Our Centers for Ethics:

How to harness ethics to increase productivity

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The situation: Human capital is central to most of the world's great companies today. So managing it effectively becomes job one. Yet it is much subtler than classic forms of capital. How do you get the most out of your most valuable resource?

The solution: One key is business ethics, an essential driver of productivity. The benefits are irresistible: At very low cost, business ethics boosts output, promotes recruitment and retention, and reduces misconduct, employee fraud, and absenteeism.

Business ethics is one of the best investments you can make. Take it from Bill Greehey, the CEO of Valero Energy: ’What we have found is that the more you do for your employees, the more they do for the shareholders, and the more they do for the community. I see this cycle with companies where they fire and hire and fire and hire. It’s just poor management. Fear does not motivate people.’

• Put the mission first and above personal considerations. You’ll make fairer and more productive decisions, based on the company’s welfare rather than your own.
• Use a common language of values to increase mutual understanding. One well-known language is the Six Pillars of Character: trustworthiness, respect, responsibility, fairness, caring, and citizenship.
• Make sure your organization lives up to your employees’ values. They’ll identify more with it, feel greater pride and dedication, and do better work.
• Develop a code of ethics and code of conduct, and stand behind them. Enron had an extensive, and meaningless, code of ethics. But taken seriously, codes alert employees to moral issues, improve choices, and reduce unethical behavior. (And if a firm has an ethics program, a judge can dramatically cut fines and executive prison sentences.)
• Support the ethics program and set the example. If you don’t, employees will notice and take the cue. Moreover, employee fraud drops when managers are good role models. Employee fraud is nearly twice as common as consumer fraud, costing firms $600 billion a year or six percent of U.S. GDP. [ Association of Certified Fraud Examiners, 2002 Report to the Nation on Occupational Fraud andAbuse; The CPA Letter, October 2002; KMPG Fraud Survey, 2003]
• Make ethics decisions in groups. You’ll benefit from varied viewpoints, make better decisions, and increase buy-in. People hew more to policies they helped craft.
• Foster transparency and trust. Keep employees informed about the organization – the good and the bad. Ask how things are going and reward honest responses, even if you don’t like them. When more information flows up and down, everyone understands the organization better and makes smarter decisions.
• Strengthen your business ethics skills. Consider attending a Josephson Institute Center for Business Ethics seminar to equip you to start or enhance a business ethics program in your organization.
• Understand that no one’s perfect. Make it clear to employees that it’s better to try operating ethically and making a few mistakes than not trying at all. Be forgiving.
• Pay attention to the little things. Avoid poisonous condescension, public criticism, and micromanagement.