Earlier this year, in association with HR Grapevine, Roffey Park hosted a roundtable on ethics in leadership. To the question ‘why does it matter?’ the common view was that ‘great leaders make great companies’, and that leadership ethics have an impact on reputation, brand, talent attraction and retention, and ultimately share value. But according to the Institute of Business Ethics 2013 survey , only one in five of the general public trust business leaders to tell the truth and make ethical and moral decisions, and only one in four trust them to correct issues that need putting right.
For the last 17 years Roffey Park has published an annual survey, the Management Agenda, of UK organisational life, issues and challenges. This year over 1,800 took part, from all sectors, and junior managers to board Directors.
In 2013, the majority of respondents regarded their organisation as behaving ethically, although there was evidence that this was more about compliance to regulations than a commitment to ‘doing the right thing’.
In contrast, this year misconduct was reported as widespread. More concerning is that although 49% of managers said that they had observed misconduct in their organisation, nearly a third of them said they chose not to report it, and one in five board directors didn’t report misconduct either.
Digging deeper into why, half of managers said they didn’t believe any action would be taken, and one in four feared reprisals. In fact, rather than report it, managers are more likely to walk. We found that, of managers who reported having observed misconduct, 54% said they plan to leave the organisation, whereas among those who’d not observed misconduct, only 41% aim to leave.
So in addition to other commercial impacts, we now also know that misconduct carries a talent retention cost.
At our ethics roundtable, while there was a view that HR can be the organisational conscience, some warned against this because it can result in the rest of the organisation absolving themselves of responsibility. So, as necessary as robust policies and compliance frameworks are, they should carry a health warning, if organisations are to avoid people acting on autopilot, not making ethical value based judgements, but simply following rules . Further, some research suggests that individuals’ moral reasoning can be less sophisticated in a work context compared to general ethical issues . So, only adopting a policy compliance approach, potentially risks making things worse.
To get to grips with misconduct, business leaders and HR needs to take a lead in reviewing the relevant policy and procedural frameworks, including whistleblowing, but we’ve seen that that alone doesn’t change the culture, and isn’t enough. A focus on the ‘soft stuff’ is also vital.
Our recommendation is to start with the big picture. Begin by considering the external environment in which your organisation operates and understand the pressure on ethical behaviour that that exerts inside the organisation.
Look at the mission and strategy, the organisational purpose, how clearly it is understood and whether it holds ethical issues, for instance in the supply chain.
Next, if your organisation espouses particular ethical values, and takes a clear stance on misconduct, look closely at the quality of leadership needed in order to achieve the ethical standards to which you aspire, and how that compares to what happens in practice.
There’s also scope to address misconduct by reviewing the organisational culture.
In relation to ethical practice, is your culture an asset or a liability? To understand the influences of your culture on misconduct and ethics, it can be useful to ask:
• In our culture, what are our basic beliefs and assumptions about the world in which we operate? Our suppliers? Our customers? Our competitors? Do we see it as a benign or hostile environment? An environment of which we are a victim or over which we have influence?
• What organisational values does that view of our environment give rise to? And what are the ethical implications?
• What norms of behaviour do those organisational values then cultivate or challenge? And what are the implications for our tolerance of misconduct?
Looking at culture also raises the question of rewards and incentives. The evidence is that this is key to understanding what drives unethical behaviour. The Edelman Trust Barometer in 2013 asked respondents who were familiar with banking and financial services scandals over the past year, what they thought was the biggest cause. Only 20% attributed it to lack of regulation, whereas 23 per cent blamed a ‘corporate culture driven by compensation / bonuses’.
Next steps and top tips
Misconduct is costly. So, to get to grips with it:
• First make the business case clear
• Be and do ‘HR with an OD mindset’
• Don’t focus only on the individual without also understanding the ethical landscape
• Be rigorous about both the hard stuff and the soft stuff –compliance and behavioural change.
And the cost of misconduct has not gone unnoticed by either FIFA or Qatar. But, who knows; if FIFA gets to grips with it, then they can be kept awake at night for the same reason as the rest of us, rather than because of a rather spectacular own goal.