10 tips for cultivating an ethical organisational culture

18. March 2020 - Stuart Schofield, Client Director, Mannaz Share this page

For organisations to be sustainable and valuable to society they need good governance, transparency and a clear purpose that extends beyond the interests of a self-interested few. Read on below.

10 tips for cultivating an ethical organisational culture

“Ethical leadership describes a respect for ethical beliefs and for the dignity and rights of others. It requires great conviction and on occasion, extraordinary levels of courage.”

Since the turn of the century we have seen a global financial collapse, prompted by irresponsible decision-making. We have also seen some large multinational organisations fake data, flout environmental protections and soften workers rights. In times such as these, the ‘character’ of an organisation and its leaders has become of prime importance.

Ethical leadership describes a respect for ethical beliefs and for the dignity and rights of others. It requires great conviction and on occasion, extraordinary levels of courage.

35,000 decisions a day

No matter who you are, everyday your moral code is being tested. It is estimated that people make on average 35,000 decisions a day – some unimportant, some highly significant. Leaders within organisations, because of the impact of their decisions on others, face a distinct moral pressure that others do not.

It can be hard to consider every moral implication of every business decision. Yet leaders who lead with a clear ethical and moral compass stand to create far greater value not only for owners and share-holders, but also value for the community and for society as a whole.

So the question is: “How do you know if your leaders have what it takes to lead with thoughtfulness, ethics and integrity?”

This article suggests that no one is immune to the occasional moral slip-up – leaders included. I also argue that there are many powerful psychological forces at work that can drive us from our ‘ethical’ path. These forces are natural, they help to protect us from criticism either from ourselves or from others, but they can also occasionally drive us to make morally questionable decisions.

Here we explore three of the most powerful psychological forces playing a role in ethical leadership and decision making. Luckily, there are things that organisations can do to help their leaders overcome these forces.

We lie to ourselves

Everyone thinks they are ‘good’. It is rare that any one of us would describe ourselves otherwise. But can we ALL really be THAT good? Studies have suggested that, even jailed criminals rated themselves as kinder, more moral, more trustworthy and honest than the average member of the public(1). This backs up what psychologists have known for decades; people in general radically over-rate their own sense of moral decency and are usually more cautious in their judgement about the moral decency of others(2).

This self-serving ‘better than average’ delusion may exist to help to bolster our sense of self confidence, but it also makes people quite poor at rating their own level of moral standing. In an organisational context, this is important. Most of us, understandably try hard to manage our reputations at work. Self-awareness may suffer as a result of this and we may not always be open to our own failings.

Give feedback

As a consequence, leaders should be given feedback on the quality of their decisions. If a leader’s decisions seem somewhat self-serving, this should be highlighted openly and honestly, because it is unlikely the leader will have spotted it. In this manner, leaders, peers and direct reports all play a role in holding a mirror up to those in power.

Ethically dubious decision-making does not just come from being self-serving, it can also be a very natural response to stress. In his 2011 best seller ‘Thinking Fast And Slow’, Psychologist Daniel Kahneman suggests that most of us are plagued by unhelpful cognitive biases that we may not be aware of. These are especially prevalent when we are under pressure.

One example of this is ‘Ego-Depletion’ – the tendency to think less carefully about the choices we are making if we have just experienced extended periods of ‘trying to be good, diligent and focused’. The will that it takes to stop us from following our more natural impulses during these times is exhausting, and eventually something has to give.

We minimise feeling guilt

When we are mentally tired we seem to stop evaluating past and present behaviour with any rigor. As a consequence, we tend to minimise any feelings of guilt associated with our previous or current slip-ups. This ultimately encourages selfishness. We don’t mean to make unethical decision, we are just too tired not to!

Ultimately, we have a strong need to minimise self-criticism and do not see our own moral short-comings. Added to this, we may be less concerned about our moral short-comings when under pressure to perform. These are just two ways in which ‘good’ people can make ‘bad’ decisions. Both of these biases are natural and reside within us all.

As we have seen, we all have a drive to minimise self-criticism, but it should also be noted that we also have a very strong drive to minimise the criticism of others.

“When we are mentally tired we seem to stop evaluating past and present behaviour with any rigor. As a consequence, we tend to minimise any feelings of guilt associated with our previous or current slip-ups.”

We follow the crowd

People don’t like to be judged harshly by others. For this reason, the effect of team norms and group-think can be a powerful influence on us. Much of the time the ‘group’ to which we belong will keep us in check. However, the groups we belong to can also drive us towards unethical decision-making.

Diane Vaughan – an American sociologist who researched the human causes behind the Challenger and Columbia space shuttle disasters – is probably most famous for coining the phrase ‘Normalisation of Deviance’(3). This phenomena describes a fairly common process that can be found in many organisations – a clearly unsafe practice comes to be considered normal
if it does not immediately cause a catastrophe.

Call it out!

