Why instilling business ethics is key for an engaged workforce

Virtually every day we hear and read about violations, transgressions and lapses of business ethics throughout all levels in the workplace, from employee to the C-Suite.

PwC’s CEO Success Study cites that a record 17.5% of CEOs left their position in 2018 at the world’s 2,500 largest companies, a 3% increase from 2017. Of those exits, more than two-thirds were planned, while 20% were considered “forced.” PwC’s study further cites that for the first time in the study’s 19-year history, scandals accounted for more CEO departures than poor financial performance or board-level disputes.

Granted, CEOs have much on their plate, but as an indicator of priority, in The Conference Board’s recent research², “abusive behavior in the workplace” ranked 13th–next to last–when U.S. CEOs were asked about the top 3 issues that would require the greatest attention in 2019 in their organization. Also of note on the list are “workforce diversity” at No. 10 and “compliance with data privacy regulations” at No. 12. Despite these statistics, we hear and read about these types of transgressions on a daily basis.

In my experience, ethical dilemmas are one of the top challenges for HR executives. Now more than ever, organizations must address their policies and processes for instilling and championing a culture of ethical behavior. Corporate codes of ethics and conduct should reflect not only behavior and actions that are illegal, but also those that are disrespectful, degrading and not reflective of the core values of the company.

Here are six key steps for developing and instilling your corporate Code of Conduct:

1. Define: Clearly define and identify unacceptable behavior.

Of course, any behavior or action that is illegal is unacceptable. When articulating illegal behavior, the lines are generally clear. It is imperative to know both federal and state laws, as well as laws in all countries in which you do business. Throughout all processes and levels, ensure your organization operates within the guardrails of the law. Working in collaboration with your legal officer and compliance counsel is key to making this happen.

In addition, any behavior or action that is not aligned with your company’s core values and Code of Conduct should also be deemed unacceptable. Here, when articulating such behavior, the lines can become blurred. For example, a coworker asking another coworker on a date might not be considered an offense the first time, however multiple requests might be considered harassment. A manager asking a subordinate on a date might be considered harassment on the first occurrence. So when does it cross the line? While it may be nearly impossible to articulate every potential situation, setting clear delineations to reduce as much of the gray area as possible is critical.

2. Consequences: Establish and implement consequences.

Make it clear upfront what potential consequences are associated with violations of your code, including behaviors and actions that may constitute means for termination. Make sure your wording adequately sets forth a range of potential outcomes and consequences, providing flexibility necessary in evaluating and determining outcomes for each offense. While again there will be some gray area, it is critical that you minimize subjectivity and recognize that every time you apply a consequence, you are setting a precedent, and it is vital that you are consistent in your actions.

3. Report: Establish ways to easily and confidentially report abuses.

How effective is a Code of Conduct if there are no safe means to report infractions? Design and implement multiple confidential ways to report suspected abuses. Options include a hotline, a designated HR manager or department, and (not or) an email address. Establish upfront principles for when managers, supervisors and employees are required to report behaviors and actions that violate the code. Make sure these principles are communicated and understood throughout your organization.

Cultivate an environment and corporate culture where senior leaders, managers, supervisors, and employees all are encouraged and feel equally comfortable to do the right thing and to call out any behaviors and actions that appear to violate the Code of Conduct. If there is ever any evidence of retaliation, how you respond to that will set the tone for future reporting of behavior inconsistent with your core values and Code of Conduct.

4. Train: Ensure your organization is well versed in your Code of Conduct … on a continuous basis.

Training is essential to understanding and compliance. Every employee at every level should know their responsibilities and what is expected of them and fully understand the potential consequences if they violate your code. All employees need to know they can speak out without fear and where to go for help. Training should be ongoing, not a one-time occurrence. It should provide real scenarios and show a range of behaviors from acceptable to unacceptable. Training may be in-person meetings, workshops, online video or education modules, webcasts, or any other method effective for your organization.

Push to ensure your Code of Conduct is a full business priority and not just a human resources priority. Reviewing and formalizing acknowledgement, understanding, and acceptance of your code should be an integral part of every performance conversation at every level throughout your organization. We all know the tone is set from the top … that is the best training ever!

5. Explode: Explode and synthesize your policies and desired behaviors to develop your company’s Code of Conduct.

Your Code of Conduct should cover the full range of doing business both internally and externally, and both domestic and abroad, as applicable. From what is illegal to what is unacceptable behavior, business Codes of Conduct should directly address core issues related to fiduciary responsibility, corporate assets, workplace practices, ethical and respectful behavior, as well as processes to enforce the code.

Areas to consider include:

Fiduciary Responsibility

• Accountability
• Financial accounting and internal controls, integrity and responsibility
• Government and trade controls
• Corporate governance
• Legal compliance–trade, competition, insider trading, bribery, government/non-government relationships, discrimination

Corporate Assets

• Data privacy
• Non-compete provisions
• Loyalty, fairness, conflict of interest
• Confidential and proprietary information
• Company properties
• Interactions–customers, competitors, suppliers and other third parties
• Use of social media and information technology
• Protection of the brand

Workplace Practices

• Substance use, weapons and violence
• Workplace health, safety and productivity
• Personal relationships, fraternization

Ethical and Respectful Behavior

• Integrity, honesty, trustworthiness
• Diversity, inclusion, equity, human rights, accessibility
• Harassment, discrimination, bullying
• Online, social and digital media
• Social and environmental responsibility

Process

• Reporting violations
• Non-retaliation policy
• Training

The topics above would apply to most organizations. However, be sure to include topics that are particular to your company culture and business practice.

Reinforcing the culture that reflects your core values needs to be pervasive throughout your organization, being reflected in all polices, processes, handbooks, meetings, webcasts, communications, etc. Leaders need to set the tone at the top and to talk repeatedly and consistently about that tone. The words describing your values and expectations need to be reflected in these messages and also in recruiting material, employment agreements, onboarding, training, ongoing performance and career discussions, etc. The consequences for not living up to your organization’s core values need to be evident.

Some good examples of Codes of Conduct can be referenced at:

Accenture

The Coca-Cola Company

The Hershey Company

Microsoft

Unilever

6. Update: Routinely review and update your code.

Your Code of Conduct should be a living, breathing component of your organization’s DNA that changes to reflect an ever-changing legal and social landscape. Be sure your code is easily and readily accessible for your entire organization. Date the document so that future updates and enhancements are easily communicated and referenced. When changes are material, communicate those changes throughout your organization and make sure to include the appropriate level of training. If necessary, ensure employees have read and understand the changes through a process that ensures their review, such as a mandatory online video or as part of a company-wide annual review process.

The bottom line is that ethics matter. Articulating and instilling your business ethics through a formal Code of Conduct that is truly owned and embraced from the top down establishes an essential framework for legal adherence, for doing the right thing and for treating people with respect–behaviors and actions that support a healthy and engaged organizational culture for employees, managers, and leaders at all levels, as well as all of the organization’s stakeholders.

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Jill Smart is an ECC Executive Partner based in Chicago, Illinois. Prior to ECC, Jill was the chief HR officer at Accenture and a leader with 33 years in consulting and human capital. Jill is the current president of the National Academy of Human Resources; serves as a board director for numerous companies, both public and private; and is a trustee for the University of Illinois. In addition, Jill is a fellow of the National Academy of HR, a fellow of the Human Resources Policy Institute, a member of the Peer Roundtable for CHROs, a member of the G100 Talent Consortium Advisory Board, and has been a director of the HR Policy Association. Jill holds an MBA from the University of Chicago and a BS in Business Administration from the University of Illinois.