How Do You Build an Ethical Organization? Begin with an Ethical Culture

Build ethical organization

It is unfortunate how common corporate immorality, deception, and abuse can be. These unethical behaviors dent customers’ trust, destroy workforce morale, and damage society overall. Managing unethical behavior is a problem that organizations have been aiming to combat for a long time.

One of the first tactics used by organizations to eliminate or mitigate recurring incidents of unethical behavior is by appointing ethics and compliance officers. The essence of this role is to assess the ethical implications of every initiative, recommending ethical policies, and consistently reporting the information to the concerned authorities. However, merely the creation of this position was insufficient in controlling corporate fraudulent practices.

In order to effectively weed out corruption and other malpractices, organizations need to develop strong values and business ethics in their people. Business ethics signify the norms of the society—which evolve with time—and govern individuals’ conduct through a sense of what’s right and what’s wrong, ingrained by parents, community, tradition, and laws. Derived from the organizational vision, norms, or relevant laws, professional ethics examine the moral beliefs, values, and actions of the individuals as well as the entire organization.

The business ethics practices have now expanded to include social sustainability that focuses on issues related to human resources—e.g., worker's rights, working conditions, and child labor—and documentation of business' compliance with national and international standards. Most companies have set up compliance programs to check unethical behavior and malpractices.

The best way to prevent any unethical behavior within an organization and, in fact, to build an Ethical Organization is by fostering an Ethical Culture. This is achieved by making ethics part of employee beliefs and incorporating those into the organizational mission, vision, and overall objectives. The Corporate Culture of the organization governs the intrinsic values and behaviors of its employees. Organizations need to address 4 critical elements, which form the pillars of an Ethical Culture:

  • Values
  • Thoughts
  • Incentives
  • Norms
How to build ethical organization

Now, let’s briefly discuss these 4 elements to an Ethical Culture.

Values

Organizations thrive on clearly defined ideologies, shared mission, vision, and values. These principles influence people and their behavior. Mission statements are critical in driving ethics across the different layers of the organization. In order for the organizational mission statement to be effective and ethics driven, it needs to be straightforward, concise, workable, relevant, and supportive of the critical operations and business processes. Clearly defined mission statements help people stay focused on the organizational values, implement these values, and measure the impact utilizing specific metrics to achieve their organizational mission.

Thoughts

Our actions are directed by thoughts and impulses that are affected by our environment and circumstances. The conscience of people in an organization helps them distinguish what’s right and what’s wrong and prevents them from carrying out any ethical slip-ups. An Ethical Culture triggers the people to deliberate on the righteousness of every action they consider taking. With ethics and principles on top of mind, people are more likely to exhibit sound ethical behavior.

Incentives

Lining up incentives with ethical results solves most of the ethical problems in companies since people are typically likely to act on what’s rewarded the most. Paying people for demonstrating ethical behavior appears to be easy, but warrants careful deliberation and planning prior to implementation. Money is not the only factor that buys employee motivation, happiness, engagement, or loyalty. For some people, meaningful work that helps them make a positive contribution, feel respected, and appreciated is a significant incentive. Therefore, rewards must include non-monetary benefits to bring positive changes in people’s behavior.

Norms

Almost all organizations give due emphasis to setting the tone at the top level when establishing ethical standards, but what they lack is setting the tone in the middle layer. The middle layer is more critical in influencing employee behavior. If this layer includes people with substandard morals and values, then it is not easy to inculcate ethical behaviors in the lower ranks, irrespective of how the senior leadership behaves. To enable an ethical culture, leaders need to focus on nurturing people who consistently demonstrate commendable behavior and are able to become role models and change agents.

Interested in learning more about Ethical Culture and how to implement it in your organization? You can download an editable PowerPoint on Ethical Organization: Ethical Culture here on the Flevy documents marketplace.


David Tang is an entrepreneur and management consultant. His current focus is Flevy, the marketplace for premium business documents and FlevyPro, a subscription service for consulting frameworks and tools. Prior to Flevy, David worked as a management consultant for 8 years. His consulting experience spans corporate strategy, marketing, operations, change management, and IT; both domestic and international (EMEA + APAC). Industries served include Media & Entertainment, Telecommunications, Consumer Products/Retail, High-Tech, Life Sciences, and Business Services. You can connect with David here on LinkedIn.

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