If organisations want their employees to make the right decision, to do right by their customers and to perform well, boards and executives need to lead by example. They need to be able to articulate the standard of behaviour, the organisation’s values (by defining what is good) and the organisation’s principles (by defining what is right) in a simple, accessible and engaging way.

The issue of ethics and culture in governance and the role they play in organisational performance is one that has evolved significantly over the past 15 years. During this time we have seen organisations move from a governance framework that prefers compliance, to an approach which places increased value in its ethical foundations.

In August, the Australian Institute of Company Directors together with The Ethics Centre hosted an event in Sydney – the first of a two-part series – on ethics for directors and senior business leaders.

MU
Dr Simon Longstaff AO, Lisa Claes MAICD, Linda Fitzhardinge GAICD and Dennis Gentilin MAICD

The evening featured talks from Dr Simon Longstaff AO, Executive Director of The Ethics Centre, Lisa Claes MAICD, Managing Director of Core Logic and Dennis Gentilin MAICD, author, speaker and corporate whistleblower.

These experts discussed the common traits found in high-performing organisations, the role and influence of ethics and how organisations can bounce back following an ethical failure.

Strong ethical foundations

“Imagine an organisation is like a building,” Longstaff explained. “Its outside features; its windows and spires and towers are what the public sees and are also what the organisation is known for. But if it is going to be of any use at all, it has to be built on solid foundations. The core values and principles of an organisation is what lays the foundation and that is what ethics are all about.”

Ethics are not the rhetorical flourishes on the wall. They involve thoroughly considered systems, policies and frameworks that embody the purpose of the organisation and help support it. It involves alignment of purpose, values principles and strategy, so that the image the organisation wishes to project is one that is in direct alignment with the actual experience of stakeholders.

When an organisation has strong ethical foundations, it can rely on its employees to make good, responsible decisions using the principles, purpose and values of the organisation as a guide. In turn, this will reduce the over-reliance on compliance and box-checking seen in some organisations. This is restrictive and poses its own systemic risks: where people lose their capacity to make sound and responsible judgements because they have never had to.

High employee engagement

“Engagement matters and is the skeleton of your organisation’s culture. High staff engagement leads to higher employee retention, productivity and profitability. Strong engagement is not a result of one thing, but a lot of little things done well, often and shared from top to bottom. That is how the biggest difference is made: through attitude, artefacts, policies and procedures,” Claes said.

Achieving high employee engagement is difficult to acquire and then sustain. It requires constant communication and ‘pulse checking’, the commitment of strong, positive role models and an understanding of the organisation’s purpose and desired behaviours across the board.

Superior performance is linked to the discretionary effort of employees: the effort that employees actively choose to put into their jobs that goes above and beyond the minimum required. Nowadays, including and retaining people with an ethical allegiance to the organisation is absolutely critical. If an organisation is not what it professes to be, people will leave.

Transparency

“Transparency is always a good idea, but in the face of an ethical failure, it’s absolutely critical to the survival of the organisation,” Gentilin said. “How an organisation responds in the immediate aftermath to a crisis is what determines how it bounces back. And failing to act openly, honestly and transparently will only further erode your credibility when the facts finally surface – as they inevitably will.”

Acting with honesty and integrity not only applies to how an organisation deals with its shareholders, customers and the media. It also applies to how an organisation functions internally: whether it is in the dynamics of a boardroom debate, the day-to-day dealings of executives or in regular communications to all staff.

Transparency should be a direct result of the alignment of purpose, values and strategy. If an organisation does go through a tumultuous period, there is a tendency to shroud the crisis in secrecy and to shut down all lines of communication. However, it is emerging from the crisis by fully acknowledging and learning from mistakes, then sharing these learnings that the ethical foundations of the organisation are strengthened.