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Blog

Interaction between culture, behavior, ethics and performance

April 7, 2015

Culture and Corporate Conscience

 

Understanding the interaction between culture, behavior, ethics and performance is essential to establishing an ethical tone at the top. The culture established in a community, such as a community of corporate leaders and their organizations, reflects shared beliefs, norms and values that define what is important and what is appropriate for those who choose to join the community. To establish an ethical culture, four questions should be asked:

 

1. What are the goals and purposes of the organization?

2. What strategies need to be implemented to achieve those objectives?

3. What kind of behaviors will support achievement of the goals?

4. How should the 'tone at the top' be set to create an environment of ethical leadership?

The Economic and Social Research Council studied these issues and published a report titled Culture and Channeling Corporate Behavior. 

 

Here is a summary of how the organization sees the "Cultural Trade-Offs for the Board of Directors to Consider."

 

CULTURAL TRADE-OFFS FOR THE BOARD TO CONSIDER

 

Values as a wealth driver versus values as a protector

Boards could consider what sort of values they want to have and work with in order to ensure that these values are lived throughout the organization.

 

Openness to mistakes versus tolerance

Boards could consider whether the organization is open to hearing about zerotolerance                              mistakes and whether staff believe there is sufficient openness to constructive criticism.                                        

 

Leadership versus followership

Boards could consider their own leadership style and find out how it is perceived throughout the organization. How do the board and CEOs want to lead?

 

Conformity versus challenge 

Boards could consider to what degree constructive challenge is encouraged in the boardroom, find out how cohesive teams are within the organization and whether staff are able to challenge people above them.

 

Independence  versus involvement

Boards could consider whether external directors are sufficiently independent in mind and sufficiently involved or engaged, and what steps could be taken to improve genuine commitment. The size and composition of boards should also be considered in line with their actual operational and strategic requirements.

 

Enforcing versus avoiding or exploiting regulation      

What attitude to regulation should an organization have? Does it want to support and work with the spirit and the letter of regulation or does it see regulation as something to be avoided or exploited for its customers interests or its own sake.

 

Common sense versus rulesand procedures

Boards could consider how to get the right balance between allowing people to use common sense and introducing rules and procedures.

 

Empowerment versus rules and tight rules versus loose rules 

Boards could consider how much empowerment and leverage is appropriate for different groups in the organization.

 

Quantitative measures versus qualitative performance

Boards could consider whether measures used properly reflect the long-term aims of the organization and whether they could easily get ‘gamed’ for personal interest.

Innovation versus control        

Boards should be aware that control can stifle innovation. The need to encourage innovation should be balanced against the need to have control; they could consider what sort of innovation they want, where it is needed, and what sort of control is appropriate.

 

Risk seeking versus riskavoiding

How clear is the board about why its members want or allow their organizations, and the teams within them, to take risk? What is the appropriate balance between risk and reward?

 

Trust versus accountability        

Attempts to increase accountability can erode trust as people who are made more accountable may feel less trusted. Boards could consider whether existing accountability systems undermine trust and what could be done to improve trust.

 

Profit versus public value

Boards could consider whether they think they have the right balance between making profits and contributing to public good and whether they are anticipating changing societal expectations sufficiently.

 

Human capital versus human cost 

Boards may want to consider how the economic austerity will affect how talents can be attracted and flourish within the organization.

 

Boards should follow certain broad guidelines in establishing an ethical culture:

  • Align and embed core values at the very top.

  • Establish a hot line for employees to report perceived unethical/illegal acts on an anonymous basis.

  • Create a pathway for would-be whistle-blowers to come forward and provide an opportunity for the organization to take corrective action before an employee brings the matter to the attention of regulators.

  • Develop ethics training programs based on the core values and code of conduct that uses case studies specific to the business to provide guidance to employees about how to handle difficult situations.

  • Reward ethical performance by meeting with employees about their concerns; ask how they handled identified conflicts or other ethical problems; have them sign-off that their actions are in accordance with the code.

  • Use a feedback loop to take the information gathered above and re-visit whether the core values are being effectively communicated and ethical behavior is ingrained in the culture of the organization.

Ethics is not like a spigot that you can turn off and on with the flip of a switch. It requires a long-term commitment to do the right thing even if it creates short-term sacrifice, and even loss, for the organization. It has been said that managers are people who do things right; leaders are managers who do the right things.

 

Blog posted by Dr. Steven Mintz, aka Ethics Sage, on April 7, 2015. Professor Mintz is on the faculty of the Orfalea College of Business at Cal Poly San Luis Obispo. He also blogs at: www.workplaceethicsadvice.com

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