Building an Ethical Culture

Photo Credit: Bureau of Safety and Environmental Enforcement (via Flickr)

For any company to reach its full potential, a change toward a culture of compliance and ethics is needed. This change should start from the top, with management leading the way. However, to truly foster an environment of compliance and ethics, everyone in the organization must be on board. Companies are open systems, filled with various networks and levels of relationships. Therefore, a holistic approach to building an ethical culture is required and must focus on every level of the system (individual engagement and motivation, interpersonal interactions, group dynamics, relationships among groups, and interactions with external stakeholders).

According to Alison Taylor, Director of Business for Social Responsibility, there are five levels at which companies should build an ethical culture: individual, interpersonal, group, intergroup and inter-organizational. At the individual level, employees will likely be more receptive to a culture of ethics if they are rewarded and their performance measured based on compliance and ethical behavior in the workplace. Often companies prioritize growth over compliance and reward employees who meet aggressive growth targets even if they used unethical means to do so. Using a rewards system that prioritizes compliance and ethics will help to foster an ethical workplace culture where employees are empowered to raise concerns and seek guidance.

In order to build an ethical culture, interpersonal relationships across the business hierarchy must be strengthened to the level that all employees and stakeholders, regardless of status, feel safe to raise concerns and express grievances. Leaders must realize the important role they play and influence they have in fostering a culture that is based on compliance and ethics.

Most companies are comprised of several groups or teams that interact with each other more frequently than with senior management. With so many groups and teams within an organization, it can sometimes be difficult to define a consistent work culture. Empowering group and team managers to feel responsible for changing culture can go a long way in developing a unified, new culture of ethics. Team members have a more personal relationship with their managers and as a result a message of compliance will more likely resonate coming from their managers.

Intergroup relationships are also very important and the quality of these relationships is crucial when it comes to building a new ethical culture. If a group gains success and power through questionable conduct, other groups might feel that the only way to get ahead is to act in an unethical manner as well. This, in turn, undermines the values of the company. In order for an ethical culture to emerge, all groups must adhere to the same ethical standards of the company.

Although internal relationships make up the majority of interactions in an organization, relationships with external stakeholders are also important to consider when establishing a lasting change in a culture. How a company treats its partners, suppliers, customers and other stakeholders can go a long way in determining its culture. Building and maintaining stakeholder trust will improve organizational culture. This means that the values and mission need to show through when interacting with external stakeholders. Building an ethical culture means sometimes walking away from big lucrative business deals, if it means engaging in unethical behavior. Such actions will go a long way in changing a culture but also how external stakeholders will view the organization.

A multi-level approach that involves all levels in a company, from the individual to the inter-organizational, ensures that there are no mismatches in the signals a company gives about building a culture of ethics. When every level of the company feels that they are part of this change process, the organization, as a whole, will become more empowered to act and work together to build a culture that fosters compliance and ethics.

Amol Nadkarni is a Program Assistant for Global Programs at CIPE