Article: Building an ethical culture


Building an ethical culture

In an environment where success is largely number-driven, the only way to push people to align with ethics and values is through constant reiteration
Building an ethical culture

Thanks to GenY, the pressure of building an ethical organizational culture is now oozing from within


The biggest challenge in training people on ethics is identifying the grey areas


Raw competition, uncertain market conditions, emergence of new players and perpetual innovation has caused the business environment to be driven by delivery of numbers today; success of an organization in most parts is evaluated in terms of the figures it displays. In such an environment, employees are incentivized on the basis of his/her delivery. With focus being on figures, the organization inadvertently may develop a temptation to set a tone which employees could perceive as “ends justify the means”. As a result, there could be chances for employees to struggle between professional right (delivering numbers) and moral right (taking an ethical path); the dilemma is of one right against the other.

This burning ethical issue became the topic of a roundtable discussion organized by the CFA Institute, a global association of investment professionals which in the forefront of developing professional competence and improving ethical conduct in the investment management profession,  and People Matters in Bangalore in April 2015. The event was based on a CFA Institute-sponsored Economist Intelligence Unit (EIU) report that examines the role of integrity and knowledge in restoring culture in the financial services industry.  The event with the topic “Building an Ethical Culture in Aligning People and Values” saw the participation of business and HR leaders from different sectors. The objective of the roundtable was to explore how Indian firms are responding to similar challenges as they seek to compete in the global marketplace. The debate revolved around what exactly is ethics, how can HR practitioners move towards building a culture of ethics, how can grey areas be identified and how can organizations avoid the pitfalls of the grey areas.

Short-term profitability versus sustainability

Delivering numbers is important, but how one does that is important too. The dilemma of ethics usually arises if the leadership fails to set the tone and culture of ethics when it comes to reaching business targets. To incentivize an employee for the numbers he delivers and to criticize him for the means he adopts to get the result is a management issue; balancing ethics with business targets is therefore likely to emerge as a leadership driven issue. Debolina Dutta, Head HR, VF Corporation, India, argues, “The choice between the ‘right’ and ‘right’ defines the moral character of the organizations and the individuals who are part of it.”

Today’s number-driven success is a very short-sighted vision. For any business to succeed in the long run, it’s important to ensure long-term customer loyalty. For this, the key is to build a culture of integrity and ethics that shapes organization brand. “Growth metrics or sale metrics alone defining organizational success is a thing of the past,” says Shalini Pillay, Head People, Performance and Culture, KPMG India. Brand of a company is closely knit with ethics and morality for which customers usually choose a product/service.

It’s important to note here that the pressure of ethical practice does not just come externally from customers. It has been noticed that Gen Y, which forms a major chunk of the workforce today, does not shy away from escalating internal concerns, especially those relating to morality and ethical practices to a global scale if things within organizations do not run the way they had thought. So the pressure to build an ethical organizational culture is now oozing from within.

Some HR-driven initiatives 

From top to bottom, ethics has emerged as one of the major concerns for companies, and building organizational culture based on ethics has been the focus for many organizations. Though the debate on whether monitoring ethics in an organization falls under the HR purview or be taken up by Learning & Development team continues, HR in many organizations have come up and made an effort to align ethics with people goals. Some best practices in ensuring an ethical work culture are:

Whistleblowers: Setting up a whistleblower policy—where employees raise concerns regarding fraudulent acts and then file a report—has been the most common practice in organizations. However, the drawback of post-mortem of frauds and unethical practices is that such acts come to light only after the damage has already been done.

Training and Mentoring: Constant guidance and training can be one of the greatest ways to prevent employees from mis-selling. Organizations need to set the correct tone for employees to build ethics in their character. “As an organization, you could reach a crossroad and be faced with a decision. At such times, you have to take the decision not as an organization, but as an individual. So while mentoring, you can’t give what you don’t have,” says Mayokun Aduwo, Lead, HR Operations India and South Asia, IBM. As brought into the forefront by many, constant reiteration on subjects of ethics and moral practices results in the development of an ethical mind. For this, it is important to have dialogue, outline concrete rules defining ethics for everyone from top to bottom within the organization. This inevitably will lead to creation of a culture based on ethics within organizations. In this regard, building a strong learning and development team is likely to go a long way.

