More Focus on Ethics, Less on Checklists

When it comes to business ethics, experts say HR leaders need to do a better job managing both employee behavior and their company's corporate culture, rather than simply relying on a check-the-box approach to the issue.

Thursday, February 23, 2017
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As an HR leader, do you focus more on employees' actions or the in-house rules and policies that govern their behavior?

Many pay too much attention to the latter, according to a new report published by LRN, a New York-based consulting organization that specializes in ethics and regulatory compliance. Last year, the company surveyed more than 550 ethics, compliance and legal experts predominantly throughout North America and, based on their responses, published the Program Effectiveness Index Report. Among its key takeaways is that too few companies adopt a "values-based" approach to shaping employee behavior.

"Our organization has long believed that culture is at the core of organizational behavior," says Michael Eichenwald, a co-author of the report who also leads the firm's advisory practice. "What this report argues for is the need for compliance officers to stop managing the program and start managing ethical behavior within their company."

According the report, 90 percent of chief ethics and compliance officers at companies with the most ethical cultures say their middle managers are enabled to help communicate the firm's conduct throughout the organization. However, almost half -- 48 percent -- of all survey respondents stated that it's sometimes or almost never true that their organization develops and/or coaches middle managers to promote their ethics and compliance program.

Also, nearly half -- 49 percent -- of respondents said that the C-suite engages them while making strategic decisions. But only 45 percent say these executives consider ethical behavior a prerequisite for promotion and over 70 percent hold leaders accountable for ethical behavior.

The report also states only half of the ethics officers reported that middle managers at their firms believe they are responsible for assessing ethics compliance risk for their business and teams.

The survey's findings reveal huge partnership opportunities for HR professionals and compliance officers, Eichenwald says, to consider employee behavior beyond the core nuts and bolts of HR. They need to manage both employee behavior and their corporate culture with the same rigor they've used to deploy key programs that tend to be process driven, he says.

"There's room for HR to say, 'What are the behaviors we want from employees every day and how do you, as leaders, show up and make that happen?" he says. "The challenge for HR officers is making managing culture a core part of what they do without making it the full subject of what they do."

Since corporate policies or guidelines can't address every ethical dilemma in the workplace, it's also important for HR to create feedback opportunities up and down the leadership chain, such as appointing an ombudsperson or installing anonymous drop boxes, says Patrick Hyland, director of research and development at Mercer Sirota (formerly Sirota), a global HR consulting firm in New York.

Through these communication channels, he says, HR can identify employee pressure points and help workers develop ethical solutions instead of taking ethical shortcuts. But the effort must be genuine. Employees must believe that senior leadership values both good and bad news.

However, don't just focus on unethical choices or actions, he says, which can lead to a punitive workplace culture. While ethical lapses must be explored and addressed, he says, strong ethical behavior should be celebrated and promoted at department meetings or in company newsletters.

"Make sure that employees feel they have a voice, that if they do have a concern about ethics that they feel confident someone will act on it," says Hyland, adding that supervisors must also be accessible to staff and model ethical behavior. "The best organizations are constantly curious about the ethical behavior within their organization. They don't rest on their laurels or assume that just because they have a history and track record of ethical behavior that challenges or ethical lapses might not pop up."

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Still, building and maintaining an ethical culture can be a tough sell for HR if the organization's leaders consider ethics as nothing more than "a garnish to a main dish," says John Paul Rollert, adjunct professor of behavioral science at the University of Chicago's Booth School of Business.

Ethics talks by leaders need to be a natural part of their daily routine instead of only being addressed at Friday morning meetings, Rollert says. That will help foster an environment where employees feel safe addressing ethical concerns instead of hiding their confusion, fearing they'll be perceived as weak or indecisive.

"Most of the ethical deliberations and qualms that present themselves in a professional environment are akin to a small buzzing you hear in your head," Rollert says. "The more you have an environment where people address that small buzzing instead of shutting the door, the more moral an environment tends to be. It's important for people to know in a direct way, often from senior executives, that addressing the buzzing and making the right decision is absolutely essential."

He points to Google as one company that stands out for its ethical workplace culture. Based solely on his personal observations of the company, employees there seem excited and optimistic about their work and believes the company's values and ethics are organic, influencing work decisions from top to bottom, he says.

HR needs to create guidelines for middle managers often involved in moral tradeoffs, he says. They need to be assured that their boss will back them up when making ethical decisions and that ethics is reflected in the company's bottom line.

"Doing well and doing good go hand in hand," says Rollert. "If businesses have an interest in getting top talent, they absolutely have to be sensitive to that."

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