Ethical Climates

Understanding, Creating, and Sustaining Ethical Climates

Photo courtesy of Corporate Compliance InsightsOpens in new window

Leaders have a responsibility for creating a safe outlet for employees to raise ethical concerns about misbehavior by superiors in the organization. Leaders can do this by focusing on the general quality of the ethical climate in the organization.

It is likely that employees experience some degree of moral distress whenever a leader is perceived to behave unethically, but the distress is usually greater in unethical climates.

Even in ethical climates, however, some individuals may be more likely than others to address perceived ethical problems in an active and constructive manner. This inclination is likely to be enhanced among individuals who feel a sense of personal power.

Employees tend to feel greater power, for example, if they believe they have attractive opportunities in the broader employment marketplace, if they are respected for their credibility and competence in the organization, and if others within the organization are somewhat dependent on them.

Leaders and their organizations can further enhance the likelihood that employees will address perceived ethical problems in an active and constructive manner by nurturing a culture that is not all “command and control,” by fostering a sense of shared leadership more than hierarchy, and by valuing upward leadership.

In the end, the most powerful way leaders and their organizations can enhance the likelihood that employees will address ethical problems in a constructive manner is by proactively creating an ethical climate throughout the organization, and that is not just a responsibility of informal ethical leaders throughout the organization but inescapably a responsibility of formal organizational leaders.

In reality, being in a formal leadership role imposes unique ethical responsibilities and challenges. Leaders more than followers or direct reports

With conditions like these, which sometimes also may represent seductive temptations to excuse one’s own behavior, it is all the more important for leaders to take positive steps to create an ethical climate and hold themselves accountable to it.

How to Create and Sustain Ethical Climates

How can leaders create and sustain ethical climates? There are several things that leaders can do to establish an ethical organizational climate.

• Formal ethics policies and procedures: It’s sometimes said that “you can’t legislate morality,” and the same may be said about legislating an ethical climate. Nonetheless, certain formal policies and procedures are probably necessary if not sufficient conditions for creating an ethical climate.
  
  
  These include formal statements of ethical standards and policies, along with reporting mechanisms, disciplinary procedures, and penalties for suspected ethical violations.
• Core ideology: A core ideology is basically an organization’s heart and soul. It represents the organization’s purpose, guiding principles, basic identity, and most important values.
• Integrity: The core ideology cannot be a mere set of boardroom plaques or other exhortations to behave well. The core ideology must be part of the fabric of every level and unit in the organization.
  
  Just as personal integrity describes, for example, a leader whose outward behavior and inward values are congruent with its public and private actions at every level and in every work area. And it is especially important that the highest level of leaders in any organization is perceived as demonstrating high integrity.

• Structural reinforcement: An organization’s structure and systems can be designed to encourage higher ethical performance and discourage unethical performance.
  
  Performance evaluation systems that provide opportunities for anonymous feedback increase the likelihood that “dark side” behaviors would be reported, and thus, discourage their enactment.
  
  
  Reward systems can promote honesty, fair treatment of customers, courtesy, and other desirable behaviors. If poorly designed, however, reward systems can also promote dishonesty.
• Process focus: There also needs to be explicit concern with process, not just the achievement of tangible individual, team, and organizational goals. How those goals are achieved needs to be the focus of attention and emphasis too.
  
  When senior leaders set exceptionally high goals and show that they expect goals to be achieved no matter what it takes, employees may be tempted to engage in unethical behavior.
  
  And when leaders turn a blind eye even to seemingly small organizational transgressions, it can lead one down a slippery slope of moral disengagement that enable larger transgressions later on.

In conclusion, it is important for leaders to recognize the importance of creating and sustaining an ethical climate. One way to think of its importance is that it is just the right thing to do.

Given the number of ethical scandals in the public arena, it will not be easy for leaders to create and sustain an ethical environment in an organization; it will take conviction, diligence, and commitment.

Like our earlier discussion on why ethics mattersOpens in new window, there are a number of tangible outcomes for leaders and their organizations that create an ethical climate. For example, one of these is greater collaboration within the organization:

Another positive outcomes as noted earlier is improved social standing and improved market share for the organization. While these outcomes should be drivers for establishing ethical climates, it is just as important that leaders and their organizations provide employees with an ethics decision-making framework which goes beyond, for example, a list of rules for employees to follow when making decisions.