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Ethics: Productivity's Essential Ingredient

Successful companies set their standards high--here's how to elevate your workers' ethics.

The most visionary companies follow a solid business plan, adjust nimbly to change, and recruit and retain talented staff. But even savvy managers often overlook one last crucial step to success: establishing an ethics-based workplace culture.

More than 40% of American workers witnessed unethical or illegal misconduct on the job, according to the Ethics Resource Center's 2013 National Business Ethics Survey. Most of the misbehavior observed may have appeared relatively minor--say, a coworker taking a two-hour lunch or using office stationery for personal correspondence--but even breaches like these can poison a job's atmosphere.

For starters, if employees observe a colleague being unethical, they'll assume this is acceptable group behavior, and may follow this seemingly established routine. "Humans are herd animals--we observe what the social norms are and stick with them so as not to stand out," explains Jennifer Hancock, a management expert at Humanist Learning Systems, an online education company based in Ellenton, Florida.

Unethical behavior can also sink morale: Why work hard, onlookers wonder, when others are phoning it in? And if your team's misdeeds go beyond minor shirking to include stealing, the financial impact can be enormous. Workplace theft is responsible for 34.5 percent of all inventory shrinkage, totaling more than $15 billion annually, according to the 2015 National Retail Security Survey.

The longer-term losses can be even more painful, starting with a talent drain. Disillusioned workers may leave—and research from the Society for Human Resource Management suggests that direct replacement costs can be as high as 50% to 60% of an employee's annual salary. Your company could also lose something irreplaceable: its good reputation. "In the current media environment, no wrong act goes unrecorded. You have to expect that any shady practice will become known," points out Mark Pastin, president of the Council of Ethical Organizations in Alexandria, Virginia, and author of Make an Ethical Difference: Tools for Better Action (Berrett-Koehler Publishers).

The good news? Employees want to work for companies that operate above board. According to a report from ethics and compliance firm LRN, 94% of employees feel it's very important to work for an ethical company, and 82% would prefer it to earning a higher salary at a business with a shady reputation. Here's how to establish high standards, and encourage employees to adhere to them every day.

Start At Orientation

Set ground rules for new employees and notify them of their ethical responsibilities. "Once you've adopted a formal code of ethics, make sure everyone in the organization receives and reviews it," adds Stephen Siegel, an attorney at Broad and Cassell in Miami who is board-certified in Florida in Health Law, and is certified in healthcare compliance by the Health Care Compliance Association.

Model Your Mottos From The Top Down

Company leaders must exemplify the business's ethics in their own behavior, says Pastin: "Actions speak louder than words—but the actions of those in management speak even louder."

Train And Retrain

Regular instruction in how to act ethically, using videos, role playing, and quizzes, can help remind employees of their moral duty and legal obligation. "Provide at least annual retraining and note that senior management needs to participate, just like every other worker," Siegel recommends.

Keep Spreading The Word

Once the annual training (and re-training) sessions have taken place, don't let the topic fade. "Periodic reminders help employees retain the knowledge they've learned, so include references to and discussions of how the code of conduct operates in internal newsletters and other publications," Siegel suggests.

Give Rewards

Catch employees doing the right thing, and honor and reward their integrity in meaningful ways. A "Good job!" won't cut it, states Pastin. Instead, offer concrete recognition, such as a prize or gift. And show how these high standards of behavior can further the employee's career, too. "You send signals about expectations through pay and promotion, so use them to advance the ethics environment where you work," Pastin explains.

Accept Feedback

Create a system that lets employees share their comments and questions about company ethics, and also allows them to report infractions anonymously. (A key element, of course, is to ensure that there is no possibility of retaliation.) Take advantage of this knowledge by using these violations as examples in employee training, says Siegel. Naturally, you'll need to omit employees' names and personal details.

If All Else Fails, Switch Up Your Staff

Be willing to part ways with employees who can't (or won't) follow the rules, especially if they've been given prior warnings. Keeping noncompliant people around gives them a chance to continue influencing others on the team. "When it comes to promoting everyday ethics in the workplace, scientists have actually studied this. And they have found that the best way to make that happen is to focus on changing the herd norm to one that places a high value on ethics," says Hancock. The fact is, you don't need everyone to be on board to start a cycle of change; instead, it takes just a few core people to create a new culture of ethical decision making and interpersonal relationships, she adds.

Under The Radar Rule Breakers

Some staffers aren't aware that their everyday activities may cross the boundaries of good business behavior. The Ethics Resource Center has found that employees sometimes engage in these often frowned-upon or prohibited acts:

  • "Friending" a client/customer on a social network
  • Blogging or tweeting negatively about the company or colleagues
  • Uploading vacation pictures to the company network or server to share them with coworkers
  • Buying personal items with the company credit card, then repaying the company for the expense
  • Doing a little less work to compensate for cuts in benefits or pay
  • Keeping a copy of confidential work documents in case they are needed at a future job
  • Taking a copy of work software home and using it on a personal computer
Source: 2011 National Business Ethics Survey conducted by the Ethics Resource Center.

Note: If you want to use this data, let me know and I will check with Bob and/or the company that did the research, to make sure it's OK for us to use it, so long as we credit the organization.

Ethics Awareness is Rising

When 2,500 Chartered Global Management Accountants worldwide were asked the following questions, their answers showed a rise in corporate ethics initiatives.
Source: CGMA® Report: Managing Responsible Business Executive Summary

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