Business Ethics 2.0

by Paul Gorrell | Talent Management

Five weeks into the Deepwater Horizon oil spill, when there was no apparent solution to plugging the voluminous leak that was devastating the fishing industry and devaluing the tourist season across four states, BP CEO Tony Hayward said, "I would like my life back." These words dovetailed with a weak apology communicating indifference to thousands of workers in the Gulf Coast region who were losing personal wealth, livelihoods and family traditions.

 

Hayward's quote became symbolic of the public perception that BP's business practices contributed to the oil spill in the first place and that its priority after the spill was to defensively protect its own value and standing with shareholders. Along with negative public sentiment about bank bailouts, this type of public struggle in stating and delivering on corporate values provides fodder when considering business ethics today.

 

Business ethics inside organizations is typically focused on legal concerns in an attempt to lower a company's potential exposure. In business schools, case studies such as the Johnson & Johnson Tylenol scare in the 1980s are used to explore the principles behind an organization's mission statement, business policies and leadership decisions. It is time for a larger, more purposeful business ethics discussion focused on values-based leadership, a business ethics 2.0 approach that goes beyond compliance.

 

Ethics Lessons From Diversity

 

Today, companies celebrate diversity and inclusion within their organizations, touting these qualities as representative of their employer brand. However, diversity has not always been a promoted value in organizations. We have evolved to this positive perspective, which has become best practice.

 

The origins of diversity were less about building an employment brand and more about defending organizations from corporate exposure. Although large companies got used to absorbing sexual harassment lawsuits in the 1970s because of bad behavior from their executives, they felt more pressure from growing numbers of class action lawsuits, where groups of individuals from a protected class joined together seeking justice for inappropriate corporate actions.

 

These lawsuits were brutally expensive, and bad publicity prompted a wave of training to curb executives' bad behavior and ensure that systems were put into place to remove enterprisewide bias in hiring and promotion. This was the diversity compliance stage, where company protection was the foremost priority.

 

Over time, factors shifted businesses' approaches toward diversity and inclusion. First, the shortage associated with the talent war caused businesses to look to nontraditional sources for talent. By expanding the available pool, companies were able to source key roles and manage productivity pressures.

 

Second, companies saw the emerging global market as a growth opportunity, which increased the need to embrace different styles, worldviews and cultures. Global teams, often forced to work virtually, created opportunities to experience new ideologies, perspectives and ways of working.

 

Third, consumers demonstrated loyalty to companies and brands that included a diverse workforce and a diversity focus. Negatively, boycotts of brands from minority groups, such as when gay rights groups boycotted Coors in the 1970s, proved the need to adjust policies and create inclusive processes to adjust brand perception within key demographics. Positively, business opportunities were realized because of diversity and inclusion-related customer experiences. This is demonstrated by the recent involvement of women in car showrooms so that female customers can buy from salespeople who can better understand their needs.

 

Today, many organizations speak of diversity and inclusion as a core value. Some would argue that we are in the age of diversity in business, with additional focus on the different perspectives of individuals from different generations in the workplace and how they interact with each other. Diversity and inclusion is believed to have a demonstrable impact on the performance and retention of key employees. We have gone far beyond the compliance stage.

 

Ethics 1.0

 

A similar trend provides us with a glimmer of the future of business ethics. Given the early 2000s scandals of Enron, Tyco and WorldCom, businesses were placed in a defensive position where they were forced to comply with new expectations focused on protecting shareholders. The Sarbanes-Oxley Act of 2002 created standards for accounting and reporting, which enforced and inscribed new levels of transparency. Because of this legislation, organizations focused carefully on compliance to ensure they were managing risk exposure and the potential penalties involved.

 

This was a reactionary and protective approach to be aboveboard as an organization. This approach does not build public trust in brands or raise stock price or customer loyalty because the ethics focus has been more about limiting bad behavior than promoting good behavior.

 

Compliance approaches only go so far in risk management. John McCarthy, executive vice president of human resources at Guardian Life Insurance Co., said one cannot use compliance alone to govern or control employee behavior.

 

"Compliance should function as the guardrails for ethical and acceptable behavior. But if someone wants to do the wrong thing, compliance alone will not stop them," he explained. "We believe in emphasizing ethical behavior. Guardian employees - beginning with on-boarding on their very first day - learn the relevance of ethical behavior and its foundational importance to our culture and values."