The biggest challenge with regard to training, however, is to identify the grey areas that lie between right and wrong. What does the word “ethics” stand for universally? Jayanti Gopal, Vice President and Country Head – HR, StateStreet India points out, “For example, the kind of complex information systems that we have today makes it extremely complex across geographies to deal with varying standards of data privacy etc. As a result, grey areas regarding ethics are likely to emerge and they are most difficult to identify.” Another may see what is considered ethical in one culture as unethical. While many employees may be focused on measuring against the trust index of the company, a mis-selling could still take place because it could be considered unethical in another culture or organization. Since there is no clear-cut answer to grey areas of ethics, these are the most difficult to identify, and thus easy to overlook.

Rewards and Recognition: An interesting question when it comes to building an ethical business culture is “how many organizations actually reward ethical practices”? It may appear to be a little out-of-the-box to reward practices that are supposed to fall under the general course of action, or so to say, be “normal”. But rewards and recognition serve as effective tools to promote a culture based on ethics within organizations. Employees today are rewarded employees’ contribution to the business proposition based on the numbers he/she delivers. To promote an organizational culture based on ethics has to be pushed by rewards and recognition to elevate and boost employees’ morality. Shanthi Naresh, India Business Leader, Talent Consulting and Information Solutions, Mercer shares how the company has instituted quarterly awards for demonstrating company values, one of them being integrity, which has really helped the company evolve.

Identify disengaged employees: According to findings, it has been outlined that employees that are the most disengaged are likely to indulge in fraudulent and unethical practices so as to meet their targets. Being able to identify such employees and providing them with correct guidance right in the beginning will lower the chances of unethical practices. If one were to look at the incident at Maruti that occurred some time ago where the HR manager was burnt alive because he was intervening between the union and the management, research tells that those who were behind this were quite disengaged within the organization. One of the industry spokesperson also emphasizes, “Engagement can play a powerful role in even controlling the kind of behaviour that you want to elicit from the employees.”

Apart from these hard-core HR led initiatives, organisations can also deploy other secondary approaches to curb unethical practices:

Naming and shaming: In today’s competitive world, reputation is integral for professional growth. Appraisals and promotions get hampered when a person’s name is attached to unethical practices. To avoid these, organizations can draw clear lines stating the aftermath of indulging in fraudulent acts.

Catch them young: Collaborating with colleges and taking initiatives to incorporate ethics into the curriculum of students can help outline the standards of ethics in organizations at an early stage. So when graduates enter the corporate world, they are well versed with ethical norms that run the business world.

In conclusion, when delivery of numbers is portrayed to be the ultimate end that defines performance, the line between right and wrong can get blurry. In such an environment, the only way to push people to align with ethics and values is through constant reiteration. The more the emphasis on ethics, the more concrete will be the line that sets the wrong aside from the right in the mind. Mere reminder discussions on ethics and values will, however, show no fruit unless they are supported by material benefits; organizations need to launch awards or bonus programs and recognition tools for those showcasing exemplary conduct in ethics, morality and integrity.


Constantly reinforce awareness on ethics   

Paul Smith, President and CEO, CFA Institute on why it is necessary to serve the best interests of clients as well as society. As companies tread on the path of profit, it becomes very hard to think about ethical issues with a long-term perspective. A lot that is not talked about is how countries can structure their organizations better to enable them to think for longer term, which is a big challenge in itself. Unfortunately, the structure of the capital market is such that people are incentivised only for the short term.

It is time to build companies that not only serve the best interests of clients, but that of societies as well. Ethics is such an issue that it can’t be solved in isolation without getting into the ambit of social responsibility. Usually, people behave fairly well with one another at the personal level. But, when they get into a corporate environment, it becomes acceptable to sell something even if it doesn’t fit the purpose or overcharge the client. All of us face dilemmas daily like what should one do when a traffic cop pulls you over? But it is interesting to note that people park their ethics before entering the corporate environment.       




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Topics: Culture, Strategic HR

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