July 31, 2007
What happened to companies like Enron, WorldCom, Tyco, or even organizations like the Catholic Church where ethics collapsed and management behavior became criminal? Their leaders did not set out to break the law. So how did they end up disgraced, and some even behind bars?
Many of these problems can be traced to a failure of ethical decision-making. Ethics acts as a "fail-safe" mechanism.
People can start out with good intentions and correct principles and then incrementally twist them to suit their own interests. This is especially true in larger companies where it is easier to distance oneself from the "faceless" corporation. That's why people who otherwise abide by high ethical standards chose to act contrary to those beliefs and leads to disastrous consequences for their organizations.
Most business executives want to run ethical companies. They believe the culture of their organization is expressed through their policies and employee handbooks. But it doesn't really work that way. Instead, the culture of a company is defined by the conduct of its managers, officers, and executives. Employees pay much closer attention to what leaders do than what they say -- and they emulate the behavior that leaders display.
In business, ethics is everyone's business. If employees see executives and managers acting in an unethical manner, they feel justified behaving the same way. If management treats other employees, customers, or vendors poorly, don't expect the employees to behave any differently.
It is tempting for employees to hide behind an organization and act as if their actions are justified because "everyone is doing it." A paycheck is a very powerful motivator, especially for individuals without a financial cushion. It's easy to be ethical when you have a roof over your head and your savings account can sustain you for a few months. But it becomes much harder to stand up to unethical management practices when you live paycheck to paycheck.
Organizational and financial pressures can often lead to a collective mentality that masks the ethical compromises individuals make; compromises they would ordinarily not make on their own. Harvard researcher Laura Nash in her book "Good Intentions Aside" writes: "History and developmental psychology have indicated that members of almost any group, though individually well intended, can sink to immoral depths they would never dare test as individuals."
Rational individuals jump on the bandwagon because their superiors are condoning or encouraging the unethical behaviors. Passions and emotions over-ride logic and common sense and circumvent an individual's personal ethical standards. This can lead to actions that cross over into criminality.
Ethical behavior must be central to management conduct and strategy. It must become a key part of the day-to-day activities of the business. Ethical policies will have no lasting impact unless management follows them and rewards employees who uphold them.
Strong ethics create high aspirations and a culture of trust and integrity. If a company strives for a higher ethical standard, employees are ennobled as well as enabled. Productivity can increase in terms of better quality products, better employee relations, better customer relations, and reduced organizational costs. To accomplish this companies must be willing to support, reward, and promote, the ethical and responsible employees and admonish, retrain, and fire if necessary the unethical, unmotivated, and un-productive ones.
Employees need to know that a level playing field exists in their workplace. Values such as trust, honesty, integrity, value, and excellence in all areas of the organization must be continually exemplified, supported and rewarded by management.
Strong business ethics are good business. The global business environment is extremely competitive and ethical lapses and the problems they create provide the opportunity for competitors to grab market share and diminish your business. Ethics is indeed the best and most long-lasting competitive advantage an enterprise can have! It makes good organizations become great.
Chris Banescu is an attorney, entrepreneur, and university professor. His business, ethics, and management articles and podcasts can be found on www.ChrisBanescu.com. He is a regular contributor to OrthodoxyToday.org, manages the conservative site www.OrthodoxNet.com, writes articles, and has given talks and conducted seminars on a variety of business and management topics. He has also written book reviews for Townhall.com and articles for Acton.org.
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