It’s hard to find a common definition of ethical conduct, and for that matter ‘misconduct’. In financial services, misconduct has a specific meaning, but for others, one working definition of ethics is the “moral principles that govern a person’s behaviour” and for ‘person’ let’s also read ‘organisation’.
Ethical conduct is ultimately about leadership, specifically when it comes to the board. Not surprising then that both the Pollard report on the BBC Saville investigation, and the Francis report on Mid Staffs Hospital Trust challenged senior leaders’ failure to act on evidence of bad practice.
Earlier this year, 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 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 per cent 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 per cent said they plan to leave the organisation, whereas among those who’d not observed misconduct, only 41 per cent aim to leave.
So in addition to other commercial impacts, we now also know that misconduct carries a talent retention cost.
What can you do in your organisation?
You need to focus on both the ‘hard’ stuff – policies and frameworks – and the ‘soft’ stuff – values and culture.
At the 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.
Furthermore, 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.
Although HR might need to take a lead in reviewing the relevant policy and procedural frameworks, including whistleblowing, we’ve seen that that alone doesn’t change the culture, and isn’t enough.
Start with the big picture. Begin by considering the external environment in which your organisation operates and understand the pressure on ethical behaviour that this 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.
Expect it to take time and cost money, but the evidence is that the ROI will always be worth it.
Alex Swarbrick is Senior Consultant at Roffey Park.
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