Understand Workplace Ethics

Workplace ethics involves more than following laws. Learn why ethical dilemmas—situations
where there's more than one 'right' answer—are among the toughest decisions you'll face
as a manager.

What is workplace ethics?

Ethics is based on morals—personal values that help individuals determine right and wrong.
Workplace ethics is how a person applies morals to professional situations.
Workplace ethics has a practical focus—ethics in action—as opposed to general philosophical
inquiry into "what is good." As such, workplace ethics can be learned.
Why ethics matters
An ethical workplace relies on each employee’s ability to distinguish between right and wrong.
A solid ethical foundation rests on two actions:

Obey the law


 Follow your company’s published code of conduct *
When employees make correct right-versus-wrong choices, everyone benefits. For example:

 The company builds a good reputation for fair employment practices, social
responsibility, and fiscal integrity. Customers (whether individual consumers or other
businesses) want to buy from companies with good reputations. And suppliers want to
do business with them.
 The company avoids the high costs—lengthy government investigations, staggering
financial liabilities, loss of morale—that come with getting caught in serious wrongdoing.
 Investors benefit because the more customers buy from the company, the better its
financial performance—thus the greater the return on investment.
 Employees take pride in working for a reputable company. They also trust one another
to "do the right thing," so they share more information and ideas—which drives
innovation.
 Society is better off, because economies thrive on trust. *
What is an ethical dilemma?
*

In right-versus-wrong situations, the correct and incorrect actions are evident. For example, it's
obviously wrong to steal from your employer. Unfortunately, the resolution to many workplace
problems isn’t as clear.
 An ethical dilemma is a situation in which a manager has to decide between two or
more correct courses of action, each of which could harm someone or something (such as the
organization, the environment, or society at large).
These quandaries are known as "right-versus-right" dilemmas. They are difficult to resolve
because the particular situations:
 Have no rules or codes of conduct spelling out what to do and what not to do; thus there
are no clear right and wrong answers.
 Require you to choose between several potential courses of action that all seem ethically
valid.
 Force you to weigh options and potentially sacrifice one value for another.
 Are complex—you need to consider potential consequences for many different
stakeholders. It's difficult to identify and weigh all the possibilities. And it's nearly
impossible to please everyone.
As a manager, many of your toughest situations will involve right-versus-right decisions.
Ethical Ambiguity
Jeffrey L. Seglin — Ethics Columnist, New York Times Syndicate
When you've made an ethical decision, you've chosen—among potential right choices—the action
that brings the greatest good and least harm.

Ethical dilemmas: What's at stake?

When faced with an ethical dilemma, consider how your action could:
 Violate someone's rights—such as a right to safety, privacy, or equal treatment in the workplace
 Erode conditions that are important for the common good (everyone's welfare)—such as
environmental health or opportunities for education
 Call into question your own virtue—your ability to act according to the highest potential of
your character and on behalf of your deepest values
Monica, a single parent on your staff, is falling behind in her work during a time when your
department is facing a critical deadline with an important customer. Your manager wants
you to fire Monica and replace her with someone who has an excellent track record.

Do you…
 Take this step so your team can meet the deadline?
 Refuse, citing your company's core values, which include "family-friendliness"?
As in any ethical dilemma, there is no one right answer. Any choice comes with both positive
and negative consequences.
For instance, if you:

Decide to….
Fire Monica and replace her
with your manager’s candidate
Keep Monica on staff and find
ways to adjust her workload.
The Benefit might be….
You've pleased your manager,
ensured your important client's
needs will be met, and
protected an important source
of revenue for your
department.
You've protected a core
company value. And you've
retained a worker who has a
solid track record and is
familiar with the client
But the risks could be….
You've contradicted a core
value of "family-friendliness."
In doing so, you may damage
morale among other
employees.
You may have put important
business at risk, and you're
acting against your manager’s
advice. Also, if you adjust
Monica's workload, other
employees may resent taking
on extra responsibilities.

