Creating an Ethically Strong Organization

In the most recent issue of the Sloan Management Review, my colleague Dr Amanda Shantz and I explore how to create an ethically strong organization.

We found that six actions are especially critical to an organization’s ethical tone:

  1. acknowledge that ethical issues are ambiguous and often create conflicts of interest
  2. explain to employees what ethical trade-offs have to be made and how to resolve these
  3. senior leaders act as role models
  4. ensure ethics are embedded in corporate policies
  5. make sure individuals feel empowered to handle ethical breaches
  6. have a clear organizational purpose

Having ethical strength is important because employees are faced with daily ethical “micro-dilemmas” that require quick resolution, and they will tend to search around them for cues concerning how to respond. Where the ethical climate is weak, then employees are less certain about what the organization regards as appropriate ethical behaviour.  This lack of certainty can lead to inappropriate choices and ultimately nudge the organization towards unethical daily practices which can then accumulate, sometimes with devastating consequences. There have been numerous examples in the press in recent years of organizations in all sectors that have been in this very situation.

The research we carried out for the Chartered Institute of Personnel and Development on this topic also highlighted the need for “distributed ethical leadership”, with leaders at all levels who actively promote ethical behaviour. Worryingly, our study found that 43% of the employees in our case study organizations judged their leaders to be ‘unconcerned myopics’, who fail to see the big picture or to address stakeholders’ needs, with just 33% acting as ‘broad visionaries’, who have strong vision and demonstrate a concern for a range of different stakeholders.

In sum, ethics are not something that is merely imposed top-down, or a generic statement that is rarely consulted. They are part of employees’ daily experience of organizational life, and bringing into the open the kind of ethical dilemmas that employees grapple with as they go about their work is important for creating and sustaining a strong ethical climate.

 

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