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Why Do Good Ethical People Sometimes Make Bad Ethical Decisions? Part 3: How You Can Save Your Organization

Posted by Natalie Law Posted on Aug 31 2016

The ethical culture of an organization, also known as “the tone-at-the-top,” begins with top management, then trickles down to mid-level management, and last but not least, to the employees. So how does an organization develop and sustain a positive ethical culture? Many researchers have spent countless hours trying to pin point those actions that answer this very question.

Gerry Zack gave a presentation at 27th Annual ACFE Global Fraud Conference entitled “The Return of the Tone at the Top where he discussed 9 signs of a toxic organizational culture.                                           (1) Favoritism: “It’s not what you know, it’s who you know.”

(2) Walking on eggshells: “If I tell him the truth, he will lose it!”

(3) Bad behavior: “I’ll step on whoever I have to in order to get what I want.”

(4) Lack of development: “Training and development only cuts at the budget and lowers production.”

(5) Information hoarding: “We will just keep them in the dark about this.”

(6) Lack of accountability: “We like her, so we will just look the other way and pretend it’s not happening.”

(7) Overly aggressive goal-setting/pressure cooker culture of meeting goals: “Can’t run a marathon after a month of training? Good-bye bonus.”

(8) One-way communication from executives: “It’s my way or the highway.”

(9) Decision making based on trying to hide a problem rather than fix the problem: “I know! I’ll bury it then no one will see it!”

Do any of these sound familiar? You’re not alone. Most organizations suffer from one or more of these toxic culture traits. But luckily there are ways to undo the mess and create and sustain a positive ethical atmosphere.

Bethmara Kessler also presented at the 27th Annual ACFE Global Fraud Conference. Her presentation was entitled “Sustaining an Ethical Culture: It’s Not Always Black and White.” She gave 9 tips on how to undo the mess and create and sustain an ethical culture.

The first tip is to make it a priority. Management should acknowledge the need for a change and work on it daily. Employees will not be receptive to the change if they do not see their leaders making the change. Toxic employees who refuse to embrace the new culture, under the right circumstances, should be removed. Negativity is contagious, but so is positivity, so fill the organization with positive energy which leads to the second tip, hire ethical people.

There are many ways of “weeding” through the many applications, but here are a few examples: background checks, verifying items on the resume, and asking questions such as “what would you do in this situation? Or “have you ever been in this situation and how did you handle it?”

Tip number 3 is to create great policies for your ethics program. Kessler states that these policies should resonate with and be relatable to everyone in the organization. They should also be simple, easy to understand and as transparent as possible so that employees don’t create their own interpretations. Most importantly, these policies should be there to help employees make the right decisions.

The fourth tip is to hold employees accountable. Make it clear what the expectations are and consequences for not meeting them. Then give consistent discipline with each person and each instance. If employees see that a co-worker isn’t being disciplined for actions that are clearly against the policy, they might follow suite and/or become demotivated.

Tip number 5 is to engage your people in an impactful way. Create ongoing communication about ethics. Make the topic fun and engaging and allow employees to give feedback and ideas.

The sixth tip is to have an “open door.” Allow open communication throughout the organization. Help the employees feel safe about discussing ethical dilemmas. Your biggest ally in preventing and detecting fraud and unethical behavior are your employees; they are the ones seeing the dirty details on a daily basis. Employees should be trained on what to look for in their department regarding fraud and unethical behavior.

Tip number 7 is to be quick and decisive in finding and disciplining unethical and fraudulent behavior. Remember, perception of detection is your strongest control. Create formal procedures for disciplinary actions and give an appropriate level of information to other employees. Like children, employees are sponges, they are listening and watching to see what you say and do. If employees see that you mean business, they will act like you mean business.

The eighth tip is to create teachable moments. When fraudulent or unethical behavior occurs find out why and how it happened. Use this information to teach others in the organization of what to look for and what not to do. Then evaluate the current policies and procedures and make any needed changes. Keep that open communication with the employees and develop them.

Tip number 9 is to evaluate yourself. Any goal in life is useless if you don’t evaluate your progress. Same goes for creating and sustaining an ethical culture. Goals should be set that can be measured and are realistic, then evaluated on an ongoing basis. Ask for the opinions directly from those whom it affects, which is everyone in the organization. Then make it a priority to implement those changes that are deemed reasonable. The employees of the organization need to see they are being heard and their opinions matter. Employees see the daily details and can give a wealth of knowledge on how things can improve. Here are some suggestions that Gerry Zack gives on how to measure the effectiveness of the ethics program: number of signed ethics policies, number of employees attending training, scores of pre-tests and post-tests, employee surveys, and compliance, enforcement and discipline data.

An ethical “tone-at-the-top” is attainable with dedication and with the right people. Following the tips and suggestions above will create an environment that can save your organization from losing time, resources, money, and great people.

The writers of this blog (whoever they may be) would like to take this opportunity to disclaim any responsibility for it.  While we (the writers) take every precaution to make sure the information conveyed is accurate, we are as human as the next person and thus, subject to flaws.  Also, the views expressed are not necessarily the views of Layton Layton & Tobler LLP or any other person in the firm except for maybe the writer.