Gut feelings are not enough

*

Since ethical dilemmas are complex, many managers rely on instinct and emotion to resolve
them. If they use reason at all, they do so after the fact—to justify their instinctual response
rather than test their decisions before acting.
Relying exclusively on your first instinct can be problematic. Monica’s dilemma illustrates
some of the perils:
 People's instincts differ. What feels like a sound judgment to you might feel otherwise
to someone else. Your manager’s instinct is to put a major client’s needs first; your
instinct may be to preserve an employee’s job.
 Few people can see all the ramifications of a business decision. It’s impossible to
consider all the possible choices if you are relying on instinct—much less all the
 consequences. For instance, if you replace Monica close to a major deadline, how quickly
can the new employee learn the role?
 You may be swayed by emotion. You may be loyal to Monica because you understand
her personal circumstances. Since you’ve worked with her successfully in the past, you
may be willing to overlook her current underperformance.
 You may be drawn to “the path of least resistance.” It’s very tempting to choose the
option that’s easiest, or will create less immediate conflict. If you let Monica go, you will
immediately satisfy your manager. But this choice may have long-term impact on your
team’s morale.
Instincts are unreliable. To effectively resolve right-versus-right dilemmas, you need to
follow a structured decision-making process.

Explore ethical decision-making philosophies

What's the best way to solve ethical dilemmas? Here's a quick analysis of several models:

Model Features Limitations

Utilitarian* Proposed by English
philosopher John Stuart Mill. It
holds that the most ethically
sound course of action is the
one that produces the most
good for the greatest number
of people.
Value based * A self-test of your values. For
example, ask yourself:
 “Would I be comfortable
if my actions were
posted on social media
or described in a
newspaper?”
 “Can I sleep at night
after taking this action?”
 “Am I comfortable with
this behavior as part of
my legacy?”
It’s not always clear what a
“good” outcome would be—or
who should be the recipient of
the “good.”
Values-based tests are only as
good as the user’s moral
compass. Also, when you rely
solely on these tests, you don’t
discuss the dilemma with
others. Talking with others can
be invaluable for making
ethical choices.

Rules – Based * Call on people to follow Simply following rules doesn’t

specific, published guidelines, teach people the critical
such as a company code of judgment skills needed to
conduct. navigate right-versus-right
ethical dilemmas.
Sheila Marcelo — Founder and CEO, Care.com
The best leaders know when they’ve made a wrong decision. They admit it, apologize, and take swift
action to correct the mistake

Resolve Ethical Dilemmas

Learn a method for handling ethical dilemmas. Follow step-by-step as manufacturer
Principle Tools works through a challenging decision.

A structured approach helps you resolve ethical dilemmas in a fair and effective manner.
When you systematically weigh your options and consider the consequences, you’re most
likely to choose the best course of action.

This ethical decision-making framework consists of three steps:

 Step 1: Gather and analyze the facts. Ask questions such as "Do I have all the
information I need to make this decision?" and "Is my definition of the problem correct?"
 Step 2: Consider the consequences. Ask questions such as "Who could be negatively
impacted by my decision?" and "What would the parties who'd be affected by my
decision think?"
 Step 3: Test your decision. Ask questions such as "Will my decision seem just as valid
years from now as it does today?" and "Can I discuss my decision with people whom I
respect openly and without reservation?"
Using the proposed framework may seem time-consuming at first. However, if you practice
using this approach, ultimately you'll become so familiar with it that you'll be able to work
through it automatically.

Step 1: Gather and analyze the facts

 *

You can't make a solid decision without accurate information. You need to gather and
analyze the facts.
As you collect information, focus equally on how a proposed course of action affects you
and others. You also need to consider how the issue arose (context) and how similar
situations have been handled previously (precedent).
Define the problem accurately
When you accurately define the ethical dilemma you're facing, you defuse emotions that
can create bias. And you boost your chances of making an informed decision later.
To define the problem:
 Describe what you know about the situation. Lay out all the relevant facts in neutral
language.
 Accept that you can't know all the facts. Note any facts you don’t know—but think you
should—for later research.
EXAMPLE

Manufacturer Principle Tools wants to expand to remain competitive in a tough industry. However,
the company is struggling financially, in part because its biggest customers, large discount retailers,
have pressured it to lower prices. Principle Tools wants to find a cost-effective way to expand.
Executives are contemplating setting up a new manufacturing plant in a developing country where
materials, construction, and labor costs are low. A cross-functional task force of managers,
representing finance, human resources, sales, and operations, is asked to explore the ethical
ramifications. The executive team will use the special task force’s findings to make a decision.
First, the task force considers the relevant facts and establishes the following potential benefits:
 Building the new plant overseas would enable Principle Tools to save at least 25% on materials,
construction, and labor.
 These savings would improve profit margins, thus likely enhancing shareholder value.
 Setting up a plant in the new country would give Principle Tools entry into a new market for its
products.
 Construction would create jobs in the developing nation.

