Tracy Gonzalez-Padron, College of Business, Colorado Springs Business Journal

Employees at all levels of an organization may deviate from acceptable practices, yet they can also help detect ethical lapses.

Problem: We recognize the importance of ethics to build trust in our company, yet struggle with how to encourage ethical conduct throughout the organization. How can I encourage my employees to follow our ethics and compliance guidelines in their day-to-day tasks?

Business managers know the importance of ethics in business. Ethical misconduct by employees can ruin a company’s reputation and can result in large fines that affect its profitability. In the past year, unethical practices at Wells Fargo, Volkswagen and Uber emphasize a key point of business ethics — manager and employee behaviors matter. Employees at all levels of an organization may deviate from acceptable practices, yet they can also help detect ethical lapses. Research in ethical conduct has found that an ethical employee has a spillover effect to encourage others to act ethically. However, many companies struggle with organizational resistance to speak up against deviations from ethical behavior.

Why do employees deviate from ethics and compliance guidelines? As Figure 1 shows, the informal culture has a greater influence on ethical behavior in the workplace than does the company’s code of ethics and policies. Formal ethical programs have little effect if they are inconsistent with the informal culture that guides employee behavior. Just look at Enron, where management espoused a robust code of ethics, but virtually ignored it. Employees internalize a company’s ethics through actions of leaders, their own experiences, stories from other coworkers and personal observations.

It is useful to point out several reasons why developing a culture where all employees embrace ethical standards can be difficult to achieve. First, ethical blindness of the individual employees or the business team occurs; they do not even realize that the decision they are making has ethical implications and thus ethical criteria do not enter into the decision. Ethical blindness occurs also in routine tasks, where employees are so focused on doing their job they miss the ethical issues. Second, financial and time pressures lead employees to cut corners. Company incentives to make sales goals can lead to unethical practices, as Wells Fargo experienced. The third reason stems from organizational silence on ethical transgressions. Employees value group loyalty, whereby a team player will not ‘rock the boat’ by advocating ethics or reporting on peers. People feel reluctant to ‘blow the whistle’ for fear of retribution by coworkers or management; allowing misconduct to continue.

What will tip the informal culture in favor of widespread ethical behavior? As Figure 2 shows, employees perceive the ethical culture of an organization through experiences with superiors. Therefore, ethical leadership plays a critical role in aligning the informal culture with the firm’s ethical aspirations. Having a leader who encourages ethical behavior can reduce employee pressures to cut corners, swallow the whistle or hide bad behavior. Employees are also more likely to feel confident in doing the right thing, and to hold their coworkers to ethical standards. Ethical leaders regularly assess their organization’s ethical culture, set an example for ethical behavior through their actions, and encourage ethical conduct throughout the company by fostering a culture of accountability.

Actions:

Here are four ways you can create a culture of accountability.

1. Communicate clear expectations of ethical behavior.

Simply printing a code of ethics is not enough. You should encourage employees to ask questions or raise ethical issues by talking about ethics frequently. Seek opportunities to highlight expected ethical issues relating to a business unit.

2. Ensure adequate resources to complete the job on time and within budget.

Avoid pressures to cut corners by setting realistic goals. Help your employees to make ethical decisions under time pressure by developing simple heuristics or ethical principles to guide them. Finally, communicate that cutting corners will not be accepted, and hold violators accountable.

3. Train employees to develop personal competence for ethics.

Focus training and communication initiatives of your ethics program to encourage employees to ask questions, voice concerns, talk to others, and identify ethical issues. For example, Mary Gentile developed a program called Giving Voice to Values (GVV) to help individuals become more engaged and confident in addressing ethical issues in the workplace.

4. Implement fair and equitable consequences for both success and mistakes.

Review how compensation and monetary incentives affect the ethical behaviors of employees. Is performance execution measured or only business results? Employee perceptions of fairness are an important part of establishing an ethical culture. Ensure consistency in enforcing policies and procedures.

Tracy Gonzalez-Padron, Ph.D., is an associate professor of marketing and international business in the College of Business at UCCS. She is also the director of the Daniels Fund Ethics Initiative at UCCS. Gonzalez-Padron has managerial business experience in international business development for multinational corporations and is the author of research on corporate social responsibility, marketing strategy and ethics. Contact: OPED@uccs.edu.