I recently visited with Dr. Pat Harned, President of the Ethics & Compliance Initiative (ECI), about the organization’s 2021 Global Business Ethics Survey (GBES). While a multitude of factors inﬂuence ethical behavior, the GBES reported that the interplay of four major ethics outcomes are tied to the daily decisions employees make with respect to how they behave in the workplace. These are: pressure in the workplace to compromise ethical standards; observations of misconduct; reporting misconduct; and, ultimately, the retaliation perceived by employees after they reported misconduct. Some of this year’s findings are quite troubling as they are clearly trending in disturbing directions.
Two of the key trends from the 2021 GBES present cause for concern. One trend noted was that pressure to compromise standards serves as a warning signal for both ongoing and future misconduct. Employees working in high-pressure organizations are much more likely to observe misconduct in their workplace. Globally, the 10-country global median also showed higher levels of employees reporting pressure compared with 2015 and 2019. A second troubling trend is that the rate at which employees observe misconduct is a fundamental indicator of the strength of a company’s ethics culture. Companies with high rates of misconduct are likely to have ineffective compliance programs, a lack of accountability, and senior leaders that fail to communicate the importance of ethics in the workplace. The four types of misconduct surveyed included improper hiring practices, abusive behavior, conflicts of interest and health violations.
The flip side of these findings is the impact on employees when they are asked to engage in unethical actions. This topic was explored in a recent MIT Sloan Management Review article, entitled “The Price Leaders Pay for Cutting Ethical Corners”. In this piece, authors Isaac H. Smith, Maryam Kouchaki and Justin Wareham considered what happens when an employee receives an “unethical request”. What they found was that “asking people to cut ethical corners can backfire in the long run” even if there is some short term gain.
When an employee receives a demand or even a request from their manager to perform an unethical act, the employee may feel trapped. The authors noted that if the employee complies “with the request, their behavior may lead to feelings of guilt or regret. Most people have an inherent desire to view themselves as good, moral individuals, and acting in ways that violate their own values is threatening to the way they want to think about themselves. Complying with an unethical request can also induce a fear of getting caught and punished.”
Conversely, if an employee refuses such a request “especially on moral grounds, the employee runs the risk of offending the requester, who may feel judged and get defensive. And if the requester is a supervisor, employees who don’t comply may worry that they will be cut off from important resources under the manager’s control, like promotions, bonuses, or desirable assignments. Because people could face negative consequences no matter what they decide to do, feelings of stress, anxiety, and paralysis can set in.” It is this stress that ECI found more apparent in the 2021 GBES.
Moreover, the longer term effects on employee motivation may be even more significant. Motivation and engagement at work — strong predictors of overall job performance — are affected by the extent to which people’s personal values match those of their workplace. People are more motivated and better able to sustain effort when their authentic goals, interests, and values align with those of their employer. When employees receive such requests “they deem to be unethical, they begin to associate their work (and the organization they work for) with morally questionable practices and pressures. This moral value incongruence can decrease their job satisfaction, lower their performance, and even lead them to look for a new job.” Obviously, such an approach can be very costly to a company, in addition to any reputational, compliance or legal issues which may arise.
The authors finding were also instructive. In controlled experiments they found that “receiving unethical requests from leaders can reduce employees’ motivation and performance. We found that this outcome is largely driven by employees’ perceptions that their personal moral values do not align with those of their organization. We also observed these tendencies most strongly and consistently in people who were less likely than others to justify and rationalize unethical behavior.” Once again, these findings correlate to the 2021 GBES on additional stress felt by employees.
These findings are significant for every compliance professional as there are serious implications for institutional fairness, a key component of any corporate compliance function. The first “is that managers should avoid making unethical requests — not only on moral grounds, but for practical reasons as well, given the potential impact on employee motivation and performance.” Second, “even a supervisor’s subtle and seemingly innocuous encouragement to act unethically might also have negative effects on motivation and performance. This is especially true for people who are less likely to morally disengage and who generally behave more ethically. So managers should also be wary of even “harmlessly” hinting that their employees could sidestep rules and regulations to get a desired result.”
The bottom line could not be more clear. “Employees may do poorly when asked to do bad.” Couple these research findings with the actual findings in the 2021 GBES, it is clear that compliance must continue to lead the communications that unethical behaviors or even asking employees to engage in “unethical actions” is counter-productive to a well-run, ethically based business.