Boards and CEO’s preside over an organisational culture that they help to create, whether by commission or omission. Corporate scandals continually highlight how organisational cultures can, and do, repeatedly encourage employees to act unethically. If we are to learn from the mistakes of the past, we will need to place more emphasis on identifying how and why organisational leaders and managers tolerate unethical behaviour when it flourishes in their midst such as exposed by Toshiba’s failure, WellsFargo, the Australian banking scandals and Volkwagen’s amidst a host of others.
To date, leaders appear to have left it to their compliance department to effectively manage culture within a framework where the ultimate goal is one of minimising risk to the bottom line. This narrow definition of active culture management leaves employees and middle managers unskilled in managing the ethical risks and tensions that they will inevitably face. These arise from the many conflicts of interest that go unmanaged in organisations as well as contextual factors such as time pressures that pit against following proper procedures; budget and cashflow pressures that rub up against maintaining honesty in accounting procedures and duty of care to customers, or, job security that compromises employee willingness to raise issues of concern. All the typical workplace challenges that remain unaddressed by codes of conduct and are instead, relegated to the “undiscussable” bucket of modern management practices.
Organisational cultures do not develop by themselves; they are spun, shaped and reinforced by either a group of enlightened executives who recognise the economic value of a ‘good’ culture or emerge by default from the behaviour that characterised individual EXCO members.
Organisational ethical infrastructures need to be built that leverage of the rich insights into how employees behave at work provided by the new behaviour sciences. This often begins by removing existing barriers including unexplored causes of employee reluctance to raise issues; middle managers inertia in managing ethical risks; compliance teams’ reluctance to provide fast and ongoing feedback on investigations or share the learning from ongoing fairlures when poor practices have been revealed. When allowed to go unchecked or unreported, poor management practices effectively inhibit employees’ confidence tin their leaders commitment to ethical behaviour. They ensure that organisations don’t learn only the consultants they bring in to clean up the mess or paper over the cracks.
The biggest barrier to organisational learning and early warnings of the seeds being sewn for inevitable public scandals is employee’s perceptions of the degree of organisational justice prevailing in their workplaces. Leaders and managers may talk about the importance of ethics and integrity but what employees ‘hear’ are examples of ‘fairness’ or lack of it. Research shows us that employee perceptions of overall fairness in the workplace strongly correlate with the incidence of misconduct or conduct risk—the more fairness, the less misconduct—and the link between fairness and willingness to report inappropriate behaviour is strong.
By building a robust ethical infrastructure and training mid and lower management levels on how to respond to issues raised and how to recognise and prevent retaliation, employee confidence in leaders’ ethical ambitions is assured. Such initiatives build organisational cultures that help protect against the kinds of reputational and financial damage so many iconic brands have recently experienced. They build ethical resilience and pride amongst employees who quickly recognise that they work for an organisation that values much more than short term results at any cost.
Addressing the ethical dimension of business essentially involves leaders creating a new organisational context where employees are forewarned and forearmed of the ethical risks inherent in their business context. They are purposely skilled to speak up and cooperate with management in ensuring an ethical and respectful culture is maintained.
There’s a strong business case for embracing ethical leadership as research shows a direct relationship between ethical behaviour, employee well-being and long-term business success. Leading brands such as Unilever, 3M, Ikea, Aldi, Patagonia, Avon and Starbucks show us how investing in training and skill development to ensure a consistent culture emerges, no matter which country they are in, also accelerates business success.
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