It is not new that ethical behaviour and integrity increases profitability and attract talents. The right talents! That is one of the responsibilities we have as business leaders.
And with that there are frequently seen pitfalls in organisations sabotaging the main vision, the purpose and the initially „good will“ to have a bigger impact.
Some of these most common pitfalls on ethical behaviour are on spot in todays episode. I am convinced that with the awareness of the importance regarding ethical behaviour a lot of troubles can be eliminated at the source.
But this is just the first step. With having an understanding what the potential pitfalls are it becomes also obvious what measurements and sanctions would be to protect the organisations’ assets and the corporate culture. Therefore – isn’t it worth to take care of it?
The topic of ethical behaviour was raised in a recent conversation I had with clients in the financial services environment. Actual media coverage of what went wrong in the financial services industry are high and news come up on a daily basis.
We all know that smart people are leading, steering and deciding. But what goes wrong? Again and again? When I mention only one scandal the effect is that 99.9% of listeners feel not related to it. It is too far away – we are not attached to it.
Nevertheless, I would like to invite you to put yourself into the position of being a business leader – or even better – being THE responsible leader – in the next big case which will happen. Just as an exercise and see what it does with you, with your team and with your organisation. How does it feel like?
We know that the responsibility is on Board, C-Level and Management and when I investigate incidents, there is hardly a case where these levels of responsibility are not involved.
More than two third of the large material fraud cases are conducted by those levels.
The roots of integrity and ethical behaviour
If you would ask your peers in the management team, board of directors or within your professional association. None of those would admit that she works for a company which is unethical and does not care about integrity.
But, with the use cases I experienced over the last three decades I must conclude that there are companies hardly being able to create and maintain a corporate culture which fosters ethical behaviour and integrity.
Different KPIs (Key Performance Indicators) underline the result and will be discussed with our clients to ensure that – if profitability and attracting talents are on their target list – the right actions can be taken, and measurements implemented.
The roots of integrity and ethical behaviour are found in the corporate culture.
There are plenty of reasons that even organisations with great intention struggle with integrity issues but there are a few pitfalls which could be eliminated to start with.
And these are the ones I have on my focus for todays episode.
Lacking corporate value management
How often do I ask employees – no matter on which hierarchy level – what the mission or higher purpose of the company is they work for.
Often the answer goes the direction of letting me know that there must be a mission statement somewhere on the intranet they have access to. I am not blaming the employees answering my question. Not at all.
If the board of directors and management is not able to transport the mission which is key to align (ethical) behaviour to the values, we have already lost our pole position to become an organization with strong ethical roots.
The values derived from the mission and purpose define the ethical behaviour and understanding of integrity in a corporate culture.
And this already leads me to the first questions:
- Do you detect any misalignment between the company values and employee behaviour? And if so, can you detect the root cause?
You already know that this question is part of the take home assignment and we come back to this later on.
Change perspective and imagine what would be possible if values would increase value?
Setting wrong KPIs
We already mentioned the KPIs a few sentences before as we often use these supporting the discussions with our clients.
KPIs are measurable, comparable, and therefore important when we talk about ethical behaviour and leadership. A key element in the different approaches and methods within Corporate Integrity Concepts.
What if we focus on the wrong parameters?
How important is quality and how is it going to be measured and rewarded? The human behaviour is quite simple in this setting. What gets measured gets done. What gets rewarded has priority.
Are we rewarding productivity before quality? These two parameters are contraindicative in most cases. The higher the productivity the less quality you can expect.
As employees are part of the most valuable assets a company it is also clear, that they are smart and understand how to tweak the figures. Creative accounting is not far to achieve what they are measured by.
It is obvious that quality needs to be far more rewarded than productivity and being part of the overall implementation strategy for a culture of corporate integrity.
Another KPI which needs to be focused on is profit which goes along with productivity too. Increasing the pressure to the sales organisations on cost of ethics will cost the company in the long run all.
Therefore, I encourage leaders to consciously follow a “profit with ethics” mindset and walk the talk. Incentives matters – check whether you set the right ones.
Good corporate governance is not lived
You remember when I started a few minutes ago with the categorization where the topic belongs to? The Board, C-Level and Management.
That is also the reason why this last common pitfall is an evergreen. We all know how important good governance is. The hottest topic for ethical behaviour is, how the governance of the company is lived!
Of course, there are differences already in the set-up of the companies’ governance but more important is how it is implemented and lived.
Not the best structure – on paper – does work when it is undermined in daily business.
Implementing these first three pitfalls into your take-home-assignment would mean that you – together with your team – reflect on
1. How is our governance lived? You can also compare what is stated in your org charts, rules and regulations and compare it what really happens
2. What are the KPIs we have set in place and do they measure what needs to be measured?
3. Do you detect any misalignment between the company values and employee behaviour? And if so, can you detect the root cause?
With these three questions for yourself, your team and your next discussions with peers will give you insights and indications for potential measurements and sanctions.
Which also leads me to the perspective, that Governance and business driven Compliance can be seen as secret weapon.
My personal whish for you is that at least these three introduced pitfalls are part of an upcoming discussion within your leadership team.
Not all at the same time as I am completely aware of the fact starting such discussion might be a challenge for some teams.
Not starting is not an option as the future is waiting and ready for corporates acting with integrity.
I have to disappoint you – these few pitfalls are not the only ones, but a good start to look at and to work on.
I am sure you remember the three questions of the take-home-assignement…..
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