You only have to have watched the news in recent years to realise the importance of being ethical in business. Corporate wrongdoing and scandals can wipe millions off the value of businesses as well as wreck reputations that have taken decades to build.
Any boss who still doubts the importance of prioritising building an ethical culture should note that customers and employees are increasingly choosing ethical companies to do business with and work for.
In the 2010 'Ethics in the Workplace' Survey' the majority of respondents said that they believed it was important to have an ethical culture. But what exactly is an ethical organisational culture and how do you build one.
Ethical organisations are characterised by leaders who role model integrity, open and honest communication, an atmosphere where people speak up about wrongdoing and a pride in high ethical standards.
Despite the evidence that it is culture that counts leaders usually try to build ethical cultures by putting the emphasis on compliance, procedures, rules and regulations. It is easier to introduce new regulations and processes than it is to address the tricky business of culture change but it is the latter makes for an ethical organisation.
The question is how do you create an ethical organisational culture? Here are the essentials:
1. The right leader. An organisation can never be ethical unless its bosses role model ethical behaviour and set the standards. They have to be clear about their values and demonstrate them in actions as well as words.
2. A clear purpose and strategy. Harvard Business School professor Michael Beer researched the difference between companies that achieve high performance levels over long time periods and those that fail when they reach a certain size. He analysed the companies that failed in the 2009 financial crash and suggested three core reasons; the companies lacked a higher purpose (they were focused on short term gains not long term value), they did not have a clear strategy and they badly mismanaged risk.
3. A focus on doing the right thing. For an ethical culture to prevail, employees also need to feel responsible and accountable for their actions. In the 'Ethics in the Workplace' survey, 70% of respondents believed that it is important that employees feel responsible for and committed to ethical practice. However only just over 40% believed that employees in their organisations actually did feel responsible. Without a sense of personal accountability people can blame their boss, the organisation or someone else. Creating an environment where people are expected to stand up for what they believe is right and take responsibility is crucial. Without it there can be no ethical culture as small and large daily wrongdoings will go unchecked. It is the regular employees who know what is going on. Bad things are hidden from management so organisations need to create a strong culture of speaking up and standing up for what is right.
4. Hiring the right people. Hiring people with the right values as well as the right skills and knowledge is important. Interviews and assessment processes should explore what people have done in certain situations as well as asking them about their rationale for their actions.
5. Firing the wrong people. If you don't fire people for wrongdoing you send a message that behaving ethically does not matter all that much. Actions speak louder than words and people become very cynical if they see senior managers espouse one thing and do another.
6. Run ethical training courses. It can be difficult to spot an ethical situation in the first place, let alone knowing the best way to tackle it. All employees need to have the knowledge and skills to identify and tackle ethical situations as well as the 'permission' to raise concerns when they have them. Running mandatory ethics training for everyone in the company signals that ethics is a high priority.
7. 'Reward' people for doing the right thing and challenge them when they do the wrong thing. It can take a lot of courage to raise concerns about the actions of colleagues. People need to be encouraged to do so by being rewarded in the form of appreciation from management including a positive mark in their performance appraisal. People often don't challenge wrongdoing for fear of ostracism from colleagues and management. They need to be actively encouraged to do so.
8. Tolerate mistakes (but not when they are made repeatedly). If people are afraid to make mistakes they will either always 'play it safe' (which is not always good for the business) or cover any errors up for fear of 'punishment'. One company gives an annual award for the best mistake made last year - it is the mistake from which the corporation learned most. It comes back to people feeling like they can speak up without fear of reprisal.
Notice that having a code of conduct is not on the list. It is not a bad thing to have one. But having one does not guarantee an ethical culture. The problems with codes of conduct are two-fold: they cannot possibly cover all situations and eventualities and usually ethical issues are not as simple as saying 'this is the right answer'. Certainly you can cover basic rules and standards in a code of conduct but there is no substitute for running training courses to help people to understand how to identify an ethical issue and how to go about making decisions as to what to do. The conversations that take place in such workshops will take you much further towards developing an ethical culture than the best code of conduct in the world will.
About this Author
Sally Bibb is an expert on ethics, trust and generations in the workplace. She is an author, speaker, former director at The Economist Group and co-founder and director of the consultancy talentsmoothie. She can be contacted at sallybibb@talentsmoothie.com You can view Sally's books and more articles at http://www.sallybibb.com
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