and executives, it will be almost impossible to gain consistent traction on uphold-ing a company’s ethical standards,” she explains.
In fact, a recently released Deloitte & Touche USA Ethics & Workplace survey revealed that 42 percent and 36 percent of employed adults rank the behavior of management and direct supervisors, respectively, as the top two factors contributing to the promotion of an ethical workplace.
Gone are the days when ethics was considered a “soft” subject in business schools. Today, the importance of ethics is ever growing. Why? There are a number of reasons, including the need to protect a company’s brand and reputation, and the desire to “do the right thing,” according to a recent study by the American Management Association (AMA) and the Human Resource Institute. Ethics has both bottom line and moral implications.
Participants in this study believe that globalization will be the number one business driver of ethics in 10 years’ time. Globalization will not only intensify market competition, but also make establishing organization-wide ethical corporate cultures and standards more complex.
“Cross-cultural ethical issues are leadership problems as well as communication issues,” asserts Karen Lehman, senior associate at Cambridge Leadership Associates. “Executives will have to excel at asking three fundamental questions to successfully manage ethical conflicts across cultures in their organizations: What is each group’s preferred outcome? How would they express their values in the noblest terms? And what losses might they sustain if one culture’s norms predominate? A careless top-down approach to any of these three (questions) will produce resistance and contribute to ethical problems.”
And with the emergence of new laws and regulations, ethical problems and corporate behavior are evermore under the spotlight. The public, the media, shareholders and stakeholders are severely scrutinizing everything from corporate financials to business strategy.
“The ethics bar has been raised, probably permanently. The United States is undergoing a corporate governance revolution on a scale unseen since the passage of the federal securities acts and the creation of the Securities & Exchange Commission in the 1930s,” says Richard Cellini, VP of Integrity Interactive Corporation, which provides companies with web-based tools for managing and mitigating ethics and compliance risk.
Executives are under pressure to lead the ethics charge, and to ensure that accountability is truth, not fiction. Here’s what you need to know to help ensure that your staff, at all levels, is getting the ethics message.
>>>Eliminate an Unethical Breeding Ground
A 2005 PricewaterhouseCoopers survey found that reported incidents of fraud increased 22 percent over the two prior years, and 43 percent of respondents admitted to engaging in at least one unethical act over the prior year.
Given this, perhaps a good place to start in mitigating unethical behavior is to understand what fuels an unethical environment. Ninety-one percent of respondents in the Deloitte & Touche survey said they are more likely to behave ethically at work when they have a good work / life balance. Among the causes of conflict between work responsibilities and personal priorities were high levels of stress (28 percent), long hours (25 percent) and inflexible schedules (13 percent). Sixty percent of employed adults surveyed felt that job dissatisfaction is the leading reason why people make unethical decisions at work, and more than half ranked a flexible work schedule among the top three factors leading to job satisfaction, second only to compensation.
“Rewarding behavior that runs counter to the culture you’re trying to create will go a long way toward fueling an unethical environment,” Robertson contends. As an example she offers the practice of protecting the ‘sacred cows’ of the organization—the top sales people—who abuse the internal staff and use their power as a slingblade, sometimes even threatening their superiors, and putting the ends way ahead of the means to achieve goals.
Furthermore, “The conspiracy of silence is an important contributing factor in sliding down the slope. People need to blow the whistle and ask tough questions,” says James Campbell Quick, the John and Judy Goolsby Distinguished Professor at the Goolsby Leadership Academy, University of Texas, Arlington.
The environment also may be a “byproduct of leadership that finds it acceptable to ignore vivid symbols of ‘privilege’—in the parking lot, in the lunchroom, in grossly inappropriate and inconsistent compensation packages, in employee promotion practices that are inconsistent, unbalanced and unjustifiable,“ says Steve Harrison, chairman of recruiting firm Lee Hecht Harrison and author of The Manager’s Book of Decencies: How Small Gestures Build Great Companies (McGraw-Hill, 2007).
>>>Do What’s Proven Effective
Experts agree that, first and foremost, leadership should model ideal behavior. In fact, executives should share the details of their ethical struggles and how they handled them, says Dr. Gene Morrissy, a corporate psychologist with Chicago’s RHR International Company, a world leader in executive and organizational development. “Modeling is insufficient because people may not pay attention unless the executive actually draws attention to the ethical behavior,” he says.
“Be definitive about what ethical behavior looks like. Hold up people and behaviors that are ethical for recognition,” Morrissy adds. This is particularly effective if employees feel that the leader in question is approachable, making it that much more compelling for them to report ethical lapses.
Further measures include creating a code of conduct that clearly articulates the organization’s expectations and values; conducting annual ethics training sessions that promote two-way communication; implementing corporate social responsibility programs; and identifying an ombudsman, as well as an anonymous ethics hotline.
Put technology to good use, Cellini adds. “Online ethics training and communication formats have proven to be highly engaging, effective and efficient from the employer’s perspective and that of the employee. More traditional formats (paper-based memoranda and live-training sessions) have proven to be boring, less effective and more expensive to deliver,” he says.
According to Harrison, “It’s also critical that compliance and the ethics officer have clout, or at least access to the top of the house.”
One of the best mechanisms for ensuring high rates of compliance is periodic, unannounced reviews. “When I was working for the CFO of a large industrial enterprise in San Antonio, we sent an accounting and finance manager to federal prison for skimming money. We found the failure during an unannounced spot check,” says Quick.
Remember, though, enforcement must be consistent. “Sanctions should be enforced uniformly from the CEO on down. Otherwise, there will always lurk in the shadows the prospect of real or rumored ethical violations by those putatively responsible for enforcing it on others,” says Jim Stroup, author of Managing Leadership: Toward a New and Usable Understanding of What Leadership Really is—and How to Manage it (iUniverse, 2004).
>>>Navigate the Landmines
The ethics landscape is strewn with opportunities to make costly mistakes. For starters, don’t label staff members who raise tough questions as troublemakers. “Support them and give them cover. Think of them as gifts sent your way so that you can learn what you need to learn,” says Lehman. “Raising questions is their way of exercising leadership on the organization’s behalf.”
Next, track the effectiveness of ethics-related training and communications programs, and publish the results on a regular basis, Cellini advises.
When communicating with staff, “Be specific. Leaders tend to be the types who speak in metaphors. You don’t want your ethical standards to be open for interpretation. Also make sure that what you say has teeth. If anyone breeches the standards of ethics there must be consequences,” says Robertson.
Don’t lose sight of the fact that all eyes are on you. “Everybody’s watching you, looking up to you, emulating you, learning from you, imitating you,” says Harrison.
Lastly, don’t think ethics can take a back seat to all other initiatives, says Robertson. “Your ethics should be the framework which anchors your business decisions. How you sell, hire, handle finances, deal with customers, create product offerings, market…all of it. Use your ethical standards as a barometer to make decisions you’re not sure of. Ask: Does this idea or decision uphold our ethical stance? If not, keep working on it.”
The onus really is on you, the executive. Says Lehman, “Own up to the problems in your company, see how you contributed and address ethical issues early. If you don’t, you’ll be swinging from your golden parachutes and watching your successors clean house.”