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Staying Out of the Headlines: Ensuring an Ethical Organization
EXECUTIVE UPDATE, June 2003

United Way. Worldcom. Tyco. The last few organizations to make the top headlines across the nation have done so in a bad way. Organizational misconduct, whether by an individual CEO or the organization itself, attacks and undermines the fundamental agreement between the organization and society; it violates a trust.
By: Frank J. Navran


 
United Way. Worldcom. Tyco. The last few organizations to make the top headlines across the nation have done so in a bad way. Organizational misconduct, whether by an individual CEO or the organization itself, attacks and undermines the fundamental agreement between the organization and society; it violates a trust.

 

Two strategies — ensuring ethical leadership and establishing ethical support systems — can help associations reassure nervous stakeholders that they are living up to society's higher standard of ethics for nonprofit organizations.

Associations exist, as do all corporations, at the pleasure of society. In exchange for the opportunity to do our work and to enjoy our privileged status as nonprofit organizations, society expects certain things in return. Foremost among those is that we act in a manner that conforms to — even surpasses — society's ethical standards.

Some of those standards are codified, and thus, as a minimum, associations and their leaders must be law abiding. But many expectations are not legally imposed. Instead, they rely on moral values and beliefs. The public often assumes that organizations understand the need to do more than simply follow the law. Associations must be ethical and trustworthy. They must be deserving of society's confidence and support.

For the past 25 years, organizations have sought to meet the public's heightened standard of trustworthiness through various initiatives. Aside from laws and regulations, some ethical actions have been suggested and encouraged through the use of strong incentives. For example, organizations that have "an effective program to prevent and detect violations," as defined by the U.S. Sentencing Commission, may receive reduced legal fines for infractions. Other ethics initiatives have been voluntary — ethical cultures created by ethical leaders and defined by a common vision of "doing the right thing."

Aspiring to do the right thing because it is the right thing to do is what we now call the "moral imperative." It does not deny that there are legal and pragmatic imperatives for high ethical standards of conduct in an organization. It merely recognizes that doing the right thing is sufficient motive in itself.

What have ethical organizations and their leaders done that has worked? How have they secured the continuing trust needed to survive? Two strategies, implemented in parallel, can build and sustain public trust:

  1. Ensure ethical leadership.

  2. Support ethical leadership with ethical systems.

Ethical Leadership
The amount of new information about what defines an ethical leader has grown. Perhaps the most valuable thing we have learned is that being perceived as an ethical leader requires more than simply being an ethical person. Certain behaviors make the ethics of leadership visible and explicit.

Leading by example is only effective when the example is observable. Ethical leaders talk about the ethical considerations underlying their own decisions. That includes the candid exploration of the ethical tensions — the conflicting pull between competing values — in their dialogue. Ethical leaders make the connection between their decisions and their values evident. Ethical leadership requires that the decision maker acknowledge the difficulty and uncertainty of resolving ethical dilemmas so others can be confident that the ethical questions were recognized and addressed.

Ethical leaders also encourage ethical conduct in others. One technique for doing so has the leader asking the other to "show his work" — describing how he or she reached a certain conclusion or decision. This teaches two lessons: first, that how one reaches a decision or accomplishes a goal is as important as the conclusion reached or goal accomplished; second, that it is legitimate to talk about the ethics of one's decisions. In fact, it is necessary.

Perhaps the ultimate test of the effectiveness of ethical leadership is the legitimacy of ethics as a topic of conversation within the organization. Do people feel free to raise ethical challenges? Are people comfortable asking for ethical guidance? Are the ethical ramifications of a decision or action routinely discussed and considered? Is ethics a legitimate topic for discussion at staff meetings, in planning sessions, and in performance reviews? Does how we achieve our results matter just as much as whether we achieve our results?

Formal Ethical Systems
Ideally, ethical leadership leads to an ethical workplace. In reality, though, no such assurance is guaranteed. Creating an ethical work environment requires that ethical leadership be supplemented with supporting systems.