‘Normalisation of Deviance’ does not only apply to unsafe practices, but can also apply to unethical behaviour. Over time, you might become insensitive to deviant practices or ideas (that far exceed the levels that you are personally comfortable with) simply because they are so ubiquitous. For example, if you see your colleagues (or even your boss) make decisions that are lazy, self-serving or morally compromised, you too may relax your own moral concerns. In these instances, strong leadership is vital. Team leaders need to resist being pulled down to the lowest tolerable standards, and must instead be the voice of integrity. A manager I recently worked with stated that his moral compass was kept on course by a very simple mental test: He would ask himself: “How would I feel explaining this practice to my partner, my parents or my children?” If the practice felt wrong, he would simply call it out!

The power-distance relationships

Of course, it is one thing for a leader to surface unethical practices within teams, but it is another thing for team members to call out bad practices carried out by their own manager. Dutch Psychologist Geert Hofstede has noticed that different cultures around the world are used to different power-distance relationships at work. Some cultures see little difference in status between manager and subordinate. Some cultures see far greater differences. If there is a large power-distance divide, it can be very difficult for direct reports to speak out when they see immoral or unethical behaviours in their leaders.

A famous example of how easy it is for most people to become subservient to high-status figures is a study conducted by the psychologist Stanley Milgram in 1963. In the study, members of the public freely administered harmful electric shocks to strangers, simply because a high-status experimenter (wearing a conspicuous grey lab coat) asked them to. Leaders in organisations may not wear a uniform as such, but their legitimacy and status is nevertheless quickly recognised and there for all to see. For this reason leaders can easily go unchecked.

“Team leaders need to resist being pulled down to the lowest tolerable standards, and must instead be the voice of integrity.”

Even though there is a temptation to defer to authority figures, leaders should be held to the same, if not higher, moral standards as anyone else in the organisation. The challenge then is to find ways for leaders to receive open feedback from others – for leaders themselves to be comfortable expressing their discomfort when they see unethical practices at work, and for these same leaders to be open to others questioning their own behaviours or judgements from time to time.

We don’t speak out

So, what does this mean for organisations that depend on ethical leadership for sustainable growth? After all, if leaders don’t think they are being unethical, if they are working in a team where deviance is normal and if they are unlikely to benefit from a subordinate pointing out the error of their other ways, what can be done to keep them on the ‘straight and narrow’?

One of the greatest protections against ‘rogue’ leaders making ethically questionable decisions is culture.

A culture that normalises openness across the organisation, that reduces the fear associated with speaking out (particularly to those in high status positions) and holds a pervasive and enlightened set of organisational values will help immeasurably.

“Employees need to be encouraged to identify the values that they hold dear and feel able to speak out when they feel that these values are being compromised. They should feel comfortable telling ‘truth to power’, and they should feel supported by their leaders when they do.”

Openness and psychological safety

Our recent survey(4) of over 60 HR leaders concluded that leaders of the future need to feel empowered and free to use their judgement, and that this should happen within an organisation that prizes openness and psychological safety.

In fact, it is the topic of ‘Psychological Safety’(5) that might be most instructive if we are trying to create the next generation of ethical leaders. Leaders at all levels play a role in creating a culture of safety. Employees need to be encouraged to identify the values that they hold dear and feel able to speak out when they feel that these values are being compromised. They should feel comfortable telling ‘truth to power’, and they should feel supported by their leaders when they do.

To find out more about how Psychological Safety can transform organisations, see our article.

Below I have listed a number of practical tips that I would recommend to build more ethical organisational cultures and help develop more ethical leadership.

10 tips for cultivating an ethical organisational culture

Building a culture that is values based, encourages openness, trust and psychological safety is not easy. Some of the following suggestions might help you to ensure your managers and their teams are behaving ethically:

  1. Open up communication. Offer feedback regularly and often. Help others (leaders and their constituents) understand how they come across and how their actions are seen through the eyes of others
  2. Maximise group decision-making where possible. Bring others in to decision-making (particularly those with a different perspective) and make the group accountable for success rather than the individual
  3. Slow down, create space to think and be mindful. Allow leaders and their teams the time to properly think through their decisions
  4. Beware of biases both as an individual and as a group – where possible leverage training to help surface and manage these biases
  5. Role-model your values. Leaders should talk about the values that they hold dear and behave in accordance to them
  6. Install a clear ‘code of conduct’ within their teams and encourage others to speak out (anonymously if necessary and with protections) when there are infringements
  7. Create a culture of psychological safety. This starts with managers being authentic themselves and role-modelling openness and trust
  8. Find ways to reduce power-distance when it comes to error reporting or the reporting of bad behaviours
  9. When hiring, promoting or developing leaders, ask about their values and how they live by them
  10. Create a set of organisational values that balance commercial success with personal dignity, honesty and the rights of others

 

  1. British Psychological Society: Readers Digest (Feb 2014)
  2. Tappin and McKay. Soc Psychol Personal Sci. (Aug 2017)
  3. Diane Vaughan. ‘The Challenger Launch Decision’ (1996)
  4. mannaz.com/en/consulting/leadership-development/survey-empowerment/
  5. The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth – Amy C. Edmondson (2018)

Stuart Schofield

STUART SCHOFIELD is a Client Director at Mannaz, drawing on 20 years’ of professional practice as a business psychologist, specifically in the areas of assessment, leadership and organisation development.

Contact Stuart: ssc@mannaz.com