Ethics is defined as conforming to principles of right versus wrong. Ethics has also been defined as taking into account how your behavior affects others and how corporate behavior affects the community. It is the manner in which one individual treats another and the manner in which an enterprise (public and private) treats both its employees and its community. Recently, I heard morality defined as how we treat people we know and ethics defined as how we treat people we do not know.
I have heard it said our nation seems focused on “me first” and gaining as much wealth as possible. This sentiment sees our nation being based on competition with no consequences for cheaters, Wall Street bankers being frequently mentioned to make the point. As a nation, we are seen to lack the will or mechanisms needed to control unethical behavior within both the private and public sectors of our economy.
In order to change this culture, organizations and communities must install controls rewarding ethical behavior and punishing cheating behavior of individuals, businesses owners, and public service officials. To illustrate, recently the criminal conviction of a peanut butter company’s CEO made national news. The conviction was so rare it was seen as newsworthy by national news organizations.
Ben Bernanke, former Chairman of the Federal Reserve stated in a USA Today interview regarding the recent financial crisis, “More corporate executives should have gone to jail. The Justice Department and other law enforcement agencies focused on indicting financial firms. He notes, it would have been my preference to have more investigation of individual action, since obviously everything that went wrong or was illegal was done by some individual, not by an abstract firm.”
It has been said that the first step leading to unethical behavior is when someone says, “no one will notice.” Encouraging associates to speak up when ethical challenges are seen is discouraged by the manner in which organizations treat Whistleblowers. Blaming the messenger occurs often and provides employees with little support or encouragement for challenging unethical behavior. Consider how many employees of Volkswagen knew about the intentional violation of emission control regulations. Why did no one in Germany or in the United States blow the whistle on these cheating behaviors? The culture either encourages ethical behavior or unethical lapses in behavior. Volkswagen’s top down, central command structure was described as creating a culture rewarding obedience and discouraging freedom of expression.
The economic crisis created by Wall Street misdeeds and weak regulation has created the need for business leaders to earn public trust once again. Public polls rate large corporations at nearly the same low level as congress. How ethical is it for the auto companies to calculate the cost of deaths versus the cost of a recall, how ethical is it for our universities to use PhD’s for associate professorships in order to reduce labor costs while at the same time presidents and chancellors are receiving larger and larger salaries and bonuses. Not to mention coaches and the ethical lapses regarding student athletes and the quality of their education. Such behavior is encouraging professors and student athletes to form unions. Recently, I was told about a healthcare organization with few employees over the age of 35. The organization’s practice is to keep staff until they reach a certain salary threshold, terminate them, and hire younger personnel who will earn less.
How ethical is it for our states to put the burden of education costs on students rather than designating adequate funding for public education? How ethical is it for hospitals to tell indigent patients care will be free only to hire attorneys and collection agencies to aggressively collect fees from these same patients when released from care? What is the ethical rationale for an oil company or power company refusing to remediate the pollution they caused?
Our economic system continues to experience the struggle between a commitment to principles and the pursuit of wealth. This struggle permeates every facet of our economy from financial institutions, to healthcare, energy, education, technology, and manufacturing. These organizations range from small to mid-size and multinational corporations and nonprofits. This struggle has been described as the tension between free markets and the public good. We hear the tension when a business owner says, “I take pride in making the finest beer using the best grains available and pay more if needed” or “If you have to decide whether to document your activities for billing purposes or help a client, you had better be serving your client!” to comments like, “Regulations are strangling our free-market system” and “let the markets decide.” These sentiments are neither right nor wrong. They are however, out of balance and tend to drive a business out of business.
How do leaders maintain ethical standards in times of challenge to financial well-being? As long as leaders maintain top of mind awareness regarding their principles, publicly post those principles, publicly recognize employees who speak up when witnessing violations and punish violators, a culture of ethical behavior can be created. Maintaining an ethical compass leads to creating a culture of innovation and a sustainable organization.
