In a world of increased reporting of corporate scandals, there’s even more recognition of the need to develop sustainable organisational practices which deliver long-term value, not only in terms of profit, but for the benefit of a range of stakeholