Uncategorized Archives - Page 3 of 5 - Business Ethics Consultants

The Benefits of Ethical Leadership

Traditional business leadership models only pay lip service to managing the social context of the business. In doing so, today’s business leaders may be missing a golden opportunity to ‘future fit’ their companies. There is a chance to leverage technologies to create workplaces that meet the social needs of employees. This focus on wellbeing encourages staff to thrive in the workplace.

New Ways of Thinking Will Propel Business Into the Future

Many recognise that today’s mainstream business models are out of sync with technology innovations. These disruptors have dissolved corporate walls and knitted suppliers and consumers into a sharing economy. Just think of platforms such as Uber, Airbnb, or Crowdfunding.

Old ways of thinking and doing are sabotaging the business success of many companies. There is a new ethical leadership model required that will be vastly different from those gone before. A huge change is needed to access and leverage employee discretionary effort. Specifically, the new model must put employees first, and output is a by-product of their engagement levels.

Despite annual employee engagement surveys, leaders hold back from actively designing their culture. Too often, companies don’t put their values into practice, and cultures remain flawed through lack of consistency.

The New Ethical Leadership Model

The new ethical leadership model involves three specific activities:

Identify the social purpose of the business beyond shareholder needs. This way, employees can feel good about the enterprises they work for. They can also find their place in the larger picture of how business can be a force for social good.
Purposely design a culture where you eliminate known risks. Forearm and forward employees of the ethical challenges they will inevitably face.
Hold leaders accountable to ensure their employees are fully engaged. To date, this has been a critical leadership skill that has gone unmeasured. Gallup revealed in 2013 that this failure has meant that only 13% of the global workforce is engaged at work. That’s because the cultures they work in do not meet their social needs. Since it is now known what motivates employees, ethical leaders need to leverage this. They must design a culture that enables employees to contribute their skills and collaborate.

Thankfully, ethical leadership is very different from leadership as usual. Leaders may fail to step up to the new ethical leadership model. If that happens, you can expect new employees to continue to vote with their feet and leave their employers promptly in search of more fulfilling work.

Please fill out the form below to get in touch regarding your organisation’s needs and we will get back to you as soon as possible. You can also call us on 0430 889 850 or email us directly at [email protected].

Behaviour Ethics: Turning Integrity Inside Out

Integrity has become the new conversation piece amongst leaders. It is a more acceptable construct than the traditional reference to business ethics. Many people hold the often unstated assumption that ethics in business is an oxymoron.

Integrity Requires a Shift

With this swing to an integrity focus, companies have the chance to redefine where they should start. If they are serious about building integrity into their business, a paradigm shift is required.

Businesses must move away from the moral philosophers’ fixation with personal character. They must begin to research the science of behavioural economics. This information will allow them to see that all people are emotional beings, even at work. People can respond in irrational ways to the contexts in which they find themselves.

It starts with consciously designing the context and culture. Companies must begin to recognise that people may behave in ways they don’t mean to. They need to forewarn and forearm their employees to protect against the pressures that will occur. They must hold managers to account for how they create unconscious ‘frames’ for employees. An example of this is Wells Fargo’s impossible target of “8 financial products per household”. In this scenario, jobs appeared to rely on sales targets. Businesses must redefine traditional operating systems to avoid repeating the mistakes of the past.

What Behaviour Ethics Tells Us

The science of behaviour ethics shows that people can be very poor decision-makers. People screen out elements of information all the time. That leaves them prone to decision-making biases of which they are unaware. Slippery slopes lead to ‘bounded ethicality’, not just in their own behaviour, but noticing that of others.

Motivated blindness also contributes to our inattention to the unethical behaviour of others. The science of behaviour ethics shows us that emotions drive our actions. Humans are not as rational as they consider themselves. Therefore, giving people more information will not always change behaviour. Memories of behaviour are not reliable, and others can unconsciously change our behaviour. Context is everything in trying to make sense of the way people act.

Integrity in Context

Each business’s context shapes definitions of integrity. However, the underlying principle remains the same. Integrity in business means the ability to consistently act in line with company values. Many companies today are entirely new to embracing the full scope of the integrity challenge. Integrity begins on the inside of the business. Enterprises can only build it on the day-to-day commitment to treating employees with respect and fairness.

People are not resources or numbers that you can manipulate according to share price fluctuations. Neither are they human capital to be invested or divested at the whim of the company. Behavioural scientists have known for years that high trust businesses are higher performing. Yet, there are still too few companies that leverage the full capacity of their people. The same commitment to human respect is then extending outside towards customers, suppliers and stakeholders.

Neither does a commitment to integrity start in the communications department. It is set at the leadership table. Leaders come to recognise that the company’s social context shapes all behaviour. They realise it is their job to manage the internal culture. That way, they can better respond to the changing external context. Leaders build company integrity by holding the line, especially when the going gets tough.

Ethical leadership means that leaders set boundaries around values-based leadership, quality services, and corporate responsibility. These boundaries are adhered to so that their employees can feel safe knowing their leaders walk the talk. It is the sum of behaviours that enables a company to achieve its strategy and objectives, or not.

Culture, not corporate policies, drives behaviour. Leaders can only build and maintain a culture if they are committed to measuring and managing their cultures. Measuring culture enables leaders to fine-tune policies and procedures. That way, they can shape and design the cultures they want.

If you would like to explore further the research into behaviour ethics, take a look at EthicalSystems.org.

RISKY BUSINESS – Or Business Ethics by Another Name?

Words are often co-opted into our language. In other words, they become trendy, and people start to use them in place of words that have become diluted. Take ‘ethics’, for example. Often considered a grey area, it is still a vital idea in business. However, the definition of ethics is continually changing.

Changing Focus

Recently, there has been a trend towards using integrity and risk as more effective descriptors of managing an ethical culture. Risk is evolving as a more hard-edged term. This shift is possibly because boards are being held more accountable for the cultures that expose their companies to risk. Those risks can be both financial and non-financial. Regulators, such as APRA, warn businesses about risk culture. They are also beginning to signal that leaders and cultures can shape behaviour in the workplace. These factors may be even more influential than the people in that business.

Disregarding someone as a ‘bad apple’ is no longer an excuse for bad behaviour. Instead, there is more of a focus on ‘the barrel’. That is, how leaders are shaping culture, which in turn is shaping employee behaviour. Risk management is a category that will appear in many annual reports. By contrast, risk culture is only just starting to appear in those of progressive companies. More than just industries with negative reputations are taking it on now, with an uptake in the financial services industry as well. This is particularly pertinent in Australia where reputational damage is frequently occurring in our banking and insurance industries.

The Importance of Culture

According to a Gallup poll, today’s leaders have created the most disengaged, siloed, and disconnected workforce in history. How? By failing to manage company culture. So, it’s excellent that regulators are finally asking leaders to be accountable for purposely designing their company cultures. They are requesting that leaders manage known risks beyond the bottom line. As social scientists have argued for a long time, policies only signal intent but culture shapes decisions. Culture is what dictates behaviour on a daily basis. Risky behaviour emerges not because of who people are but despite who they are.

This search for integrity and conduct risk dashboards is likely to become even more intense. The new science of behavioural economics is shedding more light on how cultures corrupt individuals. Whether leaders like it or not, both character and competency define leadership. The number one demand of leaders today is to protect the enterprise and stakeholders. They can achieve this by building engaging workplace cultures that enable employees to have a sense of purpose and be encouraged to contribute their talents.

What Research Says

There is an upside too. Field research from the new sciences such as that of EthicalSystems.org can tell us a lot. It shows how leaders can design the cultures they want. There is field research to prove that leaders can improve workplace performance by creating cultures of choice. These businesses outperform those that are not intentional about culture on a whole range of indicators. These include risk, employee satisfaction, and even measurable bottom-line benefits. The contribution of culture to performance is substantial and quantifiable.

James Heskett’s research demonstrates how an effective culture can account for 20-30% of the differential in performance. That is when compared with ‘culturally unremarkable’ competitors.

The elusive search for trust can be built on cultural initiatives. Deloitte found that 81% of respondents working for companies with a strong sense of purpose said that stakeholders trusted their leadership team.

