Monday, December 14, 2009

It's a Question of Your Honesty - ERC 2009 Ethics Report

All this machinery making modern music
Can still be open hearted
Not so coldly charted
It's really just a question of your honesty, yeah
Your honesty
One likes to believe in the freedom of music
But glittering prizes and endless compromises
Shatter the illusion of integrity
And the words of the profits were written on the studio walls....
Concert halls....
And echoes with the sounds of salesman...of SALESMAN! Rush - Permanent Waves


The Short of It
  • The Ethics Resource Center published it's 2009 Ethics in Business Report in November 2009. 
  • It's the sixth in a series of reports that began in 1994.
  • Apparently, workplace misconduct declines in turbulent economic times. 
  • And rises again when the pressure is off.
  • In other words, ethics are all the rage only when people are watching.
  • Which kind of defeats the whole purpose doesn't it?
The Long of It

Morals. Ethics. Good. Bad. White. Black. Grey? Hmm....lots of grey apparently.

The Ethics Resource Center just published the results of their 2009 National Business Ethics Survey - Ethics in the Recession (click the link for the free download) and it has some extremely important information in it. This is the sixth in a series of reports that began in 1994 from surveys conducted on two year cycles. The sampling error is +/- 1.8% at the 95% confidence level (which makes us survey geeks swoon). I participated in a webinar held by the ERC last week (you can access the free webcast on their home page) and had the privilege of listening to the researchers and a few key panelists sharing their thoughts and observations on the new data.

Here's the good news:
  • Misconduct at work is down - down to 49% from 56% in 2007
  • Whistleblowing is up - up to 63% from 58% in 2007
  • Ethical cultures are stronger - up to 62% from 53% in 2007
  • Pressure to cut corners is lower - down to 8% from 10% in 2007
There are lots of reasons being bandied about for the almost counter-intuitive results. Perhaps companies under the microscope behave better overall, management refocuses on ethics when times are tough, hard times force a strategic focus "back to the basics" or people who are afraid for their jobs are just less likely to engage in risky behavior. I posited that perhaps whistleblowing was up as a Darwinian response of employees wanting to "look good" by throwing their fellow colleagues under the bus (a typical Gen X suspicion I guess...) The response by the panel was they didn't think so, although in other studies they have seen increases in reported incidences that seem to correlate with the timing of annual performance reviews as well as increases in reported incidences by people who were being laid off in sort of a "I've got nothing left to lose so take that" sort of context (so maybe my point about self-interest could have some bearing after all).

Here's the not so good news:
  • Retaliation against whistleblowers is up by 3% points
  • 55% to 60% of those retaliated against experience hazing, exclusion and verbal abuse or attacks
  • 22% of respondents agreed the recession has negatively impacted the ethical culture within their companies
Here's the really not so good news:

Many companies have been forced to employ tactics to cope with the recession such as adjusted work schedules, layoffs, compensation or benefit reductions, hiring freezes, early retirements or buyouts, production slowdowns and plant closures. Of the companies who employed even ONE recessionary tactic, reports of misconduct have increased by 26% and non-reporting of observed misconduct has increased by 15%.

Now, add in the fact that 78% of respondents in this survey said they or a colleague have been affected by one or more of these tactics to weather the recession.

Uh oh.

And here's the weird news:

On page 14 of the report you are going to see data that suggests that reported incidences of misconduct at work almost directly mirror the S&P index. As reported incidences of misconduct go up, so does the S&P. As the S&P declines, so do those reports.

Fascinating.

Whatever the reasons for the overall positive news on the ethics front, the researchers have boiled the data down to two major conclusions and a series of recommendations for executives, managers, boards, policy makers and ethics professionals.  
  • Major conclusion #1: "We are experiencing an ethics bubble" - and as business conditions improve, ethical behavior will decrease.
  • Major conclusion #2: "Executives who don't elevate culture to a priority risk long term business problems" and emphasis on the culture within the organization must take precedence over emphasis on profits to ensure long term stability within a company or industry.
Please download the report for more specific recommendations that range from ways to reinforce culture, to establishing ethics committees and linking compensation to ethical behavior.
    Association executives and senior staff are in the perfect position to distribute the results of this survey to their respective memberships. In times like these, continued emphasis on ethical behavior is critical for you and your members. I encourage you to use this report as an excuse to remind your members of the codes of ethics they may have adopted and give them this report to mull over as they move into 2010.  This is particularly critical for those members who have had to use any recessionary tactics such as reduced work hours, etc. to cope with the recession and may now be at higher risk for unethical behavior on the part of their employees.

    I realize I dipped back into the Rush pond for the song for this post. I usually space bands out a bit. But thinking about this blog post and hearing this on the radio seemed like kismet - "glittering prizes and endless compromises - shatter the illusion of integrity....."

    Let's get the glue out - we've got some shattering to fix......

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