Unfortunately, it’s difficult to get through a news cycle
without hearing about a corporate scandal or misdeed somewhere in the world.
Whenever the latest one hits, I wonder how, in a
well-established organization of thousands of people, could such flagrantly
unethical behavior have gone on for so long? Why wasn’t someone brave enough to
question the dubious activities? And what led the perpetrators to make the
decisions or take the actions in the first place that would go on to hurt so many?
The answer, according to recent academic
research, is that they were working in organizations with very weak or
non-existent ethical cultures. Organizations
where it was routine for employees to ignore what was right, to achieve what was
most beneficial to them. Where people were afraid to speak up, or felt that it
would be futile,
when they saw unethical behavior. Or when they did, were simply ignored.
In many companies, the risk of misdeeds is on a far lesser
scale than the Enron debacle; it could be individual cases of concealing
wrongdoing, lying to a supervisor, stealing from the company, or falsifying
reports. Nevertheless, they can, and do, cost companies millions in government
fines and lost customers, investment and reputations.
What if there was a way for senior leaders to identify the
telltale signs of a weak ethical culture, allowing them to step in and address
them before it was too late?
Now there is thanks to a group of academic social
scientists who have come together to form
a kind of think tank called Ethical Systems. They believe that traditional corporate
approaches to ethics are outdated and there is a need for a smarter, deeper and
more holistic approach that addresses the larger challenge of organizational
culture.
“When Ethical Systems formed in 2014 after the financial
and banking crises, there were questions on the role of culture in encouraging
better behavior in the corporate world,”
said Azish Filabi, Executive Director of Ethical Systems and former Ethics
Officer at the Federal Reserve Bank of New York. “An organization could have a
great compliance program but if it isn’t affecting the underlying culture,
nothing will change.
“No one thought you could actually measure culture, it
was too nebulous. But academia has done this for years.”
Housed at New York University’s
Stern School of Business, Ethical
Systems has drawn on academic research to create a model for
executives and managers to understand their unique organizational context so
they can better shape ethical behavior. They use a variety of tools including an employee
survey-based cultural assessment, focus groups and 1:1 discussions with senior
leaders. They also integrate into their assessment existing non-survey based company data, such as data on employee
retention. From there, they pinpoint
the most relevant areas of concern. This may be across the organization or may
surface only in certain groups or departments. They then provide guidance to
the organization to course correct.
While some consulting firms
also offer surveys that attempt to address ethics risk, Ethical Systems
believes its academic-based approach is different, starting with peer-reviewed
research for survey items and social science findings on why people are likely
to misbehave. Underpinning the model are10 areas, which, based on data collected
from pilot culture assessments, have been shown to be highly predictive of
unethical behavior.
Ethical System’s Two Factor
Model of Ethical Culture, drafted by Caterina Bulgarella, PhD, Ethics Expert, Culture
Architect, and a member of the organization’s research team, divides the 10
areas into two camps:
- Disqualifiers: Companies that score high on the disqualifiers present foundational weaknesses that should be addressed.
- Qualifiers: Qualities and dynamics consistent with a robust ethical orientation. Organizations want to score high on these.
An example of a red flag is inconsistency between how
senior leaders and employees perceive the ethical culture of their
organization.
“If senior leaders think very highly on many attributes,
but the rest of the population has a much less rosy perception, that may mean
that the leaders are out of touch or that bad news is traveling up slowly
because people are afraid to deliver the truth.”
Another warning sign? If no one is using the internal channels
to report ethical violations. “What is it about your internal culture that is
preventing this” asks Azish. “That is what the assessment can help pinpoint.”
To date, the model has been
piloted at two U.S. companies (findings are on the Ethical Systems website),
and more are in the works for 2019. In addition to the statistical validation
process, Azish says they are now looking for more companies with which to work
to expand the model, by integrating objective (non-survey) data to strengthen
its effectiveness.
“The more data we have,
the stronger the assessment will be. Ultimately, we’d like to shorten the
survey so we can recommend a handful of the best questions that target what’s
most important for an organization’s culture. Today, I can’t say what those items
are until I have more data.”
While Ethical Systems has
created a free resource portal that summarizes the academic research on ethical
cultures, there is a fee for conducting the assessment and analyzing the
results.
“Though ethical cultures are
not built overnight, the systematic and methodical application of the guidance
and insights the model provides can advance corporate practices in meaningful
and remarkable ways,” writes Bulgarella, in a recent whitepaper on the model.
“Not only will organizations that heed the advice offered by the model be more
likely to build strong ethical assets, but they will be better positioned to
achieve sustainable long-term growth.”
To read more, including the
white paper describing the assessment approach, visit Ethical
Systems. To find out how your
organization can participate in a future assessment, contact Azish at afilabi@ethicalsystems.org or Noel
Boyland, Corporate Engagement Director, at noel@ethicalsystems.org.
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