Creating an ethical workplace

When it comes to managing ethical dilemmas, answers can’t always be found in codes of conduct – instead a cultural shift towards an ethical business is required. Particularly, with the rapid business globalisation over the last decade, ethical issues are becoming profoundly difficult when operating across different cultures.

People want to work for businesses they are proud of and where they can trust their managers. Businesses who are focused on building an ethical workplace value those who reflect on ethical issues, who speak up and challenge the status quo and their talent management is a transparent and objective process.

Lessons from the past

A recent survey by Deloitte has found that 94 percent of executives believe that workplace culture is important to business success, and 62 percent believe that clearly defined and communicated core values, beliefs and incentives are important. However, there is also evidence that misaligned incentives can create organisational blind spots, just like it happened in Wells Fargo’s account scandal.

Managers at Well Fargo were rewarded for the number of accounts they opened and managed – as a result, they felt driven to open accounts that customers didn’t request or approve. Misaligned incentives can also be a problem in boardrooms, as bonus payments and executive share schemes are often based on short-term metrics, instead of long-term growth.

Another scandal related to unethical business practices is Enron, one of the world’s leading energy company which collapsed in 2001. Revelations of systematic fraud and corruption across the business showed the negative consequences of unethical behaviour and the scandal has raised a question of why this behaviour occurred and become institutionalised in the first place. It turns out that difficult performance goals were the cause of the misconduct. As further academic research confirms, in many other cases giving people challenging performance goals can cause them to cheat on tasks or misrepresent performance.

Overcoming ethical challenges

Ethical lapses arise when people take risks without bearing the downside of their behaviours and they often occur where they can be most easily hidden, such as less supervised business units or understaffed teams. Business transformation initiatives can also have a negative impact on the ethical climate. By pushing too much change, too quickly and too frequently, there is an increased risk of inherent conflicts of interest and many leaders can feel poorly prepared for the dilemmas they have to face, often compelled to take decision they might later regret.

Transparency and accountability are the key elements of combating ethical business challenges. When information is shared openly across the organisation, bad dealings can be rooted out before they spread, and it’s the leader’s responsibility to shine a light on any dark corners of the businesses that might be present.

Having clear policies on equal opportunities and diversity is essential, however, to build ethics into day-to-day life, leaders need to ensure these policies are put into use and are trusted by employees. When faced with ethical dilemmas, it’s important to evaluate the situation and consult with a network of trusted peers, but the most important thing is to speak up.

Speaking up when we believe something is not right can help to resolve ethical dilemmas by remaining true to our own personal values, as well as address a business problem. At Acumen we offer leadership development programmes that give leaders at all levels practical tools to help solve real life challenges. In most cases we design the interventions specifically for each customer, but we also offer a wide range of off the shelf programmes for those who prefer this approach. For more information, please contact simon@askacumen.com.