Max Bazerman — Professor, Harvard Business School

When a group of individuals is asked to say how much work they put into a project, the total
percentage often exceeds 100. How do we do what’s right and avoid overclaiming credit?

Tips for making ethical decisions as a group

*
 Hold the meeting in neutral territory—such as an off-site location, a conference room—so
all group members can participate freely.
  Articulate your company's values and the meeting's objectives at the start. These can
provide reference points for the group's discussion and eventual decision.
 Enlist an impartial facilitator who can speak to your company's values. She can help the
group address discrepancies between core values and proposed actions.
 Set a defined point in the process at which the discussion moves to resolution—
whether it's a vote on a proposed course of action, adoption of a new policy, or timetable for
next steps.

Consider the problem from others' perspective

How do various stakeholders feel about the action you're considering? Reflect on the wider
implications of your potential actions. This helps you reduce the temptation to choose the action
that's most expedient for you. And you'll more likely select the most responsible course of action
overall.
EXAMPLE

Principle Tools' task force has gathered facts about how the company and local residents would benefit
from the plant. Now, it considers how local residents might be harmed:
 The new plant would destroy wildlife habitat. It would also increase pollution.
 The plant would increase traffic and noise for residents who live nearby.
 Setting up operations in the developing country and selling Principle Tools' consumer products
there might be seen as an intrusion of a dominant culture.
Trace the problem's origin and history
After you've defined the problem and considered how a decision would affect other stakeholders,
ask yourself: "How did this situation come about?" and "What have we done in similar
situations?"
These questions can yield new insights—and even generate better potential courses of action.

EXAMPLE

Next, the task force comes up with the following observations:

 The desire to build a new plant in a developing country came about because Principle Tools is
struggling financially and wants to expand in the least costly manner possible.
 When Principle Tools has had financial problems in the past, it has always expanded production
capacity in an effort to grow sales.
 Expanding capacity always carries risk. For example, what if there's less demand for the new
plant's products than expected? In fact, previous investments in new capacity made on domestic
soil did not achieve desired results, worsening Principle Tools’ financial performance.
After reviewing these facts, task force members discuss whether expanding capacity may have become a
reflexive solution for Principle Tools—one that could be problematic in the long term. Several members
suggest that management should brainstorm different ways to improve sales—such as introducing new
designs or coming up with new sales strategies.
Identify conflicting loyalties
In any ethical dilemma, you face conflicts of loyalty that force you to put one value ahead of
another. For instance, should you do what's best for your company? For the environment? For
your unit and boss? For you? And finally, you might wonder, what's best for your race or
gender?
When you identify conflicting loyalties, you uncover ethical nuances. The resulting insights help
you make a decision.
EXAMPLE

Finally, Principle Tools' task force lists potential conflicting loyalties inherent in the proposed plant
project:
 "We're obligated to increase returns to Principle Tools' shareholders. But building the new plant
in the proposed location might cause hardship for the communities in which we do business.
Noise and traffic will increase, and the environment will be adversely affected."
 "Constructing the new plant would create local jobs. We would feel good about helping those
people improve their standard of living. But shouldn’t our first loyalty be to create jobs in our
own country?"
 "To ensure that the new plant operates effectively right away, we'd want to staff the facility with
experienced managers from our domestic facilities. These managers would get valuable new
global experience. But it would create hardships as well: Managers would have to move their
families to an unfamiliar place. And local citizens seeking managerial jobs might resent that those
jobs have been given preferentially to foreigners."
 "The new plant would encroach on native wildlife habitat and introduce new pollutants to the
area’s water and air. In our public relations communications, we claim to be a company that cares
deeply about the environment."
 "While some people would be happy to get jobs at our factory, others might not like to see foreign
consumer products being sold in local markets. People in the proposed location have a strong
cultural identity and may view our presence there as an intrusion."
When the task force identified conflicting loyalties, they also recognized the values underlying those
loyalties. For example, they acknowledged the company’s desire to do right by shareholders,
communities, employees, and the environment.
At this point, they must begin to determine which of these values mean the most to the company. They'll
need to engage in lengthy, intense, and probably painful debate. But the process is essential for
determining how they will resolve the "gray areas" that characterize all ethical dilemmas.

