The concept of organisational culture surfaced in the late 1970s and is as relevant in the workplace today as it was then. Amongst the wealth of theories and thought leadership on the topic, the definition of culture as “the way things are done around here” is widely recognised. So too is it generally accepted that values play a significant role in shaping culture and that, in turn, culture shapes behaviour in organisations. The quest for more ethical workplace conduct makes culture especially pertinent and it makes the attainment of an ethical culture a high-priority goal.

Leaders who aim to achieve this need to start by understanding the value of an ethical culture, such as that it produces higher levels of individual accountability and avoids the need for excessive regulation. An ethical culture serves to improve employee commitment, investor and market confidence and customer loyalty, which collectively enhance the company’s reputation and brand equity. A sound ethical culture also positively impacts risk management, reducing the likelihood of high costs and other negative consequences associated with ethical breaches.

As convincing as these benefits are, the leadership challenge is to ensure that this value is appropriately recognised. Optimally, ethics should be recognised as a valuable facet of the organisation’s asset base, albeit an intangible asset, that builds greater trust and significantly enhances the quality of stakeholder relationships.

Building an ethical culture also necessitates an understanding of the organisation’s current ethical status. The recommendations and requirements contained in King III and the Companies Act (such as a Social and Ethics Committee) regarding the assessment, monitoring and reporting of ethics should translate into the clear identification of an organisation’s ethical status. This, however, assumes that the organisation has moved beyond a “tick-box” compliance approach - which is often not the case.

Measuring ethics via an instrument such as the Ethics Monitor’s web-based survey makes good business sense as it goes beyond "tick-box" corporate governance and legal compliance and provides in-depth insight into the organisation’s current ethical status, which makes ethics much easier to manage going forward. In the words of Peter Drucker, the management guru, “if you can measure it, you can manage it”.

For leaders who embark on this path, there are six key building blocks to create an ethical culture.

1. Leadership commitment

The first non-negotiable requirement is the commitment of the organisation’s leaders because they exert the greatest impact on organisational ethics. They are, of course, not the only ones within a company who are responsible for building and maintaining an ethical culture. For example, the HR Director and the members of the company’s executive committee and social and ethics committee would also be expected to demonstrate their adherence to and support for the culture. And employees are expected to uphold the culture. But building an ethical culture must start with the organisation’s leaders and its success depends on their active, on-going attention.

2. Ethics goals and strategy

Defining the organisation’s ethics goals and strategy is an important next step. Without this clarity the initiatives that follow risk not being focused or aligned. As the cheshire cat so aptly said to Alice when she asked for directions in Wonderland without a destination in mind, “if you don’t know where you’re going, any road will do”.

Building an ethical culture can serve as the optimal goal for almost any organisation. But the success of realising that goal will rest on the quality of the strategy that is put in place. Most frequently, the strategy is almost exclusively focused on reducing unethical conduct. While this is crucial, it is not sufficient - minimising misconduct does not necessarily ensure proactive ethical conduct. Therefore, to this strategy needs to be added a distinct emphasis on improving ethical conduct, which should encompass two goals. Firstly, there needs to be a focus on increasing ethical maturity, which implies that ethical behaviour is driven more by a commitment to values, rather than simple compliance with laws and rules. Secondly, emphasis must be placed on expanding the organisation’s ethical boundaries to ensure its values and ethics apply to all the stakeholders and embrace a triple bottom line. There are two principles that should underpin an ethics strategy: It should follow a proactive approach, rather than a reactive one, and all ethics initiatives should be integrated to maximise the impact, as opposed to diminishing it via a fragmented set of initiatives.

3. Ethical standards

Setting the ethical standards of the organisation entails having a clear, well-communicated code of ethics that includes the organisation’s values, its code of conduct and the necessary supporting policies. The effectiveness of an organisation’s ethical standards rests on unwavering equality in enforcement and the unwavering commitment of leaders at all levels to the company’s values and rules. They need to be seen to be “walking the talk”.

4. Ethical awareness

Ethical awareness is generally an under-used feature of an ethics programme. But achieving high levels of ethical awareness makes a valuable contribution to both reducing unethical conduct and increasing ethical conduct. This derives in part from a “big brother is watching” effect, while the regular, constant focus on ethics serves to continually reinforce its importance.

Ethics awareness is achieved in numerous ways of which communication and training are key. Ethics needs to be communicated regularly and consistently – not just now and again. And it needs to be talked about – which means, for example, that it needs to be on the agenda at strategy sessions, executive committee meetings and management meetings.

Ethics training also boosts ethical awareness. In this regard, organisations need to source effective training that adds value: Two days spent on the minutiae of a code of conduct is likely to be boring and considered a waste of time - and hence it would be ineffective. Training needs to be done via appropriate delivery methods, ranging from face-to-face interactive discussions to e-learning. Most importantly, training needs to move beyond only telling employees what they already know (yes, they do know bribery and corruption is wrong). Workplace misconduct rarely happens because the employee didn’t know right from wrong. Instead, it is more likely to arise because of unethical choices. Training, therefore, also need to focus on the question of ethical choices and ethical decision making. After all, better choices and better decisions make for better conduct.

5. Ethics assessment & reporting

Ethics assessment adds to the organisation’s ethical culture by determining its ethical strengths and vulnerabilities. The effectiveness of assessment rests on a few critical factors. Firstly, it should provide accurate, quantitative measures. This supports better risk management and allows management to identify where to act to improve ethics. Secondly, to ensure the credibility of the results, all employees should be given the opportunity to share their experiences and perceptions of ethics in the workplace. When the assessment includes only a small sample of employees, the validity of the results risks being queried - by management if the results are unexpectedly poor and by employees if the results are unexpectedly good. Similarly, the opinion of just the Board does not constitute a representative view of the whole organisation and all its employees. Thirdly, the assessment tool used must ensure the anonymity and confidentiality of the employees and their responses, which is vital to access their honest responses. An instrument such as the Ethics Monitor’s web-based survey achieves this by allowing respondents to safely share their experiences and views.

Ethics reporting, despite being a King III and Companies Act requirement, is still mostly in its infancy. An ethics report may include the Board’s view of the company’s ethics, unethical incidences and the outcomes, and some details of the organisation’s ethics programme. It seldom stems from an accurate, representative assessment and thus rarely includes quantitative measures of the organisation’s ethical status, strengths, risks and performance or information about remedial action taken for ethical risks and the outcome thereof. But it should if the intention is to provide meaningful insight into the company’s ethical status.

6. Performance management

Finally, the inclusion of ethics in the performance management system is a noteworthy building block. Making ethics a facet of good performance strengthens the company’s ethical standards, maintains ethical awareness and works to shape behaviour, all of which add support to the creation and maintenance of an ethical culture.

Collectively these six building blocks can help build an ethical culture. And it makes great business sense: The rewards are great, not least because a strong ethical culture acts as an effective defence against potential breaches of ethics. However, the key question is whether the organisation’s leaders are fully committed to both starting and staying on this path - which is not only to build and maintain an ethical culture, but, crucially, to lead by example in an ethical culture.

© Cynthia Schoeman, Ethics Monitoring & Management Services (Pty) Ltd, 2014