Why do the banks, and so many others, continue to get caught in the headlights of public scrutiny for unacceptable behaviour; why do they fail to satisfy the demands of the stakeholder economy and continue to get it wrong? Is it because they confuse ethics with morality? Morals are about how you, we, they define for themselves/ourselves what is right and wrong in a personal realm. What we have seen over many years is ‘good’ people doing ‘bad’ things and still believing themselves to be good people. And it’s simply no longer good enough. You are what you do, not what you think. Actions are what people judge you on; not your intentions but your behaviour. Business ethics, or institutional integrity, defines how the organisation, made up of all its people and its agencies, holds firm to a set of principles that are above the law and beyond the minimum. Cogent, potent statements of business ethics that are clearly understood, reinforced through how performance is measured and established as the cultural vein that carries the lifeblood of the organisation, ensure not that you get it right but that you don’t get it wrong.
Sadly, for many in business, ethics continues to be a grey area and something of a discretionary investment. Typically, organisations start from the assumption that most people want to do the right thing. However, ‘behaviour science’ shows us that this is not where organisational leaders should be starting from. The science shows that most people are not as ethical as they think they are; that they will find themselves compromising their values in certain contexts, or under certain pressures, and that they can remain blindsided to this slippage. Often, people operate on automatic pilot and simply go on what has gone before, copying the behaviour of their peers to fit in and taking short cuts because they assume they know what the context requires. This flies in the face of the obvious – that the world is continually changing in interconnected ways and most of us are powerless to shape the contexts in which we find ourselves. At work, we will be persuaded that the end justifies the means, the company needs us to do what’s necessary to make the figures, the customer can come first if that doesn’t get in the way of making targets or that it’ll all work out in the long run.
Leaders who continue to rely on the idea of “a moral compass” may themselves suffer from “bounded ethicality” arising from their failure to adopt a wider range of tools to equip themselves to identify and manage the ethical issues inherent in their business contexts.
Clearly what we need is a paradigm shift away from the moral philosopher’s focus with individual character and towards an understanding of the science of behaviour and its premise that, as employees, managers and leaders, we are essentially emotional beings that respond in irrational ways to the organisational contexts in which we find ourselves.
Business ethics are essentially about institutional integrity. Risk management needs to be re-classified as doing business ethically to protect the organisation by building a healthy culture that can risk-proof the enterprise. This new type of ethical accountability shifts the focus from individual character strengths or weakness, to the actions leaders take to design their organisational cultures.
Global regulators, including APRA, are warning Boards that behaviour in the workplace is a systemic source of financial, social and, environmental risk and they expect them to purposely manage the types of behaviour they promote.
Leading brands such as GE, 3M, Patagonia, Marks & Spencers, Avon or Starbucks show us how a consistent culture underpins business success and how it is essential to skill employees to respond to the contextual pressures they will inevitably face. Leaders play a major role by ensuring a zero tolerance for poor role modelling from the top. No matter which country they are in, the culture is the same. These organisations begin with a recognition that the leader’s role is to create an organisational context where employees are forewarned and forearmed about contextual pressures so that they can better respond to these in ways that do not comprise ethical standards.
Australia’s current cultural perspective of ethics as the preserve of individual morality sets the bar of acceptable business standards too low and keeps Board focus on compliance rather than addressing the ethical risks inherent in everyday business contexts.
Cultural and behavioural change is not an easy task. Enabling systems and processes, strong leadership, regular training and performance management, targeted engagement and communications are all critical to empowering people to think, feel and act in a way that builds a culture of integrity and respect.
It’s time to abandon reliance on “moral compasses” or hide behind notions of “greyness”. Employees know what ethical behaviour looks like; customers know it; regulators know it; and social scientists have known it for over 100 years.
It’s time to sacrifice a couple of finance people from the Board and replace them with social scientists and maybe, just maybe leaders will see the next ethical crisis coming before it decimates a hard won reputation!