And lastly, companies can enhance public reputation. Deloitte and Glassdoor recently completed a combined study. The findings were that employees rate culture and values over salary or benefits. Culture and values are 4.9 times more predictive of a positive recommendation than salary or benefits. Millennials look behind the brand, behind the advertising and even behind the CEO to explore what it’s truly like to work there. For them, culture is more important than size or brand recognition. Increasing numbers of employees are looking for job satisfaction and recognition rather than rewards. As the majority of employees are either casualised or ‘gig workers’, choice is more prevalent than career.

Risk has to be re-classified as doing business ethically to protect the organisation. Build a healthy culture to risk-proof the enterprise. Risk and integrity are more essentially about focusing on how you do business rather than what business you do.

Workplace Ethics: Whistleblowing – Too Little Too Late?

There is a major challenge facing companies today. It is how to get people to raise issues of concern because they recognise it’s good for them. The simple answer is – make it safe for them to do so. The harder thing to do is to create and embed speaking up as the hallmark of a trust culture. In such a culture, raising issues is seen to benefit the whole enterprise, and so is the natural thing to do.

The Issues With Whistleblowing

Instead, people must resort to whistleblowing. Yet, companies continue to poorly design and embed whistleblowing systems in the culture. This issue makes them the last resort for desperate employees witnessing systemic corruption. Regulators insist whistleblowing is necessary because of poor cultural management practices. They consider it an essential part of good risk management practice today.

Lack of Communication

Where there is no culture of openness, managers fail to tune into and respond to ongoing employee feedback. EY’s 2017 Asia-Pacific Fraud Survey had some interesting findings on the subject. 49% of respondents think that senior management would ignore unethical behaviour to achieve targets. 51% of senior management respondents feel under pressure to withhold information about misconduct. There is an absence of effective two-way communication between those at the top and bottom. This flaw creates an ongoing need for whistleblowing systems. Employees find themselves resorting to whistleblowing out of desperation. Instead, it should be out of genuine concern to safeguard business standards for all.

No Intention to Manage Culture

Oddly, the reasons why whistleblowing systems fail are the same reasons they need to exist. They fail because of the absence of leaders’ intent to manage culture. This attitude allows barriers to a speak-up culture prevail. Barriers include flawed power dynamics, information silos, low employee engagement, and unknown risks. Unethical behaviour emerges and flourishes little by little. That is part of why whistleblowing systems fail – leaders don’t seem to understand this. Behaviour becomes normalised.

At the core, businesses are political entities with uneven power and information biases. They encourage politics and self-serving dispositions. They can be full of people with low emotional intelligence, jostling egos, and a tendency to bully. Sometimes, they contain people with some of the most creative reasons for self-interested actions.

Many companies do not have an intentional workplace culture. In this type of culture, behaviour standards are upheld, and employees are encouraged to speak up. Without that, companies can veer towards a low trust, power-based culture. In this culture, employees protect themselves and don’t speak out about unethical behaviour.

Lack of Information

Whistleblowing systems also fail because employees lack information about how they work. They may not understand why the business designed it in the first place. That reasoning is often to ensure middle managers play their roles in building a culture of integrity. In other words, to align with the code of conduct – not for employees’ best interests.

EY’s 2017 Asia-Pacific Fraud Survey had some insights on this as well. 1 in 4 respondents say their colleagues are aware but do not report fraudulent activities for one reason. That reason is that they are not confident the company will protect them if they report it. Perhaps most alarming for corporate leaders is the next finding. 1 in 5 respondents would rather take a whistleblower report directly to law enforcement.

Separation of Mechanisms

Typically, compliance departments manage the whistleblowing hotline. The focus is often on compliance as opposed to engagement and defence. This separation of speak up mechanisms makes it ‘somebody else’s problem’. HR functions can safely lock that away and tick that box. It only comes up again when they must manage someone out of the organisation. Sadly, all too often, it’s the whistleblower themselves.

Systems are not Reviewed

A dominant ‘too busy’ mindset prevents ongoing reflection on systems. These systems may have become outdated, broken, or dysfunctional. Much less do people look into innovation in this area. So, staff members are deprived of opportunities to co-design the helpline system. The same system where they can offer early warnings of people, processes, or systems under stress.