Step 2: Consider the consequences *

After you’ve gathered and analyzed facts, examine the potential consequences of your decision.
Compare your intentions with likely results
What are your intentions? What do you want to happen following this decision? What results
would most likely emerge? Is there a large gap between what you want to happen and the
probable outcome? If there is, you likely have further ethical “gray areas” to explore.
EXAMPLE

The task force compares Principle Tools' intentions in building a new plant with the likely results of
going ahead. Some excerpts from the discussion:
 Maria: "We have multiple intentions. The primary ones seem to be to grow our business in the
least costly way possible, help raise standards of living for people wherever we can, and be a
steward for the environment. These intentions are reflected in our mission and value statements."
 Joan: "Well, that's all true. But given the realities in the country we're considering for our new
plant, our cost-saving intentions might fall flat. Sure, materials, construction, and labor costs are
cheaper there. But there are other costs of doing business—like penalties for pollution and fees
for setting up operations—that could ultimately offset any cost savings."
 Frank: "And I'm wondering whether our intention to help raise standards of living can really be
met. I guess it depends on whose standards of living we’re talking about. Every time we set up
operations in other countries, we take away potential domestic jobs. And this is during a time
when we’re already struggling economically! Don’t we have more of an obligation to create jobs at
home than to create new jobs abroad?”
Identify potential harm
*
Part of making an ethical decision is doing the greatest good and the least harm. Identify who
and what your decision could hurt. It’s helpful to divide your analysis into three categories:
money, people, and the common good.
Consider how your action might negatively affect:
 Your company’s financial well-being (money)—such as cash flow, profitability,
revenues, and market capitalization
 The individuals who’d have a stake in your decision (people)—including investors,
employees, customers, suppliers, and business partners
 Larger societal concerns (the common good)—such as the environment or the
communities in which your firm does business
EXAMPLE

Next, Principle Tools’ task force identifies the potential harm to money, people, and the common good:
 Money. Principle Tools might face unexpected costs in doing business in the proposed country.
The plant might lose money if there isn’t enough local demand for Principle Tools’ products.
 People. People living near the new plant would experience increased noise and traffic. If the plant
is staffed heavily with managers from headquarters, local citizens hoping to be hired as managers
might be resentful.
 Common good. The environment near the plant site would be damaged. Cultural changes
brought on by an influx of foreign nationals might not be welcomed.
Discuss the issue with affected parties

Who would be affected—positively and negatively—by the action you’re considering? It’s
important to consider all stakeholders.
 If possible, gather feedback from affected parties. Invite them to present their concerns,
questions, and perspectives.
EXAMPLE

Finally, the task force schedules meetings with:

 Domestic stakeholders—unionized employees of Principal Tools and managers who may be
asked to transfer overseas to start the new plant
 Citizens in the proposed country—potential employees, prospective customers, and
community leaders
 Cross-boarder interest groups—environmental and labor advocacy groups

Share What’s Behind a Decision

Paul Biddinger — Medical Director for Emergecy Preparedness, MGH and Partners Healthcare
Making ethical choices often involves shades of gray. Being open about how and why you make
decisions leads to principles that others are more likely to understand and follow.

Step 3: Test your decision

*

After you've gathered the facts and considered potential consequences, test the decision you're
considering

Test long-term validity

A decision that remains ethically sound over time is better than one that doesn't. Ask, "Will our
decision be as valid in the future as it seems now?"
Think about how your decision will be perceived in six months. A year? Longer? A course of
action that seems perfectly ethical today may pose problems later if circumstances change.

EXAMPLE

Principle Tools' task force assesses the pros and cons of staffing a new overseas plant with managers
from its company headquarters. They discuss whether this decision will remain valid over the long term:
 Maria: "Staffing the new plant with expat managers could help us ensure that the plant runs
efficiently right away. It would also give our managers valuable overseas experience."
 Viktor: "Sure, but as we discussed earlier, it could backfire on us if local citizens end up resenting
not having the chance to apply for managerial jobs themselves."
 Joan: "Some resentment on the part of a few locals aspiring to managerial work seems fairly
harmless to me."
 Samir: "Unless the political scene there changes. Say a new regime comes in and lobbies for
higher-level employment opportunities for locals. Then we'd have to be able to explain why we
 employ only expat managers at the plant—yet we claim we want to increase standards of living
for people in other countries."
 Frank: "We'd be facing a trade-off between trying to ensure efficiency and develop our
managers—and trying to create better job opportunities for people elsewhere in the world."
Test your "qualm meter"

Before you take action in an ethical dilemma, ask, "Could I disclose this decision to
respected parties without any qualms?"

Think about telling your company's CEO, your manager, your family, or even society as a
whole. Imagine the news hitting social media, a newspaper, or TV news.

