Written Code of Ethcs VS. Strong Ethical Leadership: critical analysis

There is more than one way of fostering ethical behaviour within an organisation. Establishing formal structures and systems is one of them and considered to be very effective in accomplishing this task. However, strong ethical leadership is vital in shaping long-term ethical behaviour in organizations and any other formal structure’s or system’s effectiveness diminishes dramatically without it.

Strong ethical leadership is the factor which introduces, sustains and protects the process of ethical change in an organization. In this essay relative merit of code of ethics, ethics training and strong ethical leadership will be determined in the process of shaping long-term behaviour within an organisation and attempt will be made to identify the most effective one. It should be remembered though, in the field of management and ethics definitive and clear-cut answers are a rare thing.

‘Ethics is the code of moral principles and values that governs the behaviours of a person or group with respect to what is right or wrong’ (Daft, 2007, p.252). The role of ethics in the last decade increased and big corporate scandals were probably the main reasons behind this trend. Names like Enron, WorldCom, Arthur Anderson, BP remind us of how proper conduct in ethical matters can save jobs, money and do less harm to the environment.

As organizations are trying to find the best ways and methods to introduce and shape ethical behaviour within them, several ideas emerged on how to do it. Most of them involve active involvement of organizations’ leadership. One of them is establishing formal structures and systems in the organization to introduce and facilitate change in ethical behaviour of employees.

Written code of ethics is a good example of such formal structure. ‘A code of ethics is a formal statement of the company’s values concerning ethics and social responsibility; it clarifies to employees what the company stands for and its expectations for employee conduct’. (Daft, 2007, p.262). The role of managers is very important in rewarding for compliance and discipline for violations. Moreover, they should show and apply all the principles stated in the code of ethics. It is one of the most effective ways of making formal structure work – through strong ethical leadership.

However, the presence of written code of ethics in organisations doesn’t guarantee that employees are being made aware of its content and that organization is strongly following it in its day to day business conduct. Some researchers have found that companies with written code of ethics are as likely to be found guilty of illegal activities as companies without it. McKinsey’s insider trader scandal and BP mismanagement of Gulf oil spill are good examples for companies with the written code of ethics but failing to comply with it.

In order to boost the change in ethical behaviour in the organisation, training programs in ethics are run in most organisations. They introduce core topics in business ethics and corporate social responsibility (CSR), so employees can make their own decision in a day to day running of the company. Texas Instrument has an 8 hour ethics training course and incorporates ethics in every training program provided to its employees. The effectiveness and usefulness of these systems is undoubtedly clear. But without strong leadership and visible actions from managers who will apply these principles in day to day running of an organisation all these formal structures and systems have little value.

Johnson & Johnson and general Mills are some of the successful companies which were part of a study of ethics policy and practice in large organisations (Corporate Ethics, 1988). Among the numerous findings was one particular treat of leaders which effected ethical behaviour in an organization. Actions of leaders and managers had the largest influence on how employees behaved in an ethically tricky situation. Commitment from the top management to ethics and creating the right environment was key to success in shaping the long-term ethical behaviour within the organization.

Values-based leadership is a more systematic method of expressing above mentioned ideas. Relationship between the leader and employees is based on deeply internalized and shared values, which are regularly acted upon by the leader. Often slogans, corporate events, publications, videos and leaflets are used to communicate these shared values. Behaving on these principles for a leader in everyday life is very important in committing other employees to do the same as well. Same thing is expected with self-sacrifice at the workplace. Leader’s role is to create an environment where employees will be able to develop their own character and shape organizations ethical climate.

However, several challenges lie in the path of a leader who is committed to ethical principles at the workplace. High stress situations impair human judgment and performance. Toyota’s late response to reported defects in one of its cars which led to several deaths, was not ethically right from some observers point of view.

Competition is another factor which can negatively affect leaders and employees behaviour in a critical situation. Low profit margins and fierce competition for resources does sometimes make managers to cut corners and go against organizations’ ethical standards. That is why written code of ethics and good communication channels, to spread the values written there is essential. Misunderstandings about explicit and implicit norms in the organizations might be another challenge in having harmonised ethical climate. Most of the implicit norms and assumptions should be made explicit, so they can be easily addressed and referred to.

After considering all three written code of ethics, ethics training and leadership we can make some comparisons and draw parallels. Written code of ethics and ethics training are the tools which can be used to foster and facilitate desired ethical behaviour in the organization. Whereas leadership is an essential skill and force in initiating these kind of changes. On its own written code of ethics is just a piece of paper and very little benefit seen from it without the human factor.

Human factor is in this case a strong and committed leadership, which believes in ethical behaviour and lives it. Question of whether one of them is more effective cannot be answered clearly and definitely. But most probably leadership is the power which makes things move in the organisation. Including shaping ethical climate and employees sense of right or wrong.

As an example to this kind of organization Innocent Drinks can be used. Founded in UK a decade ago, it became a dominant player in UK’s smoothie market. Gaining about 70% of the smoothie market. Ethical behaviour is taken quite seriously in this company and one of their principles is being environmentally friendly and giving 10% of their profits to charity. These ideas were present with their founders from the beginning even before the company existed.

By starting a new company they have brought these ideas of sustainable sourcing, sustainable production and sharing profits to their workplace. This in turn attracted similar minded people and reinforced their beliefs. So, the process of shaping ethical behaviour within the organization is a two way process. Leaders will introduce certain ethical ideas and try to foster them among employees by different communication channels and establishing formal structures and systems (written code of ethics, ethics training).

At the same moment, if the effort of leadership was genuine and persuasive enough, it will lead to forming a character in employees and will create organization’s native ethical climate. This can operate autonomously without always prompting and instructing in critical situations, such as high stress and fierce competition after profits or resources. Corporate culture is formed this way as well.

As a conclusion it can be said that despite written code of ethics and ethics training’s effective results in shaping long-term ethical behaviour within the organisation, the role of leadership is indispensible and formal structures and systems cannot be useful for organization without it. At the dawn of industrial revolution there were very big companies such as Ford, which were an example of innovation, ethical conduct and social responsibility long before these words existed. This suggests that leadership without written code of ethics and formal training in ethics can initiate and sustain ethical behaviour at the workplace. However, ideal situation would require the use of all tools available in modern managers arsenal in order to introduce new ideas and change an organization. Value-added leadership, culture changing techniques, disclosure mechanisms (whistle-blowing practice) are some among many of them available.

References

• Daft, R. (2007) “Understanding the theory and designg of organisations” Thomson