An Ethical Workplace Culture:
The Three Primary Factors

What does it take to have an ethical culture? Cynthia Schoeman identifies the three primary factors that contribute to an ethical culture and demonstrates how HR can positively influence all three areas.

Ethics has, in theory, always been an important issue in organisations of all kinds, whether in public, private or not-for-profit/NGO sectors. A number of factors have raised the profile of ethics, making it a much more recognised issue in the workplace today. Two such factors are increased legislation and well-recognised corporate governance guidelines. This has been driven by regular high-profile ethical failures, and the publicity given to the negative consequences of those ethical scandals have included business closure, executive resignations, jobs losses, fines, settlement costs and damaged reputations.

As a result, most organisations increasingly acknowledge the need to guard against major misconduct. A smaller number of organisations are going beyond just avoiding misconduct, but also strive to increase the level of ethical behaviour. For those organisations, the ultimate goal would be the creation and maintenance of an ethical culture, where ethics permeates the way things are done.

This goal is, however, not an easy, one-step exercise. It necessitates wide support within the company and is determined by a combination of initiatives. There are three primary factors that contribute to an ethical culture – and HR is able to provide input and positively influence all three areas.

1. Ethical standards

A company’s ethical standards are generally documented in a code of values, a code of conduct and supporting policies which, together, constitute a code of ethics. The principal purpose of the company’s ethical standards is to provide a clear guide for behaviour.

This necessitates that the standards are clearly defined, up-to-date (for example, in terms of legislation and best practice) and comprehensive (but without being too lengthy). The success of ethical standards rests on the company’s leadership giving their full, active support.

This is generally considered an HR function and, as such, HR is perfectly placed to ensure that this foundational aspect of ethics is current, annually reviewed, well understood within the organisation and, consequently, an effective facet of the organisation’s ethics programme.

2. Ethical awareness

Ethical awareness is a very effective (often under-rated) factor that serves to promote ethical behaviour on the one hand and reduce unethical behaviour on the other hand. The best example of the latter is the effect of visible policing. For example, the presence of private security vehicles patrolling some suburbs may not result in many (or any) criminals actually being apprehended, but it serves to raise ethical awareness and, in so doing, acts as a deterrent to crime being committed in those areas. The effectiveness of the patrols rests on a regular presence to maintain the necessary level of awareness. If the security vehicles patrolled the area infrequently or sporadically, it would decrease their ability to reduce unethical behaviour.

The same principle can be applied to the workplace, where high levels of ethical awareness can help reduce misconduct, while also promoting ethical behaviour, keeping the issue of ethics alive. It can be achieved by a variety of mechanisms of which the following three are especially impactful:

• Assessing, monitoring and reporting on ethical performance

  The Companies Act, Social and Ethics Committee and King III advocate the assessment, monitoring, reporting and disclosure of a company’s ethical performance. These activities can, and should, also serve to promote employee ethical awareness (amongst other benefits). HR is able to drive this process or to make recommendations to the appropriate person or committee, for example to the Social and Ethics Committee.

  A tool such as the Ethics Monitor, a web-based ethics survey, meets the requirements to assess, monitor and report on ethics. Added to that, since the ethics survey acts as an effective “listening exercise” to surface all employees’ ethical experiences and perceptions, it provides credible quantitative data for an accurate ethics report, an in-depth understanding of the organisation’s current ethical status, and a comprehensive ethics risk analysis, with insight into where to act and with what priority.

  HR can enhance ethical awareness by volunteering to act on the survey results (whether to maintain identified strengths or address current weaknesses) and by sharing the ethics survey results with employees (which also builds trust, especially when the remedial actions are implemented).

• Ethics training

  Ethics training is another important contributor to building and maintaining ethical awareness. Since training and development generally fall within the scope of HR, it is a further area where HR professionals can make a difference.

  Face-to-face sessions are best for the most effective engagement with employees. Regular, short training sessions have the effect of keeping ethics alive and making it a real part of the organisation’s focus. Ideally, these sessions should be conducted twice a year for all employees. This warrants that the sessions are designed as a series with the content of each being able to stand alone while building on the preceding session. This type of training is particularly suited to addressing the practical applications and implications of the company’s ethics for employees, and to providing the opportunity to discuss and clarify ethical challenges and dilemmas.

  Organisations should also conduct annual training to reinforce and refresh employees’ knowledge and understanding of its code of ethics and ethics policies. So too should ethics form part of the company’s induction training for all new employees. Neither of these need be done face-to-face. A web-based course with multiple-answer questions that direct incorrect answers to the relevant code or policy is a quick, easy and effective intervention.

• Leadership

  Leadership is widely regarded as the most powerful factor shaping behaviour, ethical or otherwise. In their capacity as role models, leaders are able to build ethical awareness very successfully. Their effectiveness will rest on the extent to which ethics is genuinely supported by the most senior leadership and on the company having a clear ethics strategy.

  HR can again be involved to ensure ethics workshops are conducted with the company’s leadership and top talent to emphasise the company’s commitment to ethics and to better equip their leaders to be ethical role models.

3. Operational ethics

Integrating ethical standards into the company’s operations influences whether and how ethics is practiced – and thus also influences the creation of an ethical culture. In turn, the extent to which ethics is exercised and included in the organisation has a proportional impact on ethical standards, either supporting or undermining them, and on ethical awareness, either building or eroding it.

Ethics can be incorporated into a range of systems and procedures within HR’s domain, such as:

• Ethics hotlines (which should be used with caution and wisdom)
• Recruitment checks, for example to avoid qualification fraud
• Remuneration and promotion discussions and decisions
• Performance management systems and evaluation criteria
• Employee of the month nominations
• Organisational goals and measurement. This can serve to monitor sensitive issues to reduce unethical behaviour. For example, safety goals and measures in the mining industry are important indicators to drive a reduction in unsafe behaviour
• Transparency in communications about disciplinary incidents. This can discourage further unethical behaviour and promote ethical behaviour by the company’s visible commitment to its values and rules.

In addition, if the HR executive is a member of the company’s Social and Ethics Committee, this too represents an area where influence can be exerted to ensure that the Committee fulfils a meaningful role in the organisation.

Being successful at building an ethical culture brings with it many internal, operational benefits, such as greater trust, better and faster decision making and consistency of responses, greater confidence in top management action, more individual accountability and less need for policing and the avoidance of excessive regulation. Other benefits include being able to attract and retain top staff and board members, increased employee engagement and commitment, improved risk management, higher levels of investor and market confidence and enhanced corporate reputation and brand equity.

Many of these benefits of sound ethics directly support HR’s areas of responsibility and, therefore, represent a good reason why HR should support ethics. However, the greater reason is arguably that HR maximises their spheres of responsibility and influence to make a meaningful contribution to creating a more ethical workplace for their employees. As is always the case, the extent to which HR makes this difference will rest on their commitment to ethics and the level of their engagement in pursuing an ethical culture.

By Cynthia Schoeman
Posted on Human Capital Review, June 2013