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Organizational Ethics: Building an Ethical Culture

Instilling a Sense of Right and Wrong in the Workplace

When I teach business ethics I like to begin with a discussion of the “Ethical Dissonance Model” by Maryjo Burchard that addresses the interaction between the individual and the organization, based on the person-organization ethical fit. This is an important consideration because the ethics of an individual influences the values that one brings to the workplace and decision making, while the ethics (through its culture) of an organization influences that behavior. To keep it simple, I adopt the idea that there can be a dissonance between what is considered ethical and what may actually be “best” for the subject inviting ethical consideration.

Of the four potential fit options, two possess high person-organization fit: (1) high organization ethics, high individual ethics (High-High), and (2) low organizational ethics, low individual ethics (Low-Low); and two possess low person-organization fit: (1) high organizational ethics, low individual ethics (High-Low) and (2) low organizational ethics, high individual ethics (Low-High).

Let’s focus on the ideal – High-High. More likely than not an employee who knows her values and beliefs are an ethical match for the company she works for will conform her behavior to organizational expectations. But, how does she assess organizational ethics? Two researchers, Hian Chye Koh & Elfred H. Y. Boo, identified three distinct measures of organizational ethics: support for ethical behavior from top management, the ethical climate of the organization, and the connection between career success and ethical behavior. These three factors relate to the culture of the organization and may have implications for actions such as whistleblowing. The researchers found that positive ethical culture and climate produces favorable organizational outcomes by setting down the ethical philosophy and rules of conduct and practices (i.e., code of ethics).

Given the organization-person fit and values that provide part of the culture for ethical decision making in the workplace, it is important to understand how employees view the ethics of the organizations they work for, in part to better understand corporate governance systems and whistleblowing. The 2013 National Business Ethics Survey (NBES) conducted by the Ethics Resource Center provides interesting data about ethics in the workplace. The report is the eighth in a series. The 2013 survey provides view of employees about ethics in workplace that should be of interest to all managers. The results include: 41 percent said they have observed misconduct on the job, down from 55 percent in 2007 and fewer employees felt pressure to compromise their standards, down to nine percent from 13 percent in 2011.

The continued decline in wrongdoing defied two factors that often accompany observed misconduct – retaliation and pressure to violate rules, which both rose and seemed to foreshadow an uptick in bad behavior. Historically, higher stock prices have been accompanied by higher rates of misconduct, presumably because workers and companies both were tempted to take more risks in order to enjoy the rising tides. The reverse was also true: In times of economic challenge, companies focused on ethics in order to weather the storm and misconduct declined accordingly.

The survey shows that a significant amount of misconduct involves continuous, ongoing behavior rather than one-time incidents: Employees say that more than a quarter (26 percent) of observed misconduct represents an ongoing pattern of behavior. Another 41 percent said the behavior has been repeated at least a second time. Only one-third (33 percent) of rule breaking represents a one-time incident.

Managers – those expected to act as role models or enforce discipline – are responsible for a large share of workplace misconduct (60 percent) and senior managers are more likely than lower-level managers to break rules. Surveyed employees said that members of management are responsible for six of every ten instances of misconduct and they pointed the finger at senior managers in 24 percent of observed rule breaking. Middle managers were identified as the culprit 19 percent of the time and first-line supervisors were identified as bad actors 17 percent of the time.

More than one in five workers (21 percent) who reported misconduct said they suffered from retribution as a result, nearly identical to the 22 percent retaliation rate in NBES 2011. Retaliation has not always been so widespread: The rate was only 12 percent in 2007, the first time it was measured in NBES.

Asked why they kept quiet about misconduct, more than one-third (34 percent) of those who declined to report said they feared payback from senior leadership. Thirty percent worried about retaliation from a supervisor, and 24 percent said their co-workers might react against them. Furthermore, among those who did choose to report, those who experienced retaliation were less likely than those who did not experience retaliation to say they would report misconduct the next time they see it: 86 percent compared to 95 percent who say they would report.

Additional results of the 2013 NBES:

  • The percentage of companies with “strong” or “strong-leaning” ethics cultures climbed to 66 percent in 2013, compared to 60 percent in the previous survey;

  • The percentage of companies providing ethics training rose from 74 percent to 81 percent between 2011 and 2013;

  • Two-thirds of companies (67 percent) included ethical conduct as a performance measure in employee evaluations, up from 60 percent in 2011;

  • Almost three out of four companies (74 percent) communicated internally about disciplinary actions when wrongdoing occurs.

I am oftentimes asked by my students whether I believe ethics codes and training programs help to create an ethical organization culture. Of course, no one can know for sure. I answer the question by telling them businesses have to try to instill a sense of right and wrong in workplace conduct. I leave them with the following quote from Edmund Burke: “The only thing necessary for the triumph of evil is for good men to do nothing.”

Blog posted by Steven Mintz, aka Ethics Sage, on March 18, 2013

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