Ethics in Business has become a source of much debate and scrutiny since the banking crisis in 2008. In some situations, where an organisation or industry is accused of poor practices or of being unethical, the majority view may be that the situation was brought on by collective malpractice. However, in many other situations, it is less the case of individuals or collections of individuals purposefully doing the wrong thing and more the result of a collection of lapses that when taken together result in public outrage, reputational damage and potentially the collapse of the organisation.
The individual lapses and poor decision making are often the result of:
- Focusing on a limited number of options and considering only one or two ideas.
- Failing to think widely enough: what if there was a significant change in the industry, regulatory environment or economy?
- Assuming that the best decision for the business is the best decision for all interested parties.
- Favouring short-term gains over long-term losses.
- Justifying the potential ‘harm’ to other stakeholder groups as necessary to achieve the organisation’s goals.
To raise the standard of ethics in business, businesses need to consider several factors:
Key Performance Indicators
What KPI’s does the organisation use to measure performance? How do these link to or how might they indicate ethical or non-ethical decision making? The classic example is incentivising people to achieve a particular KPI despite the fact there is a high probability that staff will need to act unethically and make decisions that conflict with the organisations published values to achieve the reward offered.
There is no point in an organisation having great processes and procedures backed up with a well-crafted purpose statement and list of values if it does not also have the right culture. I am reminded of the phrase attributed to Peter Drucker “Culture eats strategy for breakfast”.
If an organisation really wants to raise the standard of ethics in business, then it needs to work on its culture.
Organisations need to have a system in place which enables all stakeholders, not just staff, to speak up if they have a concern. But, this in itself will not be enough, when people use the approved system to raise a concern they must feel the issue has been dealt with appropriately. Worryingly research done by the Institute of Business Ethics suggest that while the provision of an appropriate system is on the rise the satisfaction with the outcome is falling.
Ethics in business is less about what you do and more about how you do it. For organisations working in a competitive and challenging environment, it is easy to overlook the how because the damage associated with it is not as immediate as the potential difficulties of failing to reach a current target. However, if you stand back and look at the longer term there is evidence to show that good ethics in business does have a positive impact on the organisation.
Our business simulation game focusses on three business drivers, Leadership Trust, Return on Capital Employed and Corporate Reputation. It provides a forum for discussion around business issues and the implications of the decision made on these drivers. Organisations that foster an open culture allowing for robust debate will improve their chances of achieving long-term success.