Barriers & Facilitatorsto Ethical Management

Nearly all men can stand adversity, but if you want to test a man's character, give him power.

-- Abraham Lincoln

Virtue Isn’t EnoughGood character is important in business. But virtuous people can

be: bamboozled into thinking that up is down, wrong is right. hamstrung by rules, regulations, power plays, lack of

information, etc. bullied and terrified into following along with something that

doesn’t smell or feel right. isolated and silenced through ridicule, being ignored, or

being placed in hyper-competition with peers. lazy, distracted, blindsided, or in denial. overwhelmed, stressed out, and incapable of rational thought

and action.

So… The structures and processes of organizations

need to be designed and implemented to relieve the pressure and ambiguity and to help people make better choices.

Organizations have to help their people be virtuous.

Consider some examples.

Barrier ………….FacilitatorVague, general ‘values’: Organizational values are

too vague and general. everything is left to the

discretion of individual managers.

There's too much room for variable applications and “cults of personality.”

Clear, specific values: Articulated in a values

statement Spelled out in a code of

conduct Interpreted with respect

to practical situations Referred to frequently Used as decision guides Revisited and revised as

needed

Barrier ………….FacilitatorTotal CEO control:

If the CEO ignores or condones or expects unethical behavior

If the CEO is a jerk or a bully or a sociopath.

Total CEO control:

If the CEO intends to enforce ethical standards, sets an example, and builds the organization around values.

If the CEO is ethically and mentally sound.

Barrier ………….FacilitatorCorporate transformations --

mergers, divestitures, acquisitions, downsizing, reorganizing –

All require major cultural transformations and may

(a) open up opportunities for unethical behavior that didn't exist when the organization was stable, or

(b) introduce a new culture that is less supportive of ethics than the old one was.

Corporate transformations –

If the resulting company takes advantage of the opportunity to structure specifically and clearly in support of ethical conduct.

If “ethics champions” emerge and are supported by the new structure.

Barrier ………….Facilitator High labor/management

turnover:

New personalities, values, motivations, and behaviors are continually brought into the organization, making it more difficult to sustain a common set of values and a strong culture.

Stable labor/management workforce:Employees can establish a long-term culture of trust and ethical behavior once they know each other and have track records to refer to.

EXCEPT THAT: New blood can encourage ethics in companies that haven’t paid attention before!

Barrier ………….FacilitatorCultural differences:

Language barriers and different interpretations.

Status/hierarchy differences.

Different ideas of right and wrong.

Different ideas about how business is and should be done.

Cultural diversity:

Opens minds and attitudes.

Fosters respect for people of alls sorts.

Permits learning and growth.

Encourages adaptive behaviors that can also be strategically important.

Barrier ………….FacilitatorIndustry Factors:

Competitive environment

Regulatory climate

Common/best practice

Stakeholder expectations

Industry Factors:

Competitive advantage

Political/regulatory interactions

Industry leadership

Stakeholder pressures

Barrier ………….Facilitator Opportunity to act

unethically

No one cares

Lax control systems

Incentives favor “whatever it takes”

Management control systems that reduce opportunity

Senior managers lead by example

Control systems are secure, orderly, double-checked

Incentives take law and ethics into account.

Barrier ………….Facilitator Talk about ethical goals,

reward only financial performance.

Look with great approval on those who meet financial targets, but never inquire how they do it.

Tie major compensation to short-term performance.

Play favorites; pick on people; reward and punish inconsistently – eventually, no one will believe anything you say.

Make it clear to everyone that business goals must be met legally and ethically.

Make a place for long-term performance in the incentive scheme.

Be consistent with positive and negative sanctions.

Be fair – don’t play favorites or pick on people.

Don’t reward or tolerate bad behavior.

Barrier ………….FacilitatorExecutive Personality:

Bullying, aggressive, loud, intimidating

Sociopath – lack of care for others

Narrow focus on profit goals

Executive Personality:

Reasonable, collaborative

Kind to others, compassionate

Broad focus on profit and other goals

Lead by Example… DO Demand honesty and trustworthiness of yourself. Whatever you expect of your employees, be willing

to do yourself. Seek out information and understanding; show how

it’s done. Consult with those affected by a decision as well as

those more knowledgeable than you. Meet regularly with staff to discuss issues, to

encourage, and to demonstrate how to engage in ethics dialogue.

Lead by Example … DON’T Don’t dump on the people below you as you climb

the ladder. Don’t use the company’s assets as your personal

piggybank. Don’t bully, yell, intimidate. Don’t worry about

letting them all know who’s boss. Don’t be afraid to confront people; don’t hide out

until conflicts blow over. Don’t deny, rationalize, avoid. Don’t avoid getting the facts.

Barrier ………….FacilitatorStructures/Processes:

No code, or a phony one.

No ethics training or supervision.

No concern for ethics in incentives.

No channels for communicating problems & concerns.

Hiring based on skills alone.

Structures/Processes:

Code of conduct – real.

Regular training and reinforcement.

Incentives accommodate ethics.

Communication channels are clear.

Due diligence in hiring.

Barrier ………….FacilitatorLemmings:One manager violates;

everyone else falls in line.

Escalation:One small mistake is

covered up, leading to more and bigger problems.

Voice – no “moral muteness.”

Mistakes are not cause for ‘execution.’

Barrier ………….FacilitatorPsychological Defenses:

DenialEntitlementRationalizationBlame-shiftingIgnorance is blissRose-colored glassesHopefulness

Psychological Defenses:

Physical & emotional reactions to ‘red flags’

‘something smells fishy’‘too good to be true’

Follow up on what you feel!

Barrier ………….FacilitatorImplementation:

Ambiguous or changing message.

Incentives out of whack.

Violations sometimes punished, sometimes not.

Punishments not seen as fair.

Implementation:

Consistent message.

Incentives in line.

Consistent and fair enforcement and punishments.

Internal processes known and respected.

Rules apply to everyone.

What Managers Can Do to Encourage Ethics in Business

1. Hire experienced people for ethically sensitive positions.

2. Recruit some non-technical people.

3. Recruit people who have multiple personal goals.

4. Stress that maximizing profits is constrained by other goals.

5. Encourage employees to be self-assured and broadly loyal.

6. Structure jobs so that unethical behavior is discouraged.

7. Increase contact between employees and those they might injure.

8. Support mechanisms for investigating and reporting unethical behavior.

9. Enforce the rules consistently; apply moderate penalties for violations.

10. Build ethical actions into performance evaluation criteria and compensation incentives.