Ethics Exchange: Culture (Part Two): Characteristics of Ethical Organizational Cultures

By Ethics Exchange posted Dec 03,2013 15:11

Jeff Kaplan: Hope you had a good Thanksgiving, Steve, and time to pick up where we left off - which was beginning a discussion of ethical cultures in businesses. Last time we spoke about the role of the government in promoting such cultures, but more important, I think, is: What do we actually mean by an ethical culture? You’ve been ethics-culture-focused for more than two decades. What have you seen that works in this area, and what doesn’t?

Steve Priest: Jeff, for me the truly good news about ethical culture is that it is not substantially different from a culture of excellence. If you look at the fundamental attributes of an ethical culture, the overlap (remember your Venn Diagrams!) with the attributes of a safety culture or an innovation culture or a customer service culture or a high performance culture is in the 90% range. Which means you do not need to go to battle with business people or other functions to attend to your ethical culture; you can co-opt them.

Jeff: I agree with all of that, but more specifically what would you say are the key components of an ethical culture?

Steve: You can slice the attributes many ways, but since my early days struggling with addition and subtraction, I like to limit myself to the five fingers on one of my hands. So the attributes are these:
  1. A commitment to doing the right thing. 
  2. Clear standards. 
  3. Organizational values put into action (by leaders and employees). 
  4. Accountability. 
  5. Open communications up, across and down the organization.
Jeff: I agree with that list, too, though sometimes (and perhaps because I’m a lawyer) find it helpful to consider the issue by saying what an ethical culture isn’t – with the following being for me some of the key attributes of an unethical culture: short-term thinking; weak employee identification with the company, its customers or its products/services; indicia of “moral hazard” (misalignment of incentives and risks), with bad behavior being rewarded where it produces short-term business gains; difficulty in asking questions/raising concerns (not just C&E ones); marginalization of C&E issues or personnel (and others in control functions); a lack of “organizational justice” – meaning a lack of fairness; questionable managerial tone – not only at the top, but also in the “middle” and at the “edges”; and an unreasonable pressure to perform. Similar to your list, of course, but with an accent on the negative.

Steve: I think that division of labor suits each of us!

Jeff: For me probably the best single question one can ask about any given company’s ethical culture comes from a report issued last week by The Economist Intelligence Unit based on a survey of financial services companies, which had the following interesting piece of data: “While respondents admit that an improvement in employees’ ethical conduct would improve their firm’s resilience to unexpected and dramatic risk, 53% think that career progression at their firm would be difficult without being flexible on ethical standards." In a truly ethical corporate culture such “flexibility” would hinder (or even derail), not help, career progression.

Steve: Yes! I spent the first few years of my consulting career working from the then revolutionary original US Sentencing Guidelines, as well as my highly practical educational training in B-School and Div. School. Thankfully as part of my work I listened to thousands of employees talk about ethics, and they told me that Codes and training and executive speeches were not the most important shapers or indicators of a company’s ethical culture. What matters most, they told me, is how managers treat employees who violate the organization’s standards. Those who violate standards should be coached, disciplined or fired. Those who live up to the standards should have the opportunity for promotion if their performance is good. Pretty simple stuff. And yet in many assessments we find very disappointing employee perceptions of their organization’s commitment to ethics in practice.

Jeff: Let’s pick up there – and particularly on the types of steps organizations should take to know their culture - when we start our next conversation.

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