Do you feel uncomfortable about disclosing your decision to others? This may be a signal
that your potential course of action has ethical problems.
EXAMPLE

Principle Tools' task force imagines the general public reading an article in a major daily newspaper
about the company’s policy of putting only staff from headquarters in managerial positions in its
overseas manufacturing plants.
Members feel uneasy about the likelihood that some people would object to this policy on the
grounds that it closes the door of professional advancement to local residents.
So they brainstorm ways Principle Tools might address the ethical concerns the policy raises. They
decide to reserve some managerial positions for local applicants and create a managerial track for
residents with special training for management roles.

Test perceptions of your intent

Another way to test your possible course of action is to ask, "Could the intent behind our action
be misperceived?"
Actions often have symbolic meanings. How that symbolic meaning is perceived in actuality is
just as important as how you intend it to be perceived.
EXAMPLE

Principle Tools' task force has been discussing the fact that building a new plant in the target developing
country will destroy some native wildlife habitat. Members talk about the possibility of Principle Tools
buying a large swath of acreage near the proposed construction site and designating it as conservation
land. Principle Tools would also staff the conservation area with wildlife specialists.
An excerpt from the task force members' conversation:
 Viktor: "This would strongly signal our commitment to conservation and community relations."
 Joan: "Yes, but what if our action is misunderstood? Antidevelopment groups might see it as just a
tactic for staving off protests."
 Maria: "And local leaders might see the move as a cheap effort to pay off the people living in that
area so they won't try to delay the plant’s construction."
With these possible problems in mind, task force members discuss ways to ensure that people see the
gift of conservation land for what it is: a genuine desire to do right by the environment and the local
community where the plant would be built.
Ideas include talking with environmental advocacy groups and local leaders to describe the proposed
gift and gauge their responses. The task force decides to put together a presentation about its long
history of environmental contributions to reassure audiences about the genuineness of its intent.
Test your openness to exceptions
Finally, ask, "Under what conditions would we make an exception to our corporate values and
ethics?"
Exceptions Can Weaken Your Corporate Values

If you can think of many exceptions, you might not have as firm a commitment to ethical
behavior as you think. You might want to consider practical ways to alter your proposed course
of action so you can uphold it without compromise.
EXAMPLE

Principle Tools' task force members discuss the conditions under which they might rethink certain long-
held company values. Excerpts from their conversation:
 Maria: "If the economy weakens, could we really afford to buy and maintain land for conservation
near the plant? And would we want to risk operational inefficiency by opening up some
managerial jobs to locals who’d need time to learn the job?"
  Joan: "You've got a point there. But not making those moves would prove that we’re not taking
those values—conservation, improving standards of living overseas—seriously."
 Samir: "I know that. So what could we do to stay true to our values?"
 Frank: "Well, we could buy a smaller piece of land for conservation or see if local leaders would
be willing to fund maintenance and staffing of the preserve."
 Viktor: "And when it comes to the question of managerial jobs for locals, we could reduce the risk
of operational inefficiency. We could match locally hired managers with mentors from our own
company. The mentors would be there only on short-term assignment and could help get the
locally hired managers up to speed quickly."
The task force did not make a quick decision. Instead, they worked hard to gather information, consider
the consequences, and test their decision’s soundness. They asked tough questions to arrive at the best
possible decision.
Manage Through Moral Gray Zones

Foster Integrity
An ethical culture strengthens morale and organizational performance. Learn practical ways
to foster openness and integrity in your workplace.

Ethics as a core responsibility

Who's responsible for ensuring ethical behavior in an organization? This task used to fall
mainly to a company’s human resources department, general counsel's office, and senior
management. Not anymore.

Thanks to the major misdeeds and lapses in good judgment that have rocked the business
world over the years, business ethics is now a primary responsibility of frontline
managers. *
In Harvard Business School’s MBA program, for example, ethics is taught as one of three
core responsibilities of all managers.

Specifically, every manager is responsible for:

 Ethics—setting an example of moral values and standards of conduct
 Economics—wealth creation and resource allocation
 The law—adherence to governmental rules and regulations *
By embracing ethical responsibilities in addition to economic and legal duties, you help your
company reap the benefits that come with being ethical—including higher workforce
morale, greater customer satisfaction, and stronger financial performance.
our ethical, economic, and legal responsibilities as a manager are intertwined—not mutually
exclusive. That's because: *
 Many economic and ethical responsibilities have been written into law.
 Responsibilities to create wealth and obey the law rest on an ethical foundation.
 As society's ethical standards evolve, the law itself often changes in response.
As you fulfill your economic and legal responsibilities, remember to uphold your ethical
responsibilities as well.
Influencing the 60 percent
Managers who embrace ethics as a core responsibility play a powerful role in shaping their
organizations.

