DESIGNING ETHICAL ORGANIZATIONS – PART 2 FINAL

“Ethics is more than a set of rules; it is the living expression of values that guide every action and decision.” (Marcello de Souza)

I want to start the final part of this article by reminding that open communication and continuous feedback with employees are crucial aspects to promote an ethical culture within an organization. By now, it should also be clear that they are not a separate element to be added to the list of fundamental principles, but an integral part of all four elements mentioned in the article as a whole: explicit values, decision-making processes, incentive systems, and cultural norms. Consider, in light of what we discussed in part one, how important communication is:

• Explicit Values: Open communication is necessary to ensure that the organization’s ethical values are understood and internalized by all employees. Leaders must constantly reinforce these values and demonstrate them in their actions. Additionally, it is important to create a channel for employees to express doubts or concerns about ethical issues.
• Decision-Making Processes: Ethical reflection should be encouraged at all levels of the organization. This can be achieved through training and guidance, but also by creating an environment where employees feel comfortable raising ethical issues and receiving guidance.
• Incentive Systems: As mentioned in the article, incentive systems are not limited to financial rewards alone, but also include recognition and validation. Open and transparent communication plays an important role here, as managers can publicly acknowledge ethical behaviors of employees.

Cultural Norms

Now let’s dive directly into part two of this article. Therefore, I ask you at this moment to assume you are a human resources manager in a company and find out that a senior-level employee is involved in workplace harassment. In this scenario, consider that he is one of the main revenue contributors to the company. How would you apply the ethical principles of integrity and justice to handle this situation?

While it may be simpler to answer the question in thought, it is not always so in practice. Real factors such as economics, financial health, collegiality, dismissal, family, among others, are present and aggravating when making our decisions. This highlights the importance of treating all ethical violations consistently, regardless of timing, situation, or even the employee’s position. The need to create a safe and inclusive work environment should be seen as uncompromising.

The truth is that companies can create environments that allow the development of employees’ capabilities, promoting a culture of continuous learning and growth that makes them fully understand the role of ethics in both the company’s life and people’s everyday lives. Hence the importance of ethical education, including the cultivation of appropriate emotions.

Companies can incorporate ethical education into their training and development programs to create a more ethical and compassionate workforce, and of course, this is related to an organization’s culture that is like an ethical ecosystem, where cultural norms play a fundamental role in preserving integrity and morals. These shared norms are not mere abstract guidelines, but a code of conduct that defines the boundaries of acceptable and unacceptable behavior. To create a truly ethical culture, it is essential to establish cultural norms that not only promote but also celebrate ethics.

In this regard, I have always supported companies in discussing their human resources policies, such as recruitment, dismissal, promotions, and compensation, which should indeed be shaped based on ethical principles. For example, it is hardly seen that companies ask themselves how they can ensure that all people have equal opportunities to develop their capabilities?

Transparency emerges as a fundamental pillar, where leaders and employees communicate openly, share relevant information, and recognize the importance of honesty. In an ethical culture, concealing facts is viewed with suspicion, and openness is valued.

Mutual respect is another cornerstone, creating an environment where everyone is treated with dignity and consideration. Differences of opinion are seen as an opportunity for learning, not a cause of conflict. In an ethical culture, mutual respect is more than a slogan; it is a way of living and working.

Communication for Cultural Norms

Communication is fundamental in this process. This is because, as already seen, culture refers to behaviors, attitudes, and values that are considered appropriate and expected within the company. These norms are often unwritten but understood and followed by members of the organization. They shape how people interact in the workplace and influence employees’ decisions and actions.

The relevance of Cultural Norms in an ethical organization is that they form the basis for consolidating and practicing ethical values. If the organization’s cultural norms do not reflect or align with the ethical values the company wishes to promote, employees are likely to struggle to act ethically on a daily basis. Therefore, it is crucial that cultural norms align with the organization’s ethical values. In this sense, communication plays a fundamental role in promoting and reinforcing these cultural norms. Here are some ways that help understand how communication is related to Cultural Norms:

• Communication of Expectations: Continuous communication is necessary to ensure that employees understand expectations regarding ethical behavior. Leaders should clearly communicate which behaviors are valued and encouraged and which are unacceptable.
• Feedback and Correction: Open communication allows employees to receive feedback on their ethical behavior. If an action is not aligned with cultural norms and the organization’s ethical values, communication can be used to correct and guide employees.
• Reporting Ethical Violations: Employees should feel comfortable reporting ethical violations without fear of retaliation. Effective communication creates an environment where employees feel safe reporting ethical issues.
• Promotion and Reinforcement: Communication also plays an important role in the continuous promotion and reinforcement of cultural norms. This can include success stories that highlight ethical behaviors and the public celebration of exemplary ethical actions.

Through communication, ethical expectations are conveyed, feedback is provided, and employees are encouraged to maintain an ethical environment. This is crucial for designing and maintaining an ethical organization in today’s times, where transparency and accountability are highly valued.