How Behaviour Ethics Can Help

On the positive side, behaviour ethics provides leaders with the tools to forewarn and forearm their employees. That way, they can be alert to the gradual nature of unethical patterns of behaviour. They will know how to spot early warning signals that they may be on the slippery slope. Drawing on the field research encourages a different approach to ethics training. This approach does not depend on the existence of moral compasses. Instead, it seeks to build the required set of social skills employees need to navigate the politics of modern workplaces.

Information and data are increasingly beyond the control of most businesses. In an age of hyper-connectivity, isn’t it time to get your own house in order? Companies need to build a speak-up culture from the ground floor up. It begins with skilling employees to face the challenges they will inevitably face. Build the right attitudes at every level to enable issues and concerns to be heard. It requires leaders to motivate, reward, and measure things that matter. It requires a purposely designed culture that makes it easy for its members to do the right thing. Business pressures necessitate that this becomes a conscious choice.

Depending on whistleblowing is too little, too late. Companies must value their people, reputations, and the wellbeing of the societies in which they operate. To do this, they need to be measuring the strength of feedback systems on culture. Then they need to act on it so that a speak-up culture can offset the need for anonymous reports of bad behaviour. Build a speak-up culture, a high trust culture, a culture that rewards people for highlighting threats. Only then, you may begin to build a culture of working towards excellence together. Rid yourself of a culture of winners and losers where retaliation, isolation, and distrust prevail.

Conduct Risk: The Moral Compass – An Anachronism in a Digitally-Connected World

Why do the banks, and so many others, continue to get publicly scrutinised for unacceptable behaviour? Why do they fail to satisfy the demands of the stakeholder economy and continue to get it wrong? Is it because they confuse ethics with morality?

The Definition of Morals and Ethics

Morals are about how you define for yourself what is right and wrong in a personal realm. Time and time again, ‘good’ people doing ‘bad’ things still believe themselves to be good people. It’s simply no longer good enough. You are what you do, not what you think. Actions are what people judge you on, not your intentions but your behaviour.

Business ethics defines how the company holds firm to a set of principles that are above the law and beyond the minimum. Statements of business ethics should be clearly understood and reinforced through how performance is measured. Ethics is the cultural vein that carries the lifeblood of the organisation. If you prioritise this, you ensure not that you get it right but that you don’t get it wrong.

Where Many Get It Wrong

Sadly, for many businesses, ethics continues to be a grey area and a discretionary investment. Typically, companies assume that most people want to do the right thing. However, behaviour science shows us that this is not where leaders should be starting. The science suggests that most people are not as ethical as they think they are. They will find themselves compromising their values in certain contexts, or under specific pressures. They may even be unaware of this slippage.

Often, people operate on auto-pilot and simply go on what has gone before. They copy their peers to fit in and take short cuts because they assume they know what the context requires. This belief flies in the face of the obvious – that the world is continually changing. Most people are powerless to shape the contexts in which they find themselves. At work, people convince themselves that the end justifies the means. They do what the company needs them to do to make the figures. The customer can come first if that doesn’t get in the way of making targets and employees think that it’ll all work out in the long run.

Leaders who continue to rely on the idea of a moral compass may suffer from ‘bounded ethicality’. They fail to adopt a broader range of tools that would help them identify and manage the ethical issues in their business contexts.

How Behavioural Science Can Help

Clearly, what is needed is a paradigm shift away from the moral philosopher’s focus on individual character. Businesses must move towards an understanding of the science of behaviour. This science offers the premise that all people are all emotional beings. People respond in irrational ways to the company contexts in which they find themselves.

Business ethics are essentially about the integrity of the company. Risk management needs to be re-classified as doing business ethically. This shift in focus protects the business by building a healthy culture that can risk-proof the enterprise. This new type of accountability shifts the focus away from individual character strengths or weakness. Instead, a spotlight is placed on the actions leaders take to design the culture.

Global regulators, including APRA, are sending a strong warning message to boards. They want to highlight that behaviour in the workplace is a systemic source of financial, social, and environmental risk. Regulators expect boards to purposely manage the types of behaviour they promote.