Consider the 20-60-20 rule often applied to fraud prevention. It stipulates that, regardless of the work
environment, when there is a chance to benefit through unethical behavior:

 20% of people will always do what’s right

 20% will always be unethical
  And 60% could be influenced either way *
As a manager, you have an important opportunity to steer this 60% toward positive choices. Ethical
managers who influence their direct reports to do what’s right help foster a culture of integrity that can
spread throughout their organizations.

Why compliance isn't enough

When direct reports or suppliers come to you with tough questions, you may be tempted to
simply refer them to local laws or to your organization’s compliance program. By obeying laws
and compliance codes, everyone can be sure they’re acting ethically, right? Not necessarily.

While compliance programs are important, they have limitations. For example: *
 Conduct that's lawful may not be ethical. In some countries, it's legal to sell hazardous
products without appropriate warnings, sell goods from suppliers who operate
sweatshops, and offer bribes while doing business.
 Compliance programs don’t inspire good behavior. Such programs tend to
overemphasize the threat of detection and punishment, rather than rewarding
exemplary behavior. Employees view them as unwelcome constraints and may rebel
against them.
 Compliance programs emphasize the importance of obeying laws. But being truly
ethical requires more than just following laws. It requires understanding the impact of
our decisions and actions on others.
Ethics online: The court of public opinion

*
Most laws aren’t broad or flexible enough to address the range of ethical dilemmas that arise on the
internet. It’s more important to consider the public’s expectations of honesty and transparency than
simply “can we do this legally?”

To navigate ethics online:

 Be proactive. Examine how your core values relate to your online conduct. Consider how
you’d handle difficult situations, such as if you received an anonymous tip that an employee
posted a picture of illegal drug use on a private social media page.
 Educate your employees about data. Make sure they’re aware of the risks involved in
careless handling of sensitive data. Set standards about what information you will collect
and share.
 Pay attention to evolving public sentiment. Public opinion is often ahead of the legal
community. And word spreads fast. Companies that do things online that are technically
legal—but that the public considers unethical—will experience a backlash.

Communicate about ethics

 To establish an ethical culture, go beyond a compliance program. Ethics come alive when they’re
discussed, debated, and celebrated—not shelved in a code of conduct.

Make ethics part of your team’s conversations. For example:

 Create a team mission or values statement. Get input from all members to help define
the good work you’d like to achieve. *
 Highlight positive values and praise ethical decisions—in speeches, training efforts,
and routine meetings. Constantly look for new examples. *
 Encourage dialogue and advice seeking. Ask direct reports about ethical challenges
and, when possible, share your own dilemmas.
 Reinforce the message—that how goals are met is as important as what goals are met.
 Conduct surveys of customers and partners—to find out how they’re being treated.
Share the feedback with the team. *
Design an Organization That Makes a Difference
Christian Busch — Associate Director, Innovation Lab, London School of Economics and Cofounder,
Sandbox
Young people today want to work for organizations that make a positive difference in the world. To
attract talent, companies may need to restructure themselves to cater to these employees’ values.

Lead by example
As a manager, you serve as a powerful role model for your team; your employees take their cues
from you. Lead by example and behave ethically in all you do.

Accordingly: *
 Be consistent.Ensure that you uphold the values you espouse.
 Be honest.Even small things—such as a well-intentioned and trivial falsehood—set a
tone.
 Assume responsibility for the tough calls—when ethical obligations conflict. And
regularly scrutinize your own decisions for bias.
 Demonstrate transparency and genuine concern for all your company's
constituencies—investors, customers, employees, suppliers, the community—rather
than making maximizing shareholder wealth the primary goal.
Use Values in Decision Making
Richard Gochnauer — Retired President and CEO, United Stationers
Make decisions based on values first and economics second.

Tips for addressing ethical challenges

*
 Buy time. When an ethical dilemma escalates, tell everyone involved that you'll get back to
them. Seek advice and raise probing questions about the dilemma. As you gain time to work
through the issue, it may resolve itself.
  Be willing to compromise. Responsible, workable compromises can help you arrive at a
solution that’s comfortable for everyone.
 Pick your battles. Tackle the high-profile ethical dilemmas that matter most. Before taking
a stand on a questionable minor issue, consider the potential impact on your time—and
reputation.
 Bend—but don’t break—the rules. Sometimes a situation calls for exceptions to protect
the validity of the company or integrity of the person making the decision. To resolve tricky
ethical dilemmas, maneuver within the boundaries set by your company's policies.

