Building an ethically strong organization

Research reveals that organizational ethics matter significantly to most employees and managers and that people want to work for employers whose values and principles are aligned with their own (Haugh, 2017). In addition, research has shown a link between ethical leadership and task performance, organizational citizenship, and other productive work behaviours (Ng & Feldman, 2015). Therefore, companies have many compelling reasons to address ethical failings at the earliest opportunity.

When employees do not have a shared understanding of events that unfold around them, what constitutes an ethical response, and the consequences of behaving otherwise, it often means the organization has created an ethically weak situation for them. Moreover, the daily dilemmas that tend to muddy the ethical waters for individuals in decisions are:

• Ethical disconnect,

• Conflicting stakeholder needs,

• Not knowing whether (or how) to speak up,

• Ethics versus expediency.

Research also shows that employees who see their managers as ethical leaders are more satisfied with their work, are more willing to go the extra mile, find the work that they carry out has significance in the broader scheme of things, and are less likely to quit.

As a practical recommendation there are six steps that can help leaders set an ethically strong organization:

•Acknowledge ethical ambiguity,

•Clarify the ethical trade-offs,

•Ensure role-modelling from the C-suite down,

•Embed ethics in corporate policies and programs,

•Empower individuals to handle ethical breaches,

•Embrace a higher cause.

T. Haugh, “The Trouble With Corporate Compliance Programs,” MIT Sloan Management Review 59, no. 1 (fall 2017): 55-62.

T.W. Ng and D.C. Feldman, “Ethical Leadership: Meta-Analytic Evidence of Criterion-Related and Incremental Validity,” Journal of Applied Psychology 100, no. 3 (2015): 948-965

Bailey, C. & Shantz, A. (2018). Building an ethically strong organization. MIT Sloan Management Review, 2018.

*Slovenian Research Agency, Program P5-0364 – The Impact of Corporate Governance, Organizational Learning, and Knowledge Management on Modern Organization, School of Economics and Business, University of Ljubljana.