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Roadblocks to Creating a Culture of Ethics
 

By Pamela Babcock  3/13/2013
 

NEW YORK—Setting aggressive financial goals that employees can’t make, having “bad barrels” instead of a few “bad apples” and watching a high performer violate rules are a few signs that an ethical workplace culture may be at risk, experts said recently.

“There are certain telltale situations where you will find opportunities to prevent and detect ethical violations,” Michael J. Critelli, CEO of Dossia and former chairman and CEO of Pitney Bowes, said to attendees on March 6, 2013, at the Global Ethics Summit presented by the Ethisphere Institute and Thomson Reuters.

A panel discussion showcased business leaders discussing the critical role ethics should play and how to imbed a culture of ethics in an organization.

The discussion moderator was former CEO of Sensormatic Bob Vanourek, co-author of Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations (McGraw-Hill, 2012), which features best practices from leaders at 61 organizations in 11 countries.

On the panel were business leaders he interviewed for his book. While introducing the panel members, Vanourek noted that in the book, Critelli said the real test of whether an organization has a zero-tolerance policy for ethics violations is if a high performer “violates the rules.” Panelist Thomas M. McCoy, an attorney and partner in O’Melveny Myers’ Washington, D.C., office, told him in interviews for the book that vision or value statements should “tell you what to do when you don’t know what to do,” Vanourek said.

Another panelist, John Bogle, the founder and retired CEO of The Vanguard Group, said the company’s rule book used to be simple and straightforward: “Do what’s right,” and “If you’re not sure, ask your boss,” Vanourek said. “Great leadership,” Bogle told him, “is integrity and trustworthines—it is vision, passion and clarity.”

What Makes an Unethical Culture?

During the session, Critelli highlighted several factors that can lead to or indicate an unethical culture:

Outsize financial rewards, like huge stock-option grants or huge bonuses. Critelli said he gave them once and “was shocked to the degree that otherwise cautious people took excessive risk in trying to reach the target.”

A visible succession battle for the CEO or another senior-level position. Critelli said it was usually not the candidates but the people loyal to the candidates who often invite unethical behavior.

End-of-quarter revenue spikes. Employees may think they can “cheat” or cut corners if business is approved in an end-of-quarter rush. Watch out for employees who far exceed targets, past performance or year-end market growth.

Assessing an Organization’s Ethics Culture

McCoy offered these steps to ensure an ethically consistent culture:

Get data. Poll employees to assess company culture. A reality check can provide a baseline to measure progress.

Review vision, purpose and value statements. Does the CEO model ethical behavior? When making big decisions, does the organization adhere to its values? If not, it may be time for realignment.

Don’t focus just on “bad apples.” “If you look for the bad barrels, you will minimize the bad apples,” McCoy noted. Pay attention to business units, particularly in other parts of the world.

What Makes an Ethical Culture?

Bogle said that Vanguard’s key was “transparency in everything you do,” as well as creating “a culture of irreverence” that allows dissent. “You want to have some kind of freedom of dissent, and that’s very hard to do the bigger you get and very hard to do when you’re trying to make all those numbers,” he said.

Critelli said boards should look for leaders who have “the iron will to do the right thing all the time. That’s how you overcome that tendency towards short-termism.”

Vanourek encouraged attendees not to view their role so narrowly that they focus only on “compliance check-box things” or say, “This is the law I have to follow, and that’s my scope.” Rather, he said they should ask, “How expansive can I make my role to really influence the ethical culture of this organization? Am I courageous enough to be a voice of one when everybody is sitting in that staff meeting talking about doing something that just doesn’t sound right?”

HR Can Help

While many organizations recruit for “head” issues (experience or education), truly great ones dive deeper into behavioral issues to assess character, Vanourek said. Ursula Burns, chairman and CEO of Xerox, has her staff vet candidates for head issues. Vanourek quoted her as saying, “All I have to focus on is their character and their culture fit.”

And that’s where HR can play an important role, he pointed out.

“Don’t be afraid to use your power to go to HR and say, ‘How are we interviewing people?’ ” Vanourek said. “That is what these leading-edge organizations are doing.”

McCoy said companies should focus on “organizational justice,” since “it’s all about the employees.”

“If they really are proud of the system of organizational justice” and feel empowered, “they’ll want to know what the rules are, and they’ll want to comply with the rules, and they’ll want to do the right thing.”

Pamela Babcock is a freelance writer based in the New York City area.

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