Encourage candor
Honesty is critical. In workplaces where there is candor, people are more likely to discuss and
embrace ethical behavior.

To encourage openness in your team: *

 Share information—unless there's a clear reason not to.
 Tell the truth. You'll develop a reputation for honesty, and others will return the favor.
 Make it safe for people to tell you difficult truths. Other employees often have access
to information that you don't. Let them know you want them to tell you unpalatable
truths about what they see in the workplace or with suppliers or customers.
 Diversify your information sources. Communicate regularly with different groups of
employees, customers, and competitors. You'll develop a broader understanding of
ethical challenges—and opportunities—for your organization.
 Hire people for candor. Look for job candidates who fostered openness in their
previous organization. They'll be valuable assets to your team.
Own Your Mistakes
Ed Ludwig — Chairman, BD
It's tough to do, but admitting your mistakes is the first step to fixing any problem.

Examine your reward systems

Reward systems can encourage great achievement—but they can also backfire. For example,
rewards that are tied only to short-term productivity may inadvertently encourage unethical
behavior.
EXAMPLE

An automotive maintenance company that rewarded mechanics solely on the sales they generated
per hour. Mechanics started doing unnecessary work on customers’ cars. *
Create a Balanced Rewards System

Make sure your reward systems:

 Acknowledge good work in multiple areas—revenue production, accuracy, and customer

satisfaction.
 Recognize actions taken for the company’s long-term health, not just short-term gains.
Establish organizational controls
Here are a few more ways to discourage unethical behavior in your organization: *
 Clearly define proscribed behaviors. Specify what’s unacceptable. Keep the standards
up-to-date as your team faces new situations.
 Conduct audits. Periodically check your employees’ work to detect wrongdoing. Do this
on an unscheduled, unannounced basis. When employees know you’re keeping track,
they're less likely to engage in misconduct.
 Address obvious ethical missteps immediately. By setting a “no tolerance” policy,
you’ll prevent the behavior from becoming widespread.
Tips for confronting unethical behavior

*
When you need to confront someone:
 Consult others. Ensure your perceptions are correct by discreetly verifying your
perceptions with other employees.
 Don't wait for egregious behavior to occur. When you see warning signs, speak to the
person(s) involved.
  Don't accuse. Instead, demonstrate that you're in fact-finding mode—speak calmly and
listen.
 Get assistance if necessary. When you want to confront a person who is above you in the
company's reporting hierarchy, consider involving your human resources department.

Why Good Managers Behave Badly

Anyone can act unethically—even the most conscientious. Learn about common blind spots
and rationalizations for immoral actions.

Recognize the forces behind misconduct

Managers often think their inherent integrity is enough to protect them against unethical
actions—but it isn't. Many honest, smart people make immoral choices in the workplace.
Your moral strength can be eroded by tough situations or by an unethical office culture.
This erosion often happens so gradually you don't even realize it.
Also, your emotions can cloud your ability to think rationally. Be aware of how you may be
motivated by:
 Obedience to authority. From a young age, people are conditioned to try to please
superiors. Your instinct may be to agree to a manager's requests, even those that aren't
ethical.
 Pressure to fit in. You may feel you have to conform to a group's tacit acceptance of
misbehaviors. It's easy to adopt the same actions because "everybody else is doing it." It
can even seem, over time, that this behavior is correct.
 Fear of loss. Loss aversion is a powerful force on the human psyche, stronger than
happiness from gains. Many unethical choices come from trying to avoid loss or cover up
earlier mistakes.

Unethical behavior: A surprising blind spot

Unexpected but true: overconfidence about your inherent morality can lead to unethical behavior.
People think because they usually act ethically that all their decisions are sound. They assume that a past
record of integrity means they don't have to scrutinize their decisions. In fact, studies show that people
who've recently done a good deed may unknowingly give themselves permission to cheat elsewhere.

