Corporations across the globe are increasingly focusing on building ethical cultures that can have a positive effect on the greater good. But a charismatic, principled leader is only the beginning. The real heroes of this revolution, says Rob Hayward of Principia Advisory, are middle managers and entry-level workers.
Over the past decade, the responsibilities of business leaders have shifted dramatically. No longer is it seen as sufficient for businesses to simply generate shareholder returns while obeying the law. Instead, leaders are expected to go beyond compliance to ensure that their organizations fulfill a social purpose, honor the values they espouse and fulfill the promises they make to their workers, customers and communities in which they operate.
The pandemic, in particular, saw an acceleration of interest in ethical and responsible business as organizations grappled with the dual responsibilities of running a business and looking after their staff and other stakeholders in challenging circumstances. Increasingly, in addition to thinking about what they must do under the requirements of regulation and the law, business leaders began to think about what they should do. Principia’s biennial ethics study, first conducted during the peak of the pandemic in 2020-21, found that as many as 97% of leaders felt a personal responsibility to ensure that their company did the right thing.
But a commitment to doing the right thing is only the beginning of the challenge. Not only do leaders have to deliberate on the right thing to do, exercising their own moral judgment to determine the appropriate course of action in volatile, uncertain circumstances, but they have to set up their organizations to follow through. While most organizations have sophisticated processes and controls that ensure legal and regulatory compliance, relatively few have similar structures in place to govern ethical deliberation and decision-making.
In recent years, leading companies have begun to rethink leadership development, investing time and attention in equipping executives to navigate ethical gray areas and to exercise appropriate judgment in day-to-day decisions. Strengthening these capabilities can have a profound and immediate impact, in surfacing tensions and trade-offs in strategic decisions and ensuring that leaders are paying attention to questions of values and principles when determining the right thing to do.
Leadership is only one element of the puzzle. At the heart of the challenge for organizations seeking to honor their ethical promises and commitments is a lengthy and complex chain that translates intent to consistent outcomes. The integrity of this chain depends on the decisions and behaviors of middle management as well as entry-level employees, demanding a radical departure from traditional approaches designed to ensure compliance.
The challenge of ethical execution
Middle managers and entry-level employees are right at the heart of the challenge of ethical execution. Organizations’ ability to honor their promises and commitments depends as much on the frontline as much as it does on the board and executive team. Leaders can define the purpose and values of the organization, but this means very little if employees do not align with and actively support — or indeed, fully understand — those values and how they relate to everyday decisions and behaviors.
Frontline employees, although often at the beginning of their careers, have a significant role to play. Their daily actions and decisions reflect the organization’s commitment to ethical practices. They are, in effect, cultural ambassadors for their organization, promoting and reinforcing the company’s ethical values to their peers and customers. As the company’s foot soldiers, they’re often the first to notice unethical behavior, and they can also bring fresh perspectives to the organization, helping leadership identify potential ethical issues and suggesting improvements.
For most organizations, middle managers are the bridge between leadership and frontline employees. They can communicate those values to the team, both directly and by role-modeling ethical behavior and decision-making. They can also uphold ethical standards by addressing unethical behavior promptly and effectively and by engaging their teams on ethical gray areas and the complexities of effective decision-making.
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How can business leaders ensure they integrate ethics meaningfully throughout the organization in a way that results in bringing the next generation on board and ensures that managers and frontline employees become cultural ambassadors?
There are two key steps: embedding purpose, ethics and values into strategy and decision-making through a focus on individual and team capabilities and shaping an inclusive, ethical culture that supports people to do the right thing.
First, embedding purpose and values into decision-making is essential. But ethical decision-making is not an innate ability. Employees at every level need to be equipped with the right frameworks and tools to consider ethics in decision-making, requiring new approaches to onboarding, learning and professional development, as well as on-the-job training that equips people to apply theoretical concepts to real-life decisions. Using scenarios and “what-ifs” can help people to identify the ethical dimensions of decisions and to apply decision-making frameworks to navigate gray areas and generate greater agility, consistency and transparency.
Second, fulfilling the organization’s ethical commitments will depend on an inclusive culture that enables people from all backgrounds to thrive within the organization, make their voices heard and feel a sense of belonging and trust. In recognition of this challenge, many organizations are now building more sophisticated approaches to assess and strengthen ethical culture. A company may implement a systematic approach to assess and enhance its ethical culture, including surveying employees and conducting interviews to measure various factors that influence ethical decision-making and behavior within the organization and using the results to pinpoint strengths and weaknesses in the company’s ethical framework.
Collaborating across the executive team
HR has a strategic role to play in driving capabilities and culture across the organization. The Chartered Institute of Professional Development (CIPD) says that “it’s vital that people professionals can define ethical behavior, identify unethical behavior, and take steps to create a shared ethical culture.” The CIPD’s guide to ethics at work suggests developing and embedding a code of ethics, which sets out the values and principles of the organization: “The beliefs of the organization expressed through values and/or a code of ethics must be credible and echoed by the board, leadership and management. This endorsement is vital to embedding ethics in the organization and needs to be communicated regularly.”
Compliance teams are also vital to further progress. Drawing on extensive experience of shaping decision-making and behaviors to ensure adherence to regulations and the law, compliance professionals are often best placed to understand the specific pressures and challenges of individual functions and job roles. Understanding these tension points is essential to effective behavior change initiatives and to embedding an understanding that ethical decision-making — asking what we should do, not simply what we are allowed to do — is essential to going beyond compliance to uphold standards of ethics and responsibility.
From authenticity to advantage
For every leader, authenticity is vital. Businesses cannot simply pay lip service to ethical values; they need to embody them. If not, they risk losing not just consumer trust, but the middle managers and entry-level workers that are the heart of ethical execution within their organizations. Together, these groups form the backbone of ethical practices, ensuring that the organization can not only meet their formal obligations but also operate in a socially responsible manner.
Their combined efforts are indispensable in creating a sustainable and ethical business environment; the organizations that are set to be most successful in the future are the ones who understand this, and commit the time, resources, and leadership attention to equipping people at every level to act ethically and responsibly in every decision and every action.
