The Moral Imperative

Most senior managers are concerned about doing what is right. There is a sense of morality about business, tempered with the pragmatic, that says, "What we do serves society; business must do some good in the grand scheme of things."

The Jefferson Center for Character Education has identified ten "Universal Values," and has found that organizations prefer to operate in accordance with these or some other commonly identified set of "universal" values. Values which are cited as being "universal" include: honesty, integrity, promise-keeping, fidelity, fairness, caring for others, respect for others, responsible citizenship, pursuit of excellence and accountability.

Organizations often reflect their agreement with these precepts and write them into their stated operational values. The execution is not always successful (sometimes it is compromised for "business" reasons), but the values are there at least in concept. One motive for addressing the effective management of the organization's ethics can be found in management's desire to create an organization that operates consistently and predictably in accordance with such stated and endorsed values.

The Pragmatic Imperative

There is a wealth of evidence suggesting that in many cases, good ethics equals good business. In terms of quality, customer service, employee relations, vendor relations, regulatory relations and public perception, the benefits of ethical dealings often and regularly make their way to the bottom line. From referrals by loyal customers to the favorable credit terms offered by outside vendors, the rewards for ethical dealings are both real and measurable. So the qualities of fairness, integrity, honesty, promise-keeping and the rest should be seen as assets.

There is also ample evidence that many counter-productive employee behaviors are a direct response to employee per-ceptions of unfairness or a lack of integrity within the organization. When employees perceive ethical conflict - disagreement between their personal values and the values overtly stated or implied by an organization's actions - they often feel a need to defend themselves from anticipated retaliation and/or to punish the organization for how they have been treated.

As managers, what we see are low commitment to organizational goals and objectives, poor performance and/or morale, lack of involvement in programmed improvement initiatives and employee indifference to the needs of the organization.

The Force of Law

The U.S. Federal government has issued a new set of sentencing guidelines for ethics violations. Most striking among the features of these guidelines are the government's effort to encourage effective ethics programs and the staggering fines prescribed for violations - which can go as high as $290,000,000.

No organization can afford a fine of that magnitude. Yet no organization is immune from the dishonest and/or unethical actions of a key employee. Therefore, according to Judge W. W. Wilkins, Jr., Chairman of the U.S. Sentencing Commission, the guidelines seek to "… reward the corporation that was trying to be a good corporate citizen."

In exchange for a good faith ethics management program and cooperation with authorities, potential fines can be lowered by as much as 80%. In fact, the only thing an organization can do before an ethics violation occurs to lower its exposure to these fines is to institute an effective ethics management program. Such a program must be directed at "preventing, detecting and reporting" ethics violations.

The Power of Perceptions

Organizations operate in the public arena. Perceptions held by the public and/or key stakeholders provide the fourth motive for interest in ethics management. Whether we are talking about stockholders, consumer advocates or regulatory bodies, the truth remains that perception is reality. If the organization is perceived as ethical, as abiding by the ten universal values for example, the organization will be regarded more favorably. For some, ethics programs are a way of saying to concerned stakeholders that, "We care. We are trying to be the most ethical organization we can possibly be." That does not mean that the ethics program is insincere. It merely recognizes that there is a positive perceptual by-product to doing what is right.

When Good Ethics is Not Good Business

Yet being ethical is not always a guarantee of success. For example, several organizations operating outside of the U.S. are finding that "business as usual" in foreign venues is very different from operating at home.

One telecommunications giant faced a significant competitive disadvantage by insisting on applying "corporate values" to business ventures in South America. The organization's ethics policies specifically prohibited some of the very techniques being employed by key competitors. One such prohibited activity was the practice of financially "influencing" decision makers on various project bids. While the company is doing well in some Latin American countries, it lost bids and therefore millions of dollars in revenues in others because of its commitment to ethics.

Management argued that situational ethics is wrong. The organization recognized it would be disruptive to and incongruent with core business in the U.S. (hence it was bad business) to have different sets of values just to win a bid. Management feared that the practice, once started, would run out of control.

This company tried to put a good face on the situation, showing how good ethics was good business in the long term. Yet privately, several senior managers bemoaned the loss of revenue and the competitive disadvantage of restrictive ethics policies.

Ethics as Choice

After sifting through dozens of definitions of "ethics" over the years, we have noticed they all boil down to the issue of choice. Ethics involves choosing the good over the bad, the right over the wrong, the fair over the unfair. It sounds like a simple enough notion, but as we saw in the example above the psychology of ethical choices is often complex and subtle. Sanford Krolich has developed an ethical decision making model (a four cell matrix) which, in a very simplified form, puts ethical decision making dilemmas in a new perspective. This model suggests that there are, in fact, four components to every decision. The model is intended to be descriptive, showing how decisions are made, rather than prescriptive, suggesting how decisions should be made.

Individualism - the concern for what will happen to ourselves as the result of the decision we make. This is where one finds hidden agendas and concern with WIIFM (What's in It For Me?).

Altruism - the concern for the impact of our decision on others or on our relationships with others. This is where we find concern for what they will say, think, feel or do. Idealism - the concern for how the decision aligns with our beliefs and values. This is where we find concern with whether a decision is right, fair and good. Pragmatism - the concern for the practical consequences of the decision. This is where we find concern for what will happen as a result of the decision. What is the impact of the decision on goals and objectives?

Krolich argues that every ethical decision involves these four components. He points out that by examining the impact of a decision, by looking at individualistic, altruistic, pragmatic and idealistic consequences, individuals find the balance most appropriate to them and make their decision. The ways in which the criteria are balanced and those balances justified are as unique as the people themselves.

While there are some so-called universally accepted values, their presence is no guarantee of consistent ethical behavior. Common values do not mean that two people in identical circumstances will make identical choices.

The value in creating an ethics management program therefore is that it brings these choices to a conscious level and defines a formal system through which the organization can ensure its values will be applied with consistency and predictability. Good ethics can reduce employee sabotage, encourage compliance with the law, reduce fiscal liability and improve the perceptions of key stakeholders. Yet there is no guarantee that in every case this will translate into profitability and success. The reasons for ethically consistent behavior are compelling, but the choice of values and the ways in which we enforce them are up to the individual.