Tuesday, March 26, 2019
Wells Fargo. Enron. WorldCom. AIG. Your Company?
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
“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.”
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
Underpinning the model
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.”
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.”