 

Ethics 2.0

 

Despite the perceived ethical lapses of particular companies or industries, there are many indicators that ethics is evolving to provide exciting opportunities for organizations, leaders and talent managers. We are shifting to a stage where ethics is understood in a more holistic framework with an intersecting connection between the employee and consumer. This connection happens at the brand level - how that brand is perceived by those who purchase products and services and those who make up the organization's workforce.

 

We are moving toward an age of ethics in the way we do business and encourage behavior from our leaders. This is not because we want to be do-gooders, but because doing good is good business. Consider:

 

1. Ethical organizations build marketplace loyalty.

Consumers are more likely to buy products and services if they are provided by companies that also promote and commit to the social good - improving the circumstances of people, the earth and its resources.

 

2. Ethical organizations attract talent.

We may be in a state of high unemployment, but organizations still want the best of the best. And the best employees are still valuable in the marketplace. Social good acts as a magnet for many stars and emerging leaders from younger generations.

 

3. Ethical organizations engage employees, promoting retention and higher levels of productivity.

People feel proud when their brand stands for something beyond traditional ideas of profit and sales.

 

Craig Dinsell, senior vice president of human resources at OppenheimerFunds, agree that a commitment to ethics builds marketplace loyalty. "We have earned the trust of the millions of investors who have chosen us to protect and grow their wealth," he said. "Our corporate values are the foundation of our business, and they define and influence the behaviors, attitudes and philosophies that guide our company. We are deeply committed to our corporate and ethical values and believe that our success is measured not only by what we achieve - but how we achieve it."

 

Dinsell also can show the connection to OppenheimerFunds' brand as an employer. "Our employment brand is an extension of our company's brand - 'the right way to invest,'" he said. "Our ethics program, and the policies, procedures and behaviors that support our corporate values, are critical components of our business strategy. Because of this, employees view OppenheimerFunds as more than a workplace - it's a place where they feel comfortable investing their careers."

 

Two points of evidence of the move toward a commitment to ethics are the increasing numbers of companies that have corporate social responsibility programs and sustainability programs. Corporate social responsibility efforts incorporate ethics within organizations to create alignment between the public good and business operations. This often includes demonstrated commitment to social causes whereby the organization provides resources for specific events or opportunities.

 

But true corporate social responsibility involves a more integrated effort, where business operations, employee decisions and causes endorsed by the organization are part of an effort to drive a cultural vision. Sustainability is similar in that it attempts to bring together an integrated focus on planet, profit and performance. Here, organizations commit to green ways of working that are measured, rewarded and proven to drive profit.

 

Ethics and Talent Management

 

In the age of ethics, talent managers can provide significant value, deepening an organization's capability to commit to social responsibility and practice what it preaches. Some ideas include:

 

1. Incorporate ethics- and values-based leadership qualities within competency models.

One must be careful since many ethical notions, such as courage and integrity, are difficult to measure and validate. Competency models that include notions linked to social responsibility can provide significant value to every aspect of leadership and promote more effective teamwork.

 

2. Create development experiences that are embedded within the current work that leaders and employees undertake.

Ethics is typically taught through case studies, but employees' current working challenges provide incredible scenarios with which to learn how to operate in line with one's values while leveraging capabilities. While action learning can be effective for leadership development when offered in a programmatic manner, such as high-potential development, it is even more effective if presented within intact teams so they can wrestle with real challenges together in light of competing values, ideas and strategies.

 

3. Integrate social causes within the learning and development space.

We can teach great leadership behavior and commitment to values by using extra work-related activities as fodder for learning.

 

Building ethical organizations involves specific work with the leaders who represent the firm and act as champions of its culture. Because of this, focus on developing leaders' ethics is essential. "The way an organization embraces values is represented by the ethical behaviors of its leaders," said McCarthy. "We do this by building awareness, educating leaders on best practices and holding them accountable in a consistent way."

 

Oppenheimer devotes specific training experiences to ethics. "We work each day to build and maintain an organization that customers and shareholders trust and employees are proud to be a part of," Dinsell said. "We view our individual and shared ethical responsibilities as more than compliance and regulatory duties - they are foundational to our culture and our products."

 

 

[About the Author: Paul Gorrell is an executive coach for Partners in Human Resources International and the author of Contextual Coaching.]