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5 Nuggets to Protect Your Organization from Ethical Disasters

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I recently read a phenomenal article, Avoiding Ethical Misconduct Disasters by Dr. Chandler. He identifies the magnitude ethical misconduct disasters can have on businesses.

“Ethical misconduct disasters are specific, unexpected, and non-routine unethical events or a series of unethical events that create significant operational disruptions and threaten or are perceived to threaten an organization’s continuity of operations.”

 

 

Here are 5 top nuggets of advice I pulled from the article:

 

1. Strategic Integrity Continuity Makes a Difference

 

In his first point, Dr. Chandler speaks to prioritizing integrity continuity. He urges executives to add “ethical issues…on the strategic agenda. Such planning must go beyond compliance issues and reactive disciplinary policies to actually manage integrity.” This means helping employees align with the company’s mission and values. No longer is it acceptable to review the company values once a quarter. These values need to be ingrained in employee’s behaviors so they are top of mind when ethical dilemmas arise. As Dr. Chandler says, “Employees who know that particular workplace decisions, behaviors, and processes exist in an ethically judged context are more aware and motivated to act ethically.”

 

[bctt tweet="“Integrity should be a priority because not only is it legally required, but also right thing to do.”"]

The code of conduct isn’t enough. Episodic trainings aren’t enough. Companies need to create a culture that promotes values, rewards ethical behavior, and creates a safe place for employees to share and question what ethics really are. To this point, Dr. Chandler continues by saying, “Integrity management is intertwined with managing the larger corporate culture and with the informal reward/motivation processes that impact employee decisions and behaviors in ways that transcend policies printed in a written code of conduct.”

 

2. If It’s So Important Everybody is Doing it, Right?

 

Wrong. Research has found that 60 percent of chief executives and boards of directors failed to engage in integrity continuity planning discussions or to include such considerations in strategic planning. Dr. Chandler continues by reporting the following startling statistics:

 

  • 57 percent of companies “have never” incorporated integrity continuity planning at the strategic executive or board level.
  • More than half of all businesses fail to assess ethical misconduct risks and to ensure integrity continuity.
  • 54 percent of companies do not have employee ethics compliance measurement among their performance appraisal criteria.
  • 56 percent of companies have never conducted an ethical behavior compliance audit.
  • 23 percent of companies have never engaged senior management in ethics/compliance training efforts.

 

3. Why Are Executives Ignoring Strategic Integrity?

 

Dr. Chandler argues that often, top executives have an illusion of control. Named by Harvard professor and psychologist Ellen Langer, this effect impedes appropriate planning and preparation because executives think it won’t happen to them. Often, they are caught in the delusion that the company is fine as long as good moral people are hired and written statements of ethics and policies are formulated. “Even systematically hiring only employees with perceived high levels of morals and ethics is no sure-fire method for preventing a major scandal.” Dr. Chandler continues this thought by giving examples of scandals involving priests within the Roman Catholic Church and referencing the 65-page Enron corporate Code of Ethics that states that employees should conduct “… business affairs…in accordance with all applicable laws and in a moral and honest manner.”

 

4. Employee’s Aren’t Perfect, So Let’s Plan for That

 

We all know humans aren’t perfect. No matter what you throw at your employees – even if you are the best CEO, executive, or manager in the world – statistically something will probably happen.

 

“One study revealed that 62 percent of all companies experienced a ‘significant or major’ integrity continuity disruption between 1986 and 1996. Although predicting ethical scandals in American business is not an exact science, one CFO.com projection forecasts up to 20 ‘major’ business ethical misconduct disasters every year.”

 

[bctt tweet="“Ethical misconduct disasters constitute serious costly risks to the continuity and survival of a business.”"]

And it is only getting worst. We are passed the times that men and women live by an ethical moral code. In 2002, the Josephson institute of Ethics published “Report Card 2002: The Ethics of American Youth,” a national study of 12,000 high school students that reported the following:

 

  • 74 percent admitted cheating on an exam at least once in the past year;
  • 38 percent admitted shoplifting at least once in the past year;
  • 37 percent admitted that they would lie “in order to get a good job.”

 

Dr. Chandler continues to write that in addition, “…the ‘inherent ethics’ of the ‘good moral people’ that a company hires include:”

 

  • 76 percent of MBA graduates who reported that they were willing to commit fraud to enhance profit reports to management, investors, and the public;
  • The fewer than 50 percent of employees who believe their employers have high ethical integrity;
  • 30 percent of all employees who currently report that they know or suspect ethical violations such as falsifying records, unfair treatment of employees, and lying to top management;”
  • 41 percent of employees in the private sector and 57 percent of employees in the public/government sector who are aware of ethical misconduct or illegal activities;
  • 60 percent of employees who state that they know but have not reported instances of misconduct in their organizations. Most employees cite the lack of companies’ confidentiality policies as reasons for not coming forward about ethical misconduct. They fear “whistle-blower” retaliation and that existing policies won’t protect them.

 

These high school students are now in our workforce, and these MBA Graduates and employees are managing and running businesses. But, poor choices don’t have to turn into magnified ethical misconduct disasters. “The key is whether the organization has adequately planned to mitigate against lapses in ethical decision making through prompt response, disciplinary actions, appropriate disclosure, communication to the workforce, and public crisis management communication so that the lapses do not escalate into catastrophes.” By utilizing strategic integrity continuity planning, you and your company can be ready.

 

5. The Plan

 

Prudent executives can begin thinking through an integrity continuity plan by following Dr. Chandlers recommended five key steps:

 

  1. Establish Explicit Ethical Goals and Criteria
  2. Demonstrate Commitment to Ethical Goals and Criteria
  3. Communicate Ethical Expectations and Train Workforce to Enact Ethical Goals and Criteria
  4. Assess and Monitor Employee Behavior and Decisions
  5. Maintain On-going Proactive Integrity Continuity Management

 

There are many tools available to come alongside your efforts and help reach your integrity continuity goals. Dr. Chandler recommends starting with a comprehensive Ethical Conduct Audit ©. We also recommend Novareté. Not only does Novareté provide a safe community for employees to discuss and challenge ethics and values, it also gives executives the ability to review analytics. You are able to monitor how employees, departments, branches, leadership teams, and the company as a whole are doing. You can monitor engagement and alignment easily. There is a Kudos platform to encourage and motivate your employees, while using the Dilemmas to practice and challenge them.

 

No matter what you do, the most important thing is to start. Build integrity continuity into your strategic planning to help prevent unethical disasters.

 

What are some things you do today? Let me know in the comments below.

“What you think you become.” Mahatma Gandhi

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