A client held weekly meetings with staff. They reviewed rumors in the department at each meeting. If a rumor was false the message was communicated to all employees. If a rumor was partially true or true, the management team confirmed the rumor with its employees. It was critically important that everyone knew the truth. This was a matter of ethical behavior to this management team. Several IT firms informed their customers when asked to provide personal information to the government. Ethical behavior was critical to these leaders’ business strategy.
This tension between conforming to principles and pursuing wealth provides drivers for helping us understand leader integrity and ethical challenges. Figure 7.1 is an illustration of the performance levels of organizations and is a Moral Compass designed to help organizations examine their current situation and take steps where necessary.
Figure 7.1 Ethics and success model
I know of no organization functioning with a lack of principles to guide them and lack of drive to pursue wealth. However, there are nonprofits who have clearly defined principles and tend to pursue those principles without regard for capital accumulation. In every case, they struggle to be sustainable. We can all think of companies who overlooked their principles in the pursuit of wealth such as Enron, Lehman Brothers, AIG, Arthur Anderson, and Standard and Poor, to name a few. It is true that we can live for a time by simply ignoring what is right and blindly pursuing wealth. The data say however this journey is short lived. A much more sustainable way to operate a business is through a balanced approach of pursuing wealth through the lens of your organization’s principles (Figure 7.2).
Figure 7.2 Ethical compass
Ethical Compass
Amoral
Low principles, high wealth
This organization focuses on wealth creation and conveys the message that the end justifies the means. As an example, a national financial services institution mandated goals for each unit to generate specified amounts in fees from each customer. This same institution was recently fined for the practice and was earlier convicted of red-lining certain neighborhoods from either qualifying for loans or being charged higher rates for the same loans provided to other neighborhoods.
Nomadic
Low Principles, Low Wealth
This organization drifts and can be identified by the mix of products and services that lack connection with one another. Leadership lacks focus and is unpredictable in expectations of associates and direction of the organization. A nonprofit was successful creating and passing legislation for cleaner air. Afterward it drifted and began participating in other endeavors having less and less relevance to clean air initiatives.
Principled
High Principles, Low Wealth
This organization has a reputation for doing good works and its leader is respected within the organization and community. However, the devotion to principles pulls the leader from attending to the financial well-being of the organization. There is continual stress between doing good and making ends meet. A number of non-profits failed during the recession as a result.
Balanced
High Principles, High Wealth
This organization takes a balanced approach to its business. Clearly stated principles are evident and staff can describe how each principle is practiced. Everyone knows the organization’s financial status and works to enhance its financial well-being. These organizations are described as being highly transparent.
With which of these quadrants would your organization align? Consider your current emphasis on principles. Then consider your focus on creating wealth by increasing revenues and reducing costs (Figure 7.3).
Figure 7.3 Ethics evaluation tool
An inventory is provided as follows. Our workshops facilitate scoring the inventory for positioning on the Ethical Compass.
1. We are encouraged to be frank and honest.
2. We do whatever it takes to exceed customer expectations.
3. We are rewarded for revealing misdeeds.
4. We receive monthly financial updates.
5. We have a written set of principles posted for everyone to see.
6. We base our decisions on costs.
7. We adhere to our principles when pursing our goals.
8. We avoid charging hidden or add-on fees.
9. Our employees are paid fairly and earn at least a living wage.
10. We are encouraged to take initiative with clients.
11. We tell customers when they do not need a product or service we offer.
12. We are rewarded and receive credit for identifying problems and implementing solutions at work.
13. Our leaders tell us the truth and show respect.
14. We make fact-based decisions.
15. Employees tell each other the truth and show respect.
16. Employees are provided the tools, resources, and training to perform their duties.
17. We value the air, water, and land around us and strive to protect it.
18. We invest the money required to protect our environment from pollution
There are many ways to erode trust and discourage creativity and innovation. A colleague of mine who works in mental health gave an example. He told the story of offering an idea to help with a difficult case in a staff meeting. The program director commented on how silly the idea was, sent an e-mail commenting on how bad the idea was and made humorous comments in the following staff meeting regarding the idea. My friend confided that he refrains from commenting in meetings now and will certainly not offer ideas again.
