Building an Ethical Culture
By: Rich Kramarik
A distinction that is sometimes misunderstood is the
difference between compliance issues and ethical issues. Compliance programs
deal with external issues that have internal implications on a company (i.e.
compliance with the SEC, IRS, Sarbanes-Oxley, and the law). Ethics programs deal
with internal issues that have external implications (i.e. company values and
codes of personal and business conduct). A frequently unrecognized challenge for
CEOs and business owners is to fully understand how they are the symbol and the
source of the culture of their organizations.
Close scrutiny of a CEO’s personal conduct occurs every day by
employees, customers and business partners. Ethical behavior by the company’s
leadership will establish respectful business relationships and solidify
employee loyalty. Unethical behavior will undermine the integrity of the
company. If there is a difference between what a leader says and what a leader
does, everyone will see it, and employees and business partners will emulate the
Whether it is simply through ethical behavior or by instituting a
full blown ethics program, the company's leadership must fully stand behind
their actions. Establishing an ethical culture is a process, not an end,
requiring the company’s leaders to demonstrate the highest standards of
integrity and accountability.
Types of leaders
Ethical leaders are committed to acting
ethically and insist upon that from their organization and from their business
partners. Not only are they demonstrably accountable for their actions, they are
perceived that way as well. They foster a culture that emulates their own
dedication to ethical behavior.
Ethically neutral leaders are
inherently committed to ethical behavior, but no one knows it. They are
perceived as leaders who have done nothing ethically wrong, but their decision
making process has no context of values or code of conduct.
Unethical leaders believe that ethics
is not relevant to the business world. They make pragmatic decisions, without
concern for their ethical implications, which sometimes don’t stand up as
ethical behavior under external scrutiny.
Foundation for ethical behavior
Executives must establish the ethical foundation for their
companies, which will serve as the cultural underpinnings that guide their
leadership. Ethical behavior is founded in:
A set of values that spell out the way
employees will relate to each other and the company will relate to its customers
and business partners.
A framework of principles for personal
and business conduct that is unambiguous and integral to everyone’s behavior; so
that unethical behavior is not an option.
Selling ethics to others so that
ethical behavior is fostered by exemplary conduct by the company’s leadership,
where decisions and actions send a clear message of what is tolerated and what
Standing for what is right in everyday
actions by rewarding positive ethical behavior and counseling others when a
breach in ethical behavior occurs.
There's no way around it. Ethical behavior cannot be delegated
and unethical behavior cannot be tolerated. Leaders have to be conscious of what
is right and what is wrong, and set the example for others by asserting their
integrity and honesty. As their reputation grows, so will the respect and
dedication of others.
An Ethical Environment
In a small business where the founder/owner's presence is felt by
everyone, it may not be necessary to document his or her values. However, it is
necessary to act appropriately on those values with ethical behavior. Large or
small, the leaders must establish a culture that fosters ethical behavior in the
context of the company’s values.
If something serious happens in your company, you want people to
feel safe in coming forward and talking it over. The CEO or business owner is
often the last person to hear about such things. A strict "no retribution"
practice for people wishing to express their concerns will instill the trust
required to encourage open communications.
Other actions toward building an ethical environment are:
Communicating what ethical conduct is
to everyone in the company is essential so they know where you stand on ethical
matters and don’t just assume what it is. Misunderstandings will be avoided when
the leader speaks clearly and forthrightly about the importance of ethical
behavior as part of the company’s vision and mission.
Decisively addressing issues must be a
priority of a responsible executive who is charged with investigating the
problem and taking appropriate action. As part of the process, examine the types
of behavior that may have caused the problem in the first place.
Ethical conduct flourishes in an environment of openness and
leadership-by-example. Unethical conduct flourishes in an atmosphere of secrecy
and misinformation. For this obvious reason the goal should always be to create
accountability in decision-making. This applies first to the people at the top
and then throughout the organization.
When decision making is done in the context of clearly
communicated and demonstrated values and code of conduct, it is much harder for
employees to fall prey to bad behavior and to blame others when something goes
wrong. Each individual should be held accountable for their actions, regardless
of rank or seniority.
The rewards of an ethical company
In an ethical environment, employees and business partners
understand that ethical behavior is the means by which business success is
achieved. They see through example after example that ethical behavior is
rewarded and unethical behavior is not tolerated. They understand that
leadership holds itself to the highest standards and that absolutely everyone,
no matter how vital to the company, is responsible for the safe-keeping of the
ethics of the company. All good things will follow.
Brought to you by:
Bob De Contreras
RTBA | Cary | Greensboro | Raleigh | Research Triangle Park | North Caroliina
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