17 Steps to a Thriving Ethical Culture

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When it comes to promoting ethical behavior in your organization, it’s not just about your own actions. It’s about building an ethical culture in which doing the right thing is not only encouraged but expected, demanded, and incentivized.

In such a culture, everybody knows that character counts. They’re committed to pursuing great results (the excellence imperative), but always with integrity (the ethics imperative).

 

The Prevalence of Integrity Problems in Organizations

How are organizations doing with integrity issues? Alas, not so good.

According to the EY Global Integrity Report 2024 (1):

  • More than one in five (21% of) respondents admit that their organization “has had a significant integrity incident, such as a major fraud, data privacy and security breach, or regulatory compliance violation in the last two years.”
  • Of those reporting their organization had an integrity incident, 25% attribute the root cause to a lack of appropriate tone from senior management team members and 20% reported pressure from management.
  • About two-thirds (65%) of board members, 57% of senior management, and 50% of workers feel under pressure not to report misconduct.

Upon reviewing the data, the report authors divided workers’ approaches toward integrity and unethical or illegal activities into three types. Here are the breakdowns:

  1. About 58% of workers are “principled employees” (unwilling to act unethically for personal gain or at the request of a manager).
  2. About 38% of workers are “potentially compromised employees” (willing to act unethically for personal gain or at the request of a manager).
  3. About 4% of workers are “potential enablers” (willing to act unethically at the request of a manager but wouldn’t do so for personal gain).
Source: EY Global Integrity Report 2024, “How Can Trust Survive without Integrity?”

Toxic Culture Attributes

What data do we have on ethics and culture? According to a study of more than 1.3 million GlassDoor reviews from U.S. workers in large companies across 40 industries, the top attributes that poison corporate culture in the eyes of workers are the following:

  1. Disrespectful
  2. Noninclusive
  3. Unethical
  4. Cutthroat
  5. Abusive

(Source: Donald Sull, Charles Sull, William Cipolli, and Caio Brighenti, “Why Every Leader Needs to Worry About Toxic Culture,” MIT Sloan Management Review, March 16, 2022)

 

What’s an Ethical Culture?

If you want to create a thriving ethical culture, it helps know what that entails. Organizations with an ethical culture value the following as high priorities:

  • Accountability
  • Belonging
  • Community engagement and service
  • Diversity
  • Equity
  • Ethical leadership
  • Inclusion
  • Fairness
  • Integrity
  • Long-term outlook
  • Respect for the law
  • Social responsibility
  • Stakeholder focus
  • Sustainability
  • Transparency
  • Trust
  • Worker empowerment

The question then becomes: How to make that happen?

“A healthy constructive culture by no means guarantees success,
but it provides the foundation for building an excellent, ethical, and enduring organization.”

-Bob and Gregg Vanourek, Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations

Leadership Derailers Assessment

Take this assessment to identify what’s inhibiting your leadership effectiveness. It will help you develop self-awareness and identify ways to improve your leadership.

 

How Leaders Can Create a Thriving Ethical Culture

Here are 17 steps you can take as a leader to establish a thriving ethical culture:

1. Commit to intentionally creating an ethical culture in your whole organization. Honor what we call the “ethics imperative”: “doing the right thing, even when it’s costly or hard.” Make sure your efforts cover the entire organization at all levels and across departments and divisions.

“… progress is impossible without an explicit and firm commitment to ethical practices.”
-Bob and Gregg Vanourek, Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations

2. Collaboratively elicit the organization’s shared values. Then inculcate them into the fabric of the organization. Speak of them often. Use them in your decision-making. Build them into performance reviews. Champion them. (See our article, “How to Create a Shared Purpose, Values, and Vision.”)

3. Establish, promote, and uphold clear ethical standards. You can do this with a clear code of ethics or set of guiding principles that define acceptable and unacceptable behaviors. Make sure that these resources are widely and easily accessible and that all workers know about them and refer to them.

4. Ensure the senior management team and board are setting the right tone from the top. That starts with modeling ethical behavior and speaking about it often.

5. Communicate the importance of ethics and integrity relentlessly. Be crystal clear and present the ideas in simple language that’s easy to grasp. Repeat these points tirelessly in multiple mediums and with cascading messages, from executives and board members to managers to front-line workers. How often do managers in your organization talk about ethical matters?

“Currently, fewer than half (47%) of management teams frequently communicate
to their employees the importance of behaving with integrity.”

-EY Global Integrity Report 2024

6. Foster a culture that champions cooperation, prosocial behavior, and laser focus on shared values and collective objectives, not on cutthroat competition and office politics.

7. Promote transparency. Be intentional about sharing what’s happening in the organization. Don’t be stingy about information shared. And be open about mistakes, signaling that they’re learning opportunities.

Personal Values Exercise

Complete this exercise to identify your personal values. It will help you develop self-awareness, including clarity about what’s most important to you in life and work, and serve as a safe harbor for you to return to when things are tough.

 

8. Create a high-quality ethics training program and incorporate it widely. Help workers understand the organization’s shared values, ethical standards, code of conduct, and how to handle ethical dilemmas and problems. The training should address everyday decision-making processes, the types of instances in which people are most likely to make bad decisions, the common rationalizations people use to justify questionable behavior, and ethics cases, simulations, and debriefs.

9. Go beyond training and integrate ethics into everything the organization does. That means job interviews, onboarding, meetings, reports, performance reviews, post-mortems, and more.