I have often told the story about my father going to work for a company having three unions. On a visit home Dad told me he had just set a company record for most grievances filed against a manager in 1 month. Things were a bit rocky he explained. Several weeks later, we were talking and he told me that after several sleepless nights he decided it was time to talk to his crew. So he called them together on a Monday morning and asked them why they were so hostile toward him. “You don’t trust us” they said. They explained that he seemed to always be checking up on them and they did not like the message it was giving. Dad explained that he had a boss who frequently wanted to know the status of projects and he needed to be ready with answers. The union suggested that he check with them at the end of each day and Dad agreed. The grievances stopped. Dad had begun building trust with his crew.
Building trust is accomplished when there is an environment of open and free flowing communication. Creating such an environment includes the following leadership actions:
1. Keeps staff current on organizational plans and activities.
Providing information on activities and decisions along with the rationale helps your staff make better decisions and feel more in the know and part of your organization.
2. Provides needed information to staff.
Learn from your associates the kind of information they need and be certain they have regular and frequent updates on progress toward goal attainment and improvements. Let them know what information is important and you wish to receive from them.
3. Is honest and direct with staff.
Provide clear information on both the good and bad news providing time for discussion and your honest assessment of the situation. Clarity and honesty will build trust over time.
4. Doesn’t shoot the messenger.
Reflective listening helps to prevent defensiveness when receiving bad news. Be sure to avoid attributing blame to the person providing the news and thank them for the message. A software development Director solicited a status update from his project manager. When she informed him the project was behind schedule and several problems had occurred during the project phase, she was terminated. No more bad news was shared within his department.
5. Encourages free flow of information among staff members.
There is no need for the leader to control all information flow and he or she could not do it if they wanted to do so. By encouraging associates to have informal meetings to share information and discuss projects you are creating an open climate for communication and building trust.
6. Encourages staff to challenge the status quo.
Thanking someone for challenging your position on an issue creates an environment for creativity. Listening, using rephrasing, and encouraging them to share their ideas and reasons sets the stage for you to respectfully share your reasoning for your idea with them. Such dialogue leads to an open and creative work environment.
7. Responds quickly to staff communications and needs.
“He promises a lot but rarely delivers” is a comment I hear frequently when interviewing staff before coaching a client. “My word is my bond” is another. Your staff learns to trust you and count on you by the actions you take when they express needs for assistance. Be sure to let them know what you can do and when you can do it. Then be certain to follow up as promised. Personnel and peers learn quickly if they are able to count on you when you make commitments. I know you have had the experience of working with people who promise to help but fail to follow through or make excuses for not doing what was promised. This quickly erodes trust. Admitting errors and following through on commitments is critical to your success in building trust as a leader.
8. Speaks calmly and with respect.
An executive I coached had created much loyalty among his leadership team. However, he also could be highly intimidating when he got upset, using profanity with a loud voice to make his points and subdue his staff. When I commented on this behavior with him, he denied actually acting in such a way. To make the point, he explained he asked his staff if he actually shouted and used profanity. Everyone agreed that he never shouted and cursed! What a surprise. However, after receiving feedback, I learned that he had curtailed both raising his voice and cursing behaviors. This was an exceptional leader who processed feedback and changed his intimidating behavior.
TRUST=Keep staff current+Provide Needed Information+Honest&Direct+No Shooting the Messenger+Encourage free flow information among staff+Encourage staff to challenge status quo+Respond quickly to staff needs+Speak calmly & respectfully.
Complete the survey in Figure 7.4 as you believe your staff would answer it. Then, ask your group to complete the survey and compare notes before creating a plan of action.
Figure 7.4 Communication survey
Plan of Action
After completing your survey, consider the lessons learned and list the items you believe your leader and workgroup should start doing in order to improve communication under START. Then list the behaviors creating barriers to good communication and list those under STOP. Finally, recognize the good things you are doing and list those under CONTINUE in order to ensure you maintain those behaviors in your new culture (Figure 7.5).
Figure 7.5 Action plan