Create an Excellent Culture to Manage Risk

A consistent culture underpins business success. To see this in action, you can look to leading brands such as GE, 3M, Patagonia, Avon, or Starbucks. They prove that it is essential to skill employees to respond to the contextual pressures they will face. Leaders play a significant role by not tolerating poor role modelling from the top.

No matter which country they are in, the culture is the same. The leader’s role is to create a context where employees are forewarned about contextual pressures. That way, they can better respond to these in ways that do not comprise ethical standards.

Australia’s current cultural perspective of ethics as up to the individual sets business standards too low. This attitude keeps board focus on compliance rather than addressing ethical risks.

Cultural and behavioural change is not an easy task. Leaders must empower people to think, feel, and act in a way that builds a culture of integrity and respect. To get there, they must offer regular training, performance management, and communicate well. Enabling systems and processes and targeted engagement can also work wonders.

It’s time to abandon reliance on moral compasses. No longer can companies hide behind the notion of grey area. Employees know what ethical behaviour looks like, customers know it, regulators know it. Social scientists have known it for over 100 years.

It’s time to sacrifice some finance people from the board and replace them with social scientists. Then maybe leaders will see the next ethical crisis coming before it decimates a hard-won reputation!

Code of Conduct – A Barrier to Good Conduct?

Gallup reports that only 15% of employees are engaged at work today. Is your poorly designed code of conduct the cause of this disengagement?

How Relevant is Your Code of Conduct?

If you were to ask everyone in your company, “Who has read the code of conduct?” how many people would say yes? The majority? A few? Hardly anyone? Our guess is hardly anyone. Yet, the code of conduct is possibly the most critical document governing your business. It establishes the company’s relationship with its employees and safeguards its reputation and social licence to operate.

For most organisations, the code of conduct also lays out the legal obligations between parties. This is especially true in the public sector and the larger not-for-profits. It sets out the framework for how people can expect others to treat them at work and the protections for employees in the event of a breach.

Experience suggests that codes of conduct often have little meaning for employees. They don’t understand its contents or how to apply its directions. They simply aren’t motivated to use it as it wasn’t designed with their needs in mind.

Typically, legal departments create the code of conduct. They often write it in ‘legalese’ – the complex version of English that lawyers need to use to make sure that they can defend their documents in a court of law. Many employees don’t understand legalese, nor its full implications. And yet, it’s presented to them on their first day in the workplace as a fait accompli, and they’re told just to sign it.

Most often, staff sign the document despite the company not offering them the chance to read it first. No one mentions the code again until they do something wrong. Often its sole purpose is to reprimand employees for poor behaviour.

Is There a Different Way?

The first step in creating an excellent code of conduct is to identify what the objectives of it are. You must also decide who it is designed for before you can put pen to paper. Is it there to serve the legal department, the HR department, or the needs of employees? If its primary objective is to help employees know what the company expects of them, then you need to start with their needs in mind.

What are the needs of the employee in understanding why their company has a code of conduct? What about the code of ethics? How best can the leaders of the organisation design a code’s content so that it resonates with employees’ needs? You need to create one that you can deliver to suit many different learning styles. It must also be suitable for the differing levels of comprehension that exist throughout most workforces.

Different levels of staff have different accountabilities. They require various content styles and nuances while still being true to the spirit of the code. Each group of staff also requires examples of specific behaviours that represent the company’s standards.

For one organisation, you can have several versions of the training content designed. Each will support the code of conduct’s intent for various staff stakeholders and their unique spheres of influence. Each workshop could be highly interactive, based on authentic workplace challenges that resonate with people in different occupations. Choose examples that work for many levels and those from different demographic backgrounds. Design a code of conduct training to match employees’ needs. To engage your staff, you must do it with this level of detailed nuance. Authenticity and relevance to them and their situation is the first barrier that you must surmount.

So, does your code guide conduct, shape the context in which people work, and give them a sense of purpose? Or, does it just sit on their employee file as a ticking performance time bomb?

This piece is an extract from a forthcoming book on how to make your code work, rewritten for context.