Ethical leadership is the most important element of the organization's "informal" ethics systems; how people perceive leaders, their agendas, and their trustworthiness strongly influence the values and setting of priorities in a work climate. But formal systems are needed as well, starting with an organization's mission, vision, and values. An ethical organizational climate and culture rest on these three statements as their bedrock.

Mission clarifies why an organization exists. Vision describes how pursuit of that mission will influence the future. Values define the principles on which the mission and vision are built, as well as the ethical standards for the organization's pursuit of both.

Once mission, vision, and values are identified, the first step toward developing formal systems for an ethical culture is the creation, communication, and implementation of a code of ethics. Clear and consistent standards, as exemplified by a code of ethics, are a necessary prerequisite to an ethical culture. They create the common understanding of what the organization means and expects when it requires employees, leaders, and boards to do the right thing.

It is naive to believe that ethics is simply common sense, that everyone knows what "doing the right thing" means. No employee can understand the ethics of an organization until the association and its leaders define and communicate it. Consider "honesty," for instance. All organizations expect their employees, leaders, and boards to be honest. But do all of them have a common sense of what that means in terms of concrete behaviors? It can mean telling the truth, not telling lies, not withholding information, not allowing a person to be misled or deceived by one's actions, and being forthcoming and candid. Ask a dozen people what it means to be honest and be prepared for any number of different answers.

A code begins with a statement of the organization's core values, the principles that should drive the decision-making process, such as honesty, respect, compassion, integrity, courage, honor, and fairness. It then defines these terms in concrete language, so everyone will know how employees and others closely involved with the association are to behave.

But a code not only defines the values or principles that should guide decisions; it also provides concrete examples. For example, "honesty" may be described as requiring the accurate and truthful maintenance and reporting of records and accounts, candid and open communication within and between teams, and accurate descriptions and reporting of the services one provides and the benefits those services will yield. These are specific behavioral expectations based on a common value.

A code also guides an individual when the ethical choice is not obvious or is ambiguous. Codes describe ethical reasoning and decision making. They suggest ways the individual might more clearly define ethical issues. They describe methods, which are consistent with the organization's values, for addressing those issues.

An effective code describes how to seek guidance when faced with ethical uncertainty. It details how to report misconduct and makes clear that such reporting is an ethical obligation. Despite the stigma that society may place on whistle blowing, employees have an affirmative duty to report unethical conduct to the organization. Similarly, the organization has affirmative obligations to protect the whistle blower and the rights of any accused wrongdoers.

Essentially, codes are unique documents, tailored to each organization and serving to create that organization's "common sense" of what "doing the right thing" entails.

Codes of ethics do not stand alone. They are supported by ethics policies. Usually, those policies predate a code of ethics, since many are required by law. For example, society has codified its commitment to fairness and respect in law and regulation. Most organizations have codified how they will satisfy those rules with policies detailing employment practices and taking stands against discrimination, harassment, and other unfair or disrespectful treatment.

Other formal systems have proved useful as well. First, to whatever extent is feasible, is ethics included as the organization measures its incremental and overall success? Does the formal measurement and reward system explicitly include the ethics of one's actions, not just the pragmatic consequences?

Are employees trained about the organization's mission, vision, and values? Do they know what the ethical expectations are? Do they understand the ethics component of success? Employees cannot be expected to know these standards intuitively. They must be communicated, and people must be trained on the how-tos of ethics. The latter includes how to make ethical decisions when the rules are ambiguous, how to seek guidance when navigating ethical gray areas, and how to raise ethics concerns.

Deliberately Ethical
The notion that all an organization needs to do is hire ethical people, and ethics will take care of itself is quaint but false. An ethical working environment is the result of ethical leadership supported by ethical systems. In simpler times, being an ethical role model might have been enough. Today, deliberately addressing ethics is a necessary part of the organizational calculus.

It is not an accident that the organizations that have integrated ethical leadership and systems are among those least tainted by scandal, most successful, and most respected. Those are the organizations most deserving of the public's trust.

Author Link: Frank J. Navran is principal consultant at the Ethics Resource Center. He can be reached at 202-872-4761.

Resource Link(s): www.ethics.org

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