THE ETHICAL MIRAGE

We have seen such a range of bad behaviour from companies in recent years it’s tempting to conclude the Western world, let alone the less developed part, remains extremely corrupt.

In reality, many countries are now trying hard to improve their approach to running responsible businesses. So far though, there’s no international agreement on what a principled business looks like.

Instead, there’s a formidable range of manuals, codes and varied legal frameworks attempting to nail down what being responsible means in terms of process, employee behaviour and corporate governance.

It’s also getting less easy to avoid taking action in this direction. Some tough rules describing unacceptable behaviour, particularly around bribery and transparency are already in place in the US and to a lesser extent in the UK and elsewhere.

To successfully do sustained business in many places around the world you will be expected to show you have in place measures to ensure your company will behave responsibly—to demonstrate you are likely to behave in an ethical or responsible way.

Yet there remains the big question of how to ensure employees do the right thing. This includes: consciously tackling ethical dilemmas, spotting misbehaviour around them, speaking up if they see it, where necessary raising concerns with their manager or supervisor, or pushing matters of concern to higher levels, using existing mechanism such as independent help lines or an ethical “ombudsperson.”

Ultimately, all the mass of codes and rules are abstractions if people are not actively engaged with doing the right thing at work. This is ethical engagement, and most research confirms relatively few people (around 3% of employees in surveyed companies) feel they are indeed genuinely ethically engaged, that is they are in effect self-governing—willing to take responsibility for pursuing ethical behaviour around them.

Until this small percentage increases, there will remain a significant compliance gap–the difference between what should happen and what does happen. Closing the gap is a concern of professionals such as compliance or ethics officers, and of senior leaders. Both seek the reassurance that the organisation is not being put at undue risk by employee misbehaviour.

How do you change people’s behaviour so they become ethically engaged—actively wanting to promote ethical behaviour within a company? There are two essential starting points and both rest with senior leaders.

First, top executives need to have evolved their own moral compass and developed the confidence to set the tone for the entire organisation.

Secondly, leaders must actively tackle the widespread perception of employees that it does not pay to speak up about unethical behaviour which they may spot around them at work.

The first of these, the need to set the right ethical tone at the top, is already enshrined in some national regulations, most notably in the US. To set the tone is to repeatedly articulate what sort of organisation you expect it to be, and then be seen to invest serious energy and time pursuing this strategic goal.

However, setting the tone turns out is not quite as simple as it may sound. Psychological research for example, reveals none of us is as ethical as we think we are. Leaders and managers often simply do not recognise there is an ethical dimension to situations and choices in which they become involved.

There is what psychologists have called “The Ethical Mirage”—people predict they will behave more ethically than they actually do. [1] The forces driving this misperception are complex and yet almost certainly influence the ability to set the tone from the top and can lead to unethical behaviour.

Raising leaders’ awareness is what behavioural change is all about, and there are some powerful tools to achieve this, once the decision is made to tackle the issue seriously.

The second of these starting points for changing people’s behaviour so they become more ethically engaged, is summed up by the widespread fate of whistle-blowers. Relatively few organisations actually reward employees for speaking up about ethical concerns. Those who do speak up often risk retaliation from the hierarchy or from colleagues who may feel threatened or betrayed by such actions.

From an employee’s perspective, almost regardless of which nation you are talking about, and whether they diligently direct their concerns through the proper channels, drawing attention to unethical behaviour can and often is severely career limiting.

There are exceptions of course. Some companies maintain an independent ethical help line where concerned employees can raise issues and be assured of anonymity and protection. Such mechanisms are part of establishing a culture of trust, helping to create an environment in which misbehaviour can be rooted out sooner, rather than later.

Setting the right tone, and installing mechanisms for assuring employees it is safe to speak up are now serious leadership challenges in the 21st Century. Both represent genuine developmental challenges for individuals and companies.

In the case of setting the right tone the task involves making sure there is close alignment between core values, strategy and leadership daily behaviours. In the case of making it safe to speak up, it usually involves a culture shift in which openness and transparency become the norm.

Andrew Leigh is author of Ethical Leadership: Creating and Sustaining and Ethical Business Culture, to be published by Kogan Page in October 2013.