ETHICS
Why Ethical People Make Unethical Choices by Ron Carucci
December 16, 2016
Most companies have ethics and compliance policies that get reviewed and signed
annually by all employees. “Employees are charged with conducting their business
affairs in accordance with the highest ethical standards,” reads one such example.
“Moral as well as legal obligations will be fulfilled in a manner which will reflect
YOU AND YOUR TEAM SERIES
Creating an Ethical Workplace
Why It’s So Hard to Train Someone to Make an Ethical Decision
by Eugene Soltes
Keep a List of Unethical Things You’ll Never Do
by Mark Chussil
Don’t Try to Be the “Fun Boss” — and Other
pride on the Company’s name.” Of course, that policy comes directly from Enron.
Clearly it takes more than a compliance policy or Values Statement to sustain a
truly ethical workplace.
Corporate ethical failures have become painfully common, and they aren’t cheap.
In the last decade, billions of dollars have been paid in fines by companies charged
with ethical breaches. The most recent National Business Ethics Survey indicates
progress as leaders make concerted efforts to pay holistic attention to their
organization’s systems. But despite progress, 41% of workers reported seeing
ethical misconduct in the previous 12 months, and 10% felt organizational pressure
to compromise ethical standards. Wells Fargo’s recent debacle cost them $185
million in fines because 5300 employees opened up more than a million fraudulent
accounts. When all is said and done, we’ll likely learn that the choices of those
employees resulted from deeply systemic issues.
Despite good intentions, organizations
set themselves up for ethical catastrophes
by creating environments in which
people feel forced to make choices they
could never have imagined. Former
Federal Prosecutor Serina Vash says,
“When I first began prosecuting
corruption, I expected to walk into rooms
and find the vilest people. I was shocked
to find ordinarily good people I could
well have had coffee with that morning.
And they were still good people who’d
made terrible choices.”
Lessons in Ethical Leadership
by Kimberly Nei and Darin Nei Here are five ways organizations
needlessly provoke good people to make
unethical choices.
It is psychologically unsafe to speak up. Despite saying things like, “I have an
open door policy,” some leadership actions may inhibit the courage needed to raise
ethical concerns. Creating a culture in which people freely speak up is vital to
ensuring people don’t collude with, or incite, misconduct. Elizabeth Morrison of
New York University, in Encouraging a Speak Up Culture, says “You have to
confront the two fundamental challenges preventing employees from speaking up.
The first is the natural feeling of futility — feeling like speaking up isn’t worth the
effort or that on one wants to hear it. The second is the natural fear that speaking
up will lead to retribution or harsh reactions.” A manager’s reactions to an
employee’s concerns sets the tone for whether or not people will raise future
issues. If a leader reacts with even the slightest bit of annoyance, they are signaling
they don’t really want to hear concerns.
There is excessive pressure to reach unrealistic performance targets. Significant research from Harvard Business School suggests unfettered goal setting
can encourage people to make compromising choices in order to reach targets,
especially if those targets seem unrealistic. Leaders may be inviting people to cheat
in two ways. They will cut corners on the way they reach a goal, or they will lie
when reporting how much of the goal they actually achieved. Says Lisa Ordonez,
Vice Dean and professor at the University of Arizona, “Goals have a strong effect of
causing tunnel vision, narrowly focusing people at the expense of seeing much else
around them, including the potential consequences of compromised choices made
to reach goals.” Once people sense the risk of failure, they go into “loss
prevention” mode, fearing the loss of job, status, or at-risk incentives. The
Veterans Administration learned this lesson the hard way when trying to address
the 115-day wait time in their Phoenix hospital. They set a new goal of reducing the
wait to 14 days, which resulted in an alleged 24-day wait. But employees said they
felt compelled to manipulate performance records to give the appearance of
meeting these goals. As many as 40 veterans died waiting for care at the Phoenix
center, some more than a year. Organizations must ensure people have the
resources, timelines, skill and support they need to achieve targets they are given,
especially ambitious stretch goals.
Conflicting goals provoke a sense of unfairness. And once a sense of injustice is
provoked, the stage is set for compromise. Maureen Ambrose, Mark Seabright,
and Marshall Schminke’s research on organizational injustice clearly shows a direct
correlation between employees’ sense of fairness and their conscious choice to
sabotage the organization. Consider one organization I worked with whose pursuit
of growth created conflicting goals. The head of Supply Chain was given a $3.5
million capital investment to overhaul a plant to triple its production. Some of that
funding came from the 25% budget cut in marketing in the same division. At the
same time, Sales divided its quota territories to raise topline performance. The
intensity of resentment in the salesforce at having to drive revenues with smaller
territories was compounded by having fewer marketing dollars to sell more
product. The conflicting goals created excess product capacity that was
bottlenecked getting to market. Two years later, the organization was indicted for
channel stuffing.
Too many leaders assume that talking about ethics is something you do when
there’s been a scandal, or as part of an organization’s compliance program.
Everyone gets their annual “ethics flu shot” in the mandatory review of the
compliance policy, and all is well for another year. Nick Eply, professor at the
University of Chicago, in Four Myths about Morality and Business, says, “It’s a myth
to think ‘Everyone is different and everything is relative.’ You actually have to
teach people the relative value of principles relative to choices.” Leaders have to
infuse everyday activities with ethical considerations and design policies and
norms that keep ethics top of mind. Jonathan Haidt, Professor of Business Ethics
at NYU and founder of says, “It’s important to talk about the positive examples of
ethical behavior, not just the bad ones. Focusing on the positive reasons you are in
business, and reinforcing the good things people do strengthens ethical choices as
‘the norm’ of the organization.”
A positive example isn’t being set. Leaders must accept they are held to higher
standards than others. They must be extra vigilant about not just their intentions,
but how it is others might interpret their behavior. While they can’t control every
possible misinterpretation, leaders who know their people well make careful
choices in how they react to stressful situations, confront poor performance, how
politic they are in the face of controversy, and how receptive they are to bad news.
Above all, even in what might be considered the smallest “white lie,” ethical leaders
are careful not to signal that hypocrisy is ok. As an example, a leader may casually
review an employee’s presentation and provide feedback like, “I think we need to
take these two slides out — that data is inflammatory and we don’t want to derail
the ultimate outcome which is to convince the budget committee to give us the
resources we want.” While the leader might presume he has acted in the best
interest of the group — going to bat for resources they need- the person building
the presentation has just been told, “We can’t tell the entire truth because it could
prevent us from getting what we want.” Leaders must put themselves in the shoes
of those they lead to see what unintended messages they may be sending.
Organizations who don’t want to find themselves on a front-page scandal must
scrutinize their actions to far greater degrees than they may have realized. In an
age of corporate mistrust, creating ethical workplaces takes more than compliance
programs. It requires ongoing intensified effort to make the highest ethical
standards the norm, and ruthless intolerance of anything less.
Ron Carucci is co-founder and managing partner at Navalent, working with CEOs
and executives pursuing transformational change for their organizations, leaders, and
industries. He is the best-selling author of eight books, including the recent Amazon
#1 Rising to Power. Connect with him on Twitter at @RonCarucci; download his free e-
book on Leading Transformation.
Related Topics: Risk Management | Leadership
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14 COMMENTS
Yan Johnson 2 years ago
Yan Johnson I truly believe that creating a speak up culture is EXTREMELY important. Sometime people don’t speak up because their afraid of what the outcome will be. Having a culture of like minded people will ease
Reply 2 0
the fear of standing alone, doing the right thing can be costly and lonely but the true reward is when YOU look in the mirror and Respect and love what you see. The motto of stand for nothing and fall for anything is REAL.
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