Four pervasive beliefs

 *

Your brain has a natural tendency to deceive itself—to think that what benefits you is also
ethical. Managers who behave unethically usually do so based on four mistaken, but commonly
held, beliefs:
"This isn't really illegal or immoral."
Not All Legal Decisions Are Ethical

Just because actions are technically legal doesn't mean they're ethical. Relying strictly on the
law is especially risky when it comes to online business, where regulation lags behind the
public's perception of right and wrong.
EXAMPLE

Managers at a brokerage house bilked the company's banks by initiating small overdrafts that they
then covered after enjoying interest-free use of the money. The individual sums were small. But
cumulatively, the savings on interest that the brokerage would otherwise have owed to the banks
was substantial.
The brokerage hadn't specifically proscribed overdrafts or spelled out their illegality, so managers
decided that this tactic wasn't wrong. And all the while, their bosses assured them that what they
were doing was clever. But the practice came to the attention of government investigators—who
didn’t agree. The brokerage was eventually fined millions for fraud.
 "I'm doing what's best for my company."
Profits don't justify unethical actions. Don't just focus purely on potential profits—examine the
long-term implications of your actions on others.
EXAMPLE

During a housing boom, banks set ambitious goals to grow mortgage lending. They rewarded loan
officers for the number of deals made, regardless of risk. As a result, loan officers wooed borrowers with
subprime loans that started with modest payments but then ballooned to higher interest rates.
Borrowers often didn’t understand the loans' complex terms and weren't warned about the financial
consequences.
Loan officers pursued this strategy until the housing market collapsed. As a result of these questionable
actions, thousands of people lost their homes to foreclosure. Lenders faced huge losses and even
bankruptcy.

"My behavior will be condoned."

*
Some employees act unethically with tacit protection from managers. However, when missteps
are exposed, you are unlikely to remain safe.
EXAMPLE

Financial executives at an energy firm performed complicated and deceptive accounting maneuvers in
order to hide large financial losses on its balance sheet. Senior management protected and rewarded
these financial executives. Eventually, the losses became too large to hide. The company went bankrupt,
and thousands of people lost their jobs.
"My actions won't be made public."
Just because unethical actions might not be immediately exposed doesn't make them right. Given
how easy it is for information to spread today—through technology and social media—it's more
and more unlikely that unethical actions will remain permanently hidden.
EXAMPLE

A small group of executives and corporate medical directors at an asbestos manufacturer suppressed
research showing that the company's product caused a fatal lung disease in its employees. They
rationalized their conduct because they thought no one would ever find out. Because this information
was not revealed for decades, many people suffered.

Should You Lie to Save Your Company?

When facing a large-scale ethical dilemma, lying is not in your organization's or your own best interest.

Unintended support for unethical actions

 *

Most managers want to create an ethical culture. Yet many become so focused on short-term
business goals that they inadvertently encourage misbehavior.
Common mistakes to avoid include:
 Motivated blindness. Conflicts of interest that motivate you to "look the other way."
EXAMPLE

A retail manager has a goal to reduce employee turnover in the region's stores. To keep employees
happy, the manager ignores when vendors give the staff free items.
 Arm's-length blindness. Feeling you're not responsible for unethical work outsourced
to others.
EXAMPLE

A public relations team is hired to promote a new store that's opening in the region. In addition to
promoting that news, they fabricate negative reviews about your competitor on social media sites.
 A gradual descent into unethical behavior. Your failure to address small ethical
missteps may set the conditions for greater misbehavior.
EXAMPLE

Retail staff occasionally "forget" to let customers know they can apply for a manufacturer's rebate on
certain items. Over time, they stop mentioning the rebate entirely because it reduces their commission.
 "The ends justify the means."
EXAMPLE

A manager promotes an employee who generated record-setting sales in the previous month, even
though he achieved his goal by offering a two-for-one deal on a brand that has strict policies against
such discounting.

Ethical Fading
Ethical fading happens when we engage in unethical behavior without realizing it. To remain ethical at
work, create employee incentives that encourage the right behavior.

Resist temptation
*

Your "ethical compass" is your guiding sense of right and wrong. Here are three ways to keep it
in working order:
 Communicate your beliefs. Ask yourself, "What am I trying to achieve?" "How can our
organization do good in the world?" Then share these beliefs often with coworkers.
 Be rigorous in difficult situations. When everything's going well, it's easy to hold
yourself to high standards. But when circumstances are challenging, you may consider
 shortcuts—particularly if you tell yourself it's "just this once." Instead, ask, "Am I
proceeding in ways I approve of? If not, what changes do I need to make?"
 Look for positive and negative examples from others. Stories of people who benefited
from ethical decisions—or faced the consequences of wrongdoing—can be great
motivators for making the ethical choice.