Good Ethics Are Good for Business 19:13, July 28, 2016

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Good Ethics Are Good for Business

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A 2015 Gallup poll found business executives at the bottom of professions when it comes to people’s perception of workplace ethics. They have company: just below them are lobbyists, telemarketers, and members of Congress.

It’s hardly surprising. Corporate scandals headlined 2015, from Volkswagen cheating on emissions tests to FIFA officials being indicted for racketeering and fraud. This dismal view of corporate ethics suggests that companies need to do more to burnish their images and to forge a stronger culture of ethics in the workplace.

Acting ethically is its own reward. But there are also some good business reasons to promote ethical behavior. Scandals drive away consumers — there are signs that Volkswagen is already losing customers in Europe — and they may also affect a business’s ability to attract and retain top talent.

According to the 2016 Deloitte Millennial Survey, millennials place a high-value on workplace ethics and responsibility. 87% of millennials worldwide agreed that “the success of a business should be measured in terms of more than just its financial performance.” 25% of millennials thought ethics, trust, integrity, and honesty were the most important values a business should follow if it is to have long-term success. Only about 5% thought focusing on profit would propel organizations to long-term success.

Millennials are now the largest living generation and will make up an increasingly large part of the workforce. If companies want to retain a competitive workforce, it’s important for them to make sure their corporate values line up with their employees’ values  — especially since the Deloitte survey also suggests Millennials are particularly prone to switching jobs and pursuing organizations that match their personal values.

Good Ethics Are about Good Decisions

But there is also another good reason for business’s to nurture ethics in the workplace: good ethics are about making good decisions, and good decisions are good for business.

Research suggests that poor decision making might be the root of many ethical lapses from the everyday to the Enron. As researchers David Messick and Max Bazerman argue, “the causes of poor ethical decisions are often the same as the causes of poor decisions generally.”

What Messick and Bazerman’s research shows is that unethical business decisions are not necessarily the result of greed or the pursuit of profit (as is commonly assumed). Rather, unethical business decisions result from, in Messick and Bazerman’s words, “psychological tendencies that foster poor decision making.”

Thus, an organization with a robust and effective ethics program will be encouraging a climate where employees can make better decisions in general. This conclusion shouldn’t be that surprising. After all, the temptations and pressures that might push us to pursue a short-term goal over the organization’s long-term health are the same as those that might push us to choose the easy but unethical path over the hard but ethical one.

The Fear and Futility Factors: Ethics and Communication

An ethical organization depends on its employees to voice their concerns and opinions. Even the best firms will occasionally be tempted to take the easy way out of a situation. But the best firms will have a culture that quickly identifies and rejects those temptations. Fostering this kind of culture means creating a workplace where employees feel comfortable reporting misconduct and criticizing the company’s plans. This culture is good both for workplace ethics and business goals.

According to the National Business Ethics survey of Fortune 500 employees, employees who observed misconduct but did not report it attributed their failure to report to several causes.

  • 62% “Believed no corrective action would take place”
  • 42% worried that their reports were “not confidential”
  • 29% reported “fear of retaliation from coworkers”

In short, employees felt either too afraid to report or that their reports would go unheeded. Unsurprisingly, these feelings are among the causes of poor communication more generally.

James Detert and Ethan Burris, professors of management at Cornell and the University of Texas at Austin respectively, identify two main obstacles to open communication in an organization — what they call the fear and futility factors. Employees are either too scared to speak up (the fear factor) or feel that speaking up will have no effect on their organization (the futility factor).

These findings line up with the National Business Ethics survey. In other words, the fear and futility factors are central to failures in both communicating effectively and reporting ethical lapses.

As we would expect, Deter and Burris argue that improving communication is good for an organization: “In a number of studies, we’ve found that when employees can voice their concerns freely, organizations see increased retention and stronger performance.”

Start with Good Decision Making

When we look at ethics as rooted in good decision making, it becomes abundantly clear why good ethics are good for business: because doing the right thing is about making the right decision. A company that has effective ethics training and robust policies to promote ethical behaviors will make better decisions, period.

The other side of this equation, however, is that an organization that wants to create an effective workplace ethics program should focus on the individual biases and organizational barriers to good decision making. A program that simply raises awareness or tries to scare employees into being ethical not only misses the real causes of unethical actions but misses the real opportunities of creating a truly ethical culture.

By developing a strong ethics training program, you can help cultivate a culture of openness and trust in your organization, empowering your employees to make effective, ethical decisions.

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