“…many companies already have regular ‘postmortem’ meetings when important projects end. Organizations can add a standard set of ethics questions to these meetings: Was this project and process consistent with our values? Did we cross any lines? Was anyone harmed? Some companies also have project ‘premortems’—an ideal opportunity to discuss ethical challenges in advance.” -Susie Allen, “5 Research-Backed Strategies for Building an Ethical Culture at Work,” Kellogg Insight

10. Encourage open dialogue and create a safe space for team members to express concerns. That should include anonymous reporting channels like ethics hotlines.

“No one is more valuable to the organization than the subordinate willing to speak truth to power.”
-Warren Bennis, leadership author

11. Hold everyone accountable and investigate and address misconduct swiftly and impartially. Making exceptions for the top brass or high performers will only breed cynicism. According to an Ethisphere report, “Eight Pillars of an Ethical Culture,” 39% of respondents didn’t believe the rules and disciplinary actions for unethical behavior were the same for everybody in their workplace.

12. Incorporate ethics into performance evaluations. Linking ethical behavior to success reinforces the importance of integrity. Many elite organizations, for example, base half of worker reviews on performance and half on ethical behavior (and/or how they contribute to the organization’s culture).

13. Publicly recognize, celebrate, and reward ethical behaviors, such as asking tough questions, speaking up when you have concerns (a “speak-up culture”), and reporting wrongdoing. This will create a positive reinforcement loop and encourage workers to get on board. According to that same Ethisphere report, 93% of workers report a willingness to report misconduct if they observe it, but only 54% of workers who observed misconduct in the past year actually reported the matter.

Alignment Scorecard

When organizations aren’t aligned, it can reduce performance dramatically and cause frustration and dysfunction. With this Alignment Scorecard, you can assess your organization’s level of alignment and make plans for improving it.

 

14. Emphasize the importance of renewal and rest. Avoid creating a culture of burnout that can contribute to ethical problems, according to researchers. (See my article, “The Problem with Tired Leaders.”)

“Creating the culture of burnout is opposite to creating a culture of sustainable creativity.”
-Arianna Huffington, author and entrepreneur

15. Promote worker wellbeing and mental health. According to Adam Nemer of Simple Mental Health, more than one out of five workers struggle each year with a diagnosable mental illness, but less than half seek care. Many don’t even know that they’re struggling. Yet there are real consequences, both human and organizational. For instance, mental health struggles are a leading cause of poor productivity and worker absenteeism and turnover.

16. Promote long-term thinking. Avoid playing the short game. Consistently make decisions that benefit the organization and community in the long run. (See our article, “Leadership for the Long Haul—The Endurance Imperative.”)

“All the incentives in any organization always run to the short term….
It’s really important for somebody to keep their eye on the prize.”

-Billy and Debbie Shore, co-founders, Share Our Strength

17. Embrace corporate social responsibility and conscious leadership practices . Examples: Focus on the “triple bottom line” (profit, people, and planet) and creatively find ways to add value to all stakeholders (workers, customers, suppliers, partners, and communities), not just shareholders.

 

Conclusion

Too many organizations today have lost the trust of their workers and customers, and too many institutions have lost the public’s trust. Most people want to work for values-based organizations that operate with integrity. That requires not only standards, systems, and processes but also intentional culture-building.

“An ethical culture is not created by accident. It is deliberately crafted at many levels of the organization under the guidance of leaders who hard-wire it into the processes and practices by which business gets done.”
David Greenberg, former CEO, LRN, owner, Blacksford

 

Reflection Questions

  1. To what extent is doing the right thing expected, demanded, and incentivized in your organization?
  2. Do you have a thriving ethical culture?
  3. What more will you do, starting today?

 

Tools for You

Leadership Derailers Assessment

Take this assessment to identify what’s inhibiting your leadership effectiveness. It will help you develop self-awareness and identify ways to improve your leadership.

 

Related Articles & Resources

 

Postscript: Quotations on Building an Ethical Culture

  • “A culture of character is the legacy of triple crown leadership.” -Bob and Gregg Vanourek, Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations
  • “There’s evidence that more-ethical companies have happier employees and do better in the market.” –Maryam Kouchaki, professor of management and organizations, Kellogg School of Management
  • “Leaders are responsible not just for their own ethics but also for creating an environment where they foster more ethical behavior by all the people within their organization.” –Max Bazerman, Professor, Harvard Business School
  • “Culture and values provide the foundation upon which everything else is built.” –Jeff Weiner, executive chairman, LinkedIn, founding partner, Next Play Ventures
  • “For individuals, character is destiny. For organizations, culture is destiny.” -Tony Hsieh, former CEO, Zappos, author, Delivering Happiness
  • “The CEO is the curator of an organization’s culture. Anything is possible for a company when its culture is about listening, learning, and harnessing individual passions and talents to the company’s mission. Creating that kind of culture is my chief job as CEO.” –Satya Nadella, Chairman and CEO, Microsoft

(1) The EY report is based on a survey of more than 5,000 board members, senior managers, managers, and workers in a sample of large organizations and public bodies around the world (53 countries and territories).

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Gregg Vanourek is a writer, teacher, and TEDx speaker on leadership and personal development. He is co-author of three books, including Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations (a winner of the International Book Awards written with his father, Bob Vanourek) and LIFE Entrepreneurs (a manifesto for living with purpose and passion). Check out his Leadership Derailers Assessment or join his rapidly growing community. If you found value in this, please forward it to a friend. Every little bit helps!

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