Ethics and Leadership. Part 2


This post is part of a series. to read the previous post click here.

Ethical Culture in the Workplace

ethicsperformance

Most organizations have an either all-in or all-out approach when it comes to ethics. They either care about the employee’s well-being or they completely ignore it and concentrate solely on the profits and the bottom-line. Most companies that adopt the latter approach to ethics usually have reports of employees witnessing misconduct in the workplace, be it time-theft or more serious white-collar crimes.

Essentially there are 4 types of business/corporate ethical cultures:

1) Apathetic: Minimal concern for people or performance

2) Caring: High concern for people; minimal concern for performance

3) Exacting: Minimal concern for people; high concern for performance

4) Integrative: High concern for people and performance

To enforce/establish these types of cultures, companies use either a compliance-based or value-based approach.

Compliance-based cultures use a more legalistic approach to ethics. In reality, this kind of culture revolves around risk management rather than ethics and lack  a long-term focus or integrity. Employees are usually subject to quarterly or yearly compliance quizzes and checklists. Their impacts are usually very short-lived without proper reinforcement.

Value-based cultures on the other hand rely on mission-statements that define the firm and stakeholders’ relationships. They focus on values rather than law and feel less legalistic to the employees. To instill value-based cultures, buy-in from the top executive management and all levels of management is critical.

Adopting the right kind of culture for your business can have very profound impact on your organization’s success. It brings a whole new level of commitment from employees who will be ready and willing to invest in the company. Employees will be more likely to make personal sacrifices for the company. The correlation is almost 1:1. The more a company is dedicated to ethics and shows concerns including a safe work environment, competitive salaries & benefit packages, the greater the employee’s dedication will be.

It is therefore no surprise that companies that are perceived by their employees as being more honest and ethical are usually more profitable. This is because an ethical climate in an organization provides a platform for increased efficiency, productivity, profitability, and customer satisfaction. All keys to a successful and profitable venture.

To implement an ethical culture in a work place can be rather challenging, depending upon the industry one is in. This is because studies support the fact that ethics are learned while interacting with others. As such, if you are in an industry that is known for unethical behaviors, it is very much more likely for a culture of deceit and corruption to persist within such an industry. Still, it is also a fact that superiors in a company have a strong influence over their subordinates and most employees will go along with the superior’s moral judgments in order to showcase their loyalty. The task of changing a corporate culture, especially when it comes to ethics, is therefore a full-time job that has to be taken seriously by upper management. As shown in the chart below, different industries are trusted at varying levels by their stakeholders.

TrustPercent

As it may be observed, in this post 2008 recession era, banks have taken a real beating when it comes to trust. In the past 2 years, the problem has not been rectified either as can be seen in the chart below. Trust in financial services sector has remained stagnant from 2013 to 2014.

2013Trust

What remains to be seen is how perturbed the financial industry will be by these findings. Will the major players in the financial industry be making any radical re-branding moves in 2015 and what opportunities will they present to the consumers. Your thoughts, comments and questions are always welcomed.

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