How to cultivate an ethical workplace (and reap the benefits)

By Beth Wallace

Workplace ethics have a significant impact on an organisation’s success. Research suggests that ethical businesses are more productive and perform better financially than those with unethical cultures.

Ethical businesses are also more likely to attract and retain talent and build trust with employees, customers and the public.

On the flipside, perceived unethical behaviour can discourage employee engagement, leading to reputational damage and even legal problems.

Although no one single factor defines an ethical culture, organisations that excel in this area tend to have one thing in common – a clearly stated set of core values and principles tied to a defining purpose, says Dr Simon Longstaff AO FCPA, executive director at The Ethics Centre.

These values and principles provide a guiding star for the policies, structures and frameworks that dictate how an organisation operates and ensure “a close alignment between what is said and done”, he says.

Longstaff says ethical organisations promote a culture of curiosity that goes beyond mere compliance. Such a culture can empower to employees to stay on the “right” path, by always questioning how and why things are done.

“It is not restricted to wondering about things that appear to be a problem. It is curiosity about why anything is done,” Longstaff says.

“The two great enemies of achieving an ethical culture are hypocrisy – where you say one thing and do something else – and an unthinking custom and practice,” he adds.

However, neither is necessarily intentional.

“When ethical failures occur and you talk to the people involved and ask them, ‘How did this happen?’, the first thing they will say, quite truly, is ‘I didn’t see it at the time’, ‘Everybody was doing it’, or ‘That is just the way things were done’,” Longstaff explains.

Ethical culture characteristics

While not all organisations have a perfect ethical culture, very few are unscrupulous to the core, so ethical environments rarely need to be built from the ground up. Some organisations may simply need to build on what they already do well.

An ethical workplace culture will also look different for everybody, says Belinda Zohrab-McConnell, regulation and standards lead at CPA Australia.

“Even within an organisation, the perception of whether the culture is ethical will vary, unless there is some sort of framework providing a point of reference.”

For accountants, an ethical culture can be built upon the requirements set out in the APES 110 Code of Ethics for Professional Accountants. However, for anyone else in business, stablishing or furthering an ethical culture may be more challenging where there is no framework to build upon.

 

"Even within an organisation, the perception of whether the culture is ethical will vary, unless there is some sort of framework providing a point of reference."

 

In such situations, Zohrab-McConnell says the existence or absence of an ethical culture can be assessed against an organisation’s internal and external-facing mission(s), values, strategies, commitments and policies, and whether it is prepared to be held accountable against these.

An ethical culture must be based on achievable commitments and transparent outcomes, she adds.

For example, if a business is committed to achieving gender diversity at management level, the efforts undertaken to attain this – and the outcomes of such efforts – must be communicated openly to internal and external stakeholders, together with an opportunity for open reflection on the strategy and the results.

“Similarly, a commitment to openness and transparency with stakeholders concerning a strategic move must be paired with the facility to hear and respond to feedback from such stakeholders,” Zohrab-McConnell says.

Leaders play a vital role in guiding an organisation’s ethical compass.

Governance, risk and audit expert Dianne Azoor Hughes says leaders are responsible not only for helping to define its core values and principles, but also for modelling ethical behaviour and ensuring employees feel comfortable raising dilemmas at the earliest opportunity.

Tellingly, a Gallup study found that while just 40 per cent of US employees report unethical behaviour in the workplace, they are 24 per cent more likely to do so if they trust leadership.

To build this trust, Azoor Hughes says ethics should guide all decision-making and leaders must align their actions with the company’s internal policies and procedures, to “reflect a practical ethical approach as to how partners and staff should conduct themselves across all service lines”.

An organisation can deeply ingrain its principles by celebrating them in partner and staff performance evaluations, she adds, and by encouraging open communication – letting team members know where to go when they need assistance if matters do arise.

“Partners and staff should be able to seek help with ethical issues without fear or favour as to the outcome, but with a common understanding that resolution of any perceived ethical issue is paramount,” Azoor Hughes says.

Ethical education

Just as organisations support workers to improve their job skills, so too can they guide them towards becoming their best moral selves, says Isaac Smith, associate professor of organisational behaviour and human resources at Brigham Young University.

Smith believes one of the keys to designing an environment that promotes ethical learning is to build opportunities for moral reflection into the everyday experience of employees.

“It is often said that we learn from experience, but that is only partly true,” he explains. “We only learn from experience that we reflect on. In terms of morality and ethics at work, institutionalising moral reflection can go a long way toward helping people learn from their experiences.”

For example, organisations can make ethics a part of work reviews, held before and after a big project or initiative. Before a project or initiative, participants could be asked to think through any reasons why it might fail. In a debrief, participants are then asked what they learned from the project/initiative that can help them prepare for the next one.

“Asking ethics‑related questions both before and after projects can encourage people to learn from past experiences and prepare for future experiences,” Smith adds.

“Ethical reflection can also be institutionalised into the work environment through mentoring relationships, performance evaluations and during onboarding and training.”

Of the latter, Smith believes that studies suggest that ethics training is less effective in short, infrequent sessions or when administered exclusively through online platforms or in lectures.

“Conversely, ethics training with more experiential and reflective components is more effective,” Smith argues.

“When workers are inexperienced themselves, you can use scenarios and case studies to help them engage in deeper reflection about ethical issues.”

Commit to self-improvement

Employee ethical development does not rest solely on the shoulders of the organisation.

Accountants, for example, can educate themselves about ethical requirements through self-study and referring to the Accounting Professional and Ethical Standards Board (APESB) guidelines and/or their firm’s internal policies.

Azoor Hughes advises employees to consult with more senior colleagues or partners when they are uncertain about situations that arise during their professional work.

“Often, an uneasy feeling will be the first prompt to an employee to examine and consult on an issue of concern, to determine the course of action needed,” she says.

Smith recommends employees adopt a threestage approach to staying on the right path:

• Prepare in advance for ethical challenges.
• Make good decisions in the moment.
• Reflect on and learn from successes and failures.

To support this approach, employees can take several steps to proactively prepare for ethical challenges, rather than simply reacting when they occur, Smith says.

These include identifying their personal values, setting ethically relevant goals, engaging in self‑reflection and finding an ethics mentor or seeking guidance and moral feedback from others.

It is also important for individuals to consult organisational policies, clarify the expectations of their job and find a job with the right moral “fit”, where their own values align with the organisation, he adds.

When employees identify an opportunity to make improvements, Zohrab-McConnell urges them to share it with their employer.

She also believes employees should hold their organisation accountable to the changing expectations of stakeholders – what may have been considered ethical 10 years ago may no longer be seen in the same light.

“Quite apart from legislative and regulatory changes over such a period, societal expectations may have changed substantially,” Zohrab-McConnell says.

“For the benefit of both internal and external stakeholders, the standards to which an organisation holds itself and its workforce accountable must be reviewed regularly.”

CPAs in Australia and New Zealand are required to adhere to the APES 110 Code of Ethics for Professional Accountants, (“the Code”), as issued by the Accounting Professional and Ethical Standards Board (APESB). The Code mandates compliance with the fundamental principles of integrity, objectivity, professional competence, due care, confidentiality and professional behaviour in all professional interactions.

Belinda Zohrab-McConnell, regulation and standards lead at CPA Australia, emphasises that while it is crucial for accounting firms to ensure all partners and employees are aware of and comply with these standards, the obligations outlined in the Code ultimately sit with the individual members, not their employers.

“The Code is written with the individual member in mind, not the organisation they are employed by, own or govern,” she says.

“This can create tension when a firm or organisation consists of individuals, only some of whom are bound by the Code’s requirements.

Therefore, it is incumbent upon such a firm or organisation to adopt or adapt a framework for an ethical culture. A member with a senior role in such a firm or organisation is expected to be influential in this respect.”

Practices to cultivate an ethical culture