Additionally, it is important to note that open communication and feedback not only prevent ethics from becoming a taboo topic but also help build an environment where employees feel valued and respected. When employees have the opportunity to express concerns and opinions, they become more engaged and invested in the organization’s ethical culture. Furthermore, open communication and continuous feedback are not a separate element but a vital component that permeates all aspects of building a strong ethical culture. They ensure that ethical values are understood and followed, decisions are made ethically, incentive systems are effective, and cultural norms are maintained and reinforced.

Thus, it is possible to ensure that ethical concerns can be discussed and resolved effectively. Communication channels should be accessible to everyone, from the base to the top of the organizational hierarchy, allowing ethical concerns to be heard and addressed appropriately.

Creating Ethical Cultural Norms Is Not Enough

It is important to clarify that the creation of ethical cultural norms is not sufficient. These norms need to be cultivated and reinforced constantly in order to build and maintain a strong ethical culture. Leaders have a crucial role in this task, as they not only define the norms but also serve as role models to be followed. However, often the “example that comes from within” is more influential than that from top management. Employees and colleagues have a significant impact on cultural norms through their daily actions.

Descriptive norms, that is, the actual behavior of colleagues, have substantial social influence. In an article by Nicholas Epley and Amit Kumar, they cite an example from an experiment conducted by a UK government agency, where different versions of a letter were sent to delinquent taxpayers. The most effective letter was one that compared the recipient’s behavior to that of other citizens: “Out of ten people in the UK, nine pay their taxes on time. At the moment, you are part of a small minority that has not paid us yet.”

Social norms often have underestimated impact. In a study on energy efficiency in California, residents underestimated the influence of social norms, wrongly believing that environmental appeals would be more persuasive. However, when social norms were highlighted, there was a significant reduction in energy usage.

Managers can promote an ethical culture by highlighting and celebrating exemplary actions by employees. While the tendency is to focus on warnings and “ethical black holes,” this approach can create a mistaken perception that undesirable conduct is more common than it actually is. By focusing on the “ethical references” of the organization—those who embody ethics and the mission statement—cultural norms are strengthened, and ethics become a living force within the organization.

Thus, cultural norms are not mere principles on paper but the essence that defines the company’s identity. They shape not only behavior but also the character of the organization. Therefore, the challenge is not only to establish norms but to cultivate them, live them, and constantly reinforce them. Ethics ceases to be an option and becomes the foundation of organizational culture, promoting integrity, responsibility, and respect. After all, ethics is more than a set of rules; it is the living expression of values that guide every action and decision.

HOW TO IMPLEMENT THE ETHICAL PROJECT

There is a great author I admire called Martha Nussbaum. Her texts help reflect on the daily operations of organizations, shedding light on awareness of the topic. As a compilation, I can give examples such as:

• Promote Ethical Education: Develop training programs that assist employees in understanding and incorporating ethical principles of human capability. Use training scenarios that emphasize the importance of appropriate emotions, empathy, and equality in the workplace.
• Evaluate Organizational Culture: Conduct regular assessments of organizational culture to measure progress in implementing ethical values. Use climate surveys and feedback from employees to identify areas needing improvement. Ethics in companies can also be used in the design of performance evaluations and as a reward and incentive for good behavior. Let’s remember 1982 when Johnson & Johnson was involved in the famous Tylenol scandal. Since then, they have reinforced their ethical conduct, for example, the 360-degree evaluation of each executive is based on the four components of the company’s famous “credo,” which expresses commitment to customers, employees, communities, and stakeholders. In a version of the evaluation we observed, each executive was assessed on items such as “nurtures commitment to our creed,” “confronts unethical actions or those that push the boundaries of ethics,” and “establishes an environment whose norm is unwavering integrity.”
• Set Capacity Development Goals: Establish specific goals related to the development of employees’ capabilities. This may include goals to improve communication skills, conflict resolution, critical thinking, and ethical leadership. Ethics in companies can also be used in the design of performance evaluations and as a reward and incentive for good behavior.
• Encourage Diversity and Inclusion: Actively promote diversity and inclusion at all levels of the organization. Create recruitment and promotion policies that ensure equal opportunities for all, regardless of gender, ethnicity, sexual orientation, etc. First impressions are extraordinarily powerful. For many employees, a company’s values were revealed in the hiring process. Although interviews are generally seen as opportunities to identify the best candidate, they also initiate the acculturation process. In a company I work with, for example, interview questions are designed around a core value, such as putting customer needs first. In an interview script, employees are informed of this value and then asked, “Tell me about a time when you identified an unmet customer need and were able to resolve it.” I don’t know if this question identifies people who treat customers with respect, but that’s not necessarily the goal. Highlighting values in interviews reveals their importance to the company. It is part of a broader system that draws attention to ethics. But not only that, in my opinion, more than qualifications, the person to be hired must embody the same line of attitudes and thoughts that align with the company’s culture.
• Reward Ethical Behavior: Create reward systems that recognize and value ethical behavior. This may include recognition programs, public praise, and awards for those who demonstrate a commitment to the company’s ethical principles. In principle, aligning financial incentives with ethical outcomes may seem easy, but it is difficult in practice. This is where a mission statement can be helpful. For example, Southwest Airlines used an executive scorecard to link compensation to its four core values: all employees are important, all flights are important, all customers are important, and all shareholders are important. Each value is demonstrated by an objective measure — “every employee is important” according to voluntary turnover; “every flight is important” according to performance and punctuality. This card reflects the alignment of business success with the company’s essential ethical values, helps employees keep them in focus, and indicates the behaviors necessary to put them into practice.

Additionally, leaders can reward ethical actions by showing employees the positive impact of their work on other employees and recognizing their actions in presentations and publications. They can also create opportunities within the company to behave ethically towards colleagues.

In a recent field experiment I had the opportunity to follow, randomly selected managers had to perform five acts of kindness to favor certain colleagues over a period of four weeks. This not only increased the number of positive acts observed in the company but also made the beneficiaries more likely than those in the control group to engage in kind gestures towards other employees, demonstrating that ethical behavior can be contagious. These gestures improved the well-being of both those who practiced them and those who received them. Perhaps more importantly, there was an impact on the mental health of employees. Symptoms of stress and depression dropped significantly among participating groups compared to the condition of others who were not yet involved in the project, a result that continued for at least three months beyond the initial one-month intervention.

Of course, one cannot, under any circumstances, neglect the need to communicate values and ethical principles clearly and consistently throughout the organization. It is crucial for leadership to position itself as a living example, incorporating these principles into policies, procedures, and daily practices.

It is also worth remembering that no company will ever achieve perfection, because after all, no human being is perfect, but capable of improvement. In fact, when researching the implementation of an Ethical Culture in various companies, it is noticeable that serious lapses have occurred, and even after tireless efforts, examples of these still abound. It is vital to recall that real-world people are not entirely virtuous nor entirely impious, but capable of both good and evil. What often determines their actions is the influence of the environment. Remember the beginning of Part One of this article. Therefore, companies must create a system that makes the practice of good as easy as possible. This implies careful attention to the real context in which people operate, transforming fundamental ethical principles into business strategies and policies.

Keeping ethics in focus, rewarding ethical behavior with a variety of incentives, and promoting adherence to ethical standards on a daily basis is essential. Doing so will not miraculously transform employees, but it can help them achieve their maximum ethical potential, allowing them to be as ethical as they are capable of being. This journey of ethical self-improvement is a constant pursuit and challenge that all organizations must face, recognizing that human imperfection is a constant, but the pursuit of ethical behavior must be unwavering.

A Valuable Moral Compass for Organizations

In a constantly evolving business world, discussing ethics and human capabilities provides a valuable moral compass for organizations. As we look to the future, it is clear that integrating these ethical principles into the daily operations of companies is not only a wise choice but a pressing necessity.

Commitment to a lasting ethical culture, based on understanding and developing human capabilities, is not only beneficial for the growth and success of organizations but will also play a vital role in building a fairer, more compassionate, and ethical workplace. As companies adapt to technological and social changes, the importance of leading with empathy, promoting equality, and cultivating emotional intelligence will become increasingly evident.

Organizations that embrace their responsibility in this matter will not only stand out in terms of integrity and accountability but will also play a crucial role in promoting a more just and inclusive society. This is the path to a future where business is not only focused on profits but also on making a positive difference in the world, one step at a time.

Even after the Tylenol scandal and all its changes in conduct and ethical policy, it did not prevent Johnson & Johnson from making headlines again with the talcum powder scandal and its more than 9,000 billion-dollar lawsuits in the United States. Let’s not forget the Volkswagen emissions fiasco, Wells Fargo’s fraudulent sales practices, Uber’s privacy invasion, as well as numerous recent scandals in Brazil that, incidentally, can never be forgotten, which makes it clear that corporate wrongdoing is a permanent reality in global business.

Unethical behavior exacts a significant price from companies, damaging both reputation and employee morale, while increasing regulatory costs — not to mention the broader damage to society’s overall trust in business. Few executives break the rules to gain advantages, and most companies have programs to prevent bad faith at all levels. However, recurring scandals show that there is much to be done.

Furthermore, remember, a leader who promotes an ethical culture should strive to create contexts that keep ethical principles at the forefront of people’s minds, reward ethics through formal and informal incentives and opportunities, and weave ethics into everyday behavior. In this regard, I recommend Nicholas Epley’s book “Mindwise: Why We Misunderstand What Others Think, Believe, Feel, and Want” and behavioral scientist Amit Kumar’s articles, along with the work of Martha Nussbaum. Also, a very interesting article that helps us reflect on the subject written by David Cohen, which can be found in the ESPM digital collection (https://acervo-digital.espm.br/Artigos/ART/2014/97442.pdf), are rich in discussions presented here.

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Hello, I’m Marcello de Souza! I started my career in 1997 as a leader and manager in a large company in the IT and Telecommunications market. Since then, I have participated in important projects of structuring, implementation, and optimization of telecommunications networks in Brazil. Restless and passionate about behavioral and social psychology. In 2008, I decided to delve into the universe of the human mind.

Since then, I have become a professional passionate about deciphering the secrets of human behavior and catalyzing positive changes in individuals and organizations. Doctor in Social Psychology, with over 25 years of experience in Cognitive Behavioral and Human Organizational Development. With a wide-ranging career, I highlight my role as:

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