Research shows that good business ethics pay off financially as well as legally. Here’s how to promote “doing the right thing” in your organization.
Enron’s Jeffrey Skilling. Worldcom’s Bernie Ebbers. Tyco’s Dennis Kozlowski.
Their antics cost stockholders a fortune, robbed employees of their livelihood, and resulted in all of them facing long prison terms. But there also was an upside to the corporate scandals they caused. American business began to focus on ethics.
What it’s been finding has been largely positive. Most companies do business ethically. And those who emphasize doing the right thing actually score financially as well in legal terms.
That last point comes from a survey done by employee research consultant ISR and reported in BLR’s Best Practices in HR newsletter. The survey asked employees’ opinions of their companies’ business behaviors. What it found was a high correlation between companies their employees thought acted ethically and those that had superior financial performance. A second ISR study showed higher levels of employee engagement at such companies, as well, leading to higher productivity and retention.
This all matched up to DePaul University research, which showed businesses that put ethics up front were also worth more. When 300 companies were studied, those with no ethics code had a total market value-added of some $3.24 billion. A similarly-sized group with a code but a minimum commitment to ethics totaled $6.1 billion. But the market value-added of a third group with both a code and a publicly stated commitment to follow it totaled $10.6 billion.
How ethical is your organization? And how strongly do you play HR’s traditional role as “conscience of the company”? How much, in other words, do you function as what’s been called “the other CEO,” the Chief Ethics Officer?
Here are some suggestions from the experts to advance the cause of ethics in your organization:
First, do you have an ethics problem? The danger signs include:
–A closed organization in which information is not shared and in which questions about business practices are discouraged or ridiculed
–A cavalier attitude toward investors and customers, mocking them for how easily they can be manipulated
–A belief that integrity slows success, and a tendency to “spin” bad news and to “shoot the messenger” with the courage to deliver it
–Unrealistic business expectations, and a focus on short-term financial goals, with an emphasis on ends over the means used to get there
Avoid ethics problems before they happen through these steps:
–Educate management about the positives of promoting ethics, including the financial advantages and reduction in risk that come from doing the right thing.
–Encourage open statements of your company’s values. Then craft HR and other policies that reflect those values.
–Promote the company’s ethical position in every communication to workers, starting with your job offer letters. Ask about the company’s ethics in exit interviews, too.
–Survey both managers and employees on how the company is behaving ethically. Surveying both can reveal any gap in perceptions.
–Conduct such surveys every 12–18 months, and be prepared to act on what you’ve learned.
–Maintain an open door to employee questions and qualms about ethical matters.
–Have, and publicize that you have, a procedure for reporting ethical violations that ensures no reprisals.
–Constantly remind management that ethics starts at the top. Or as ISR puts it, “leadership sets the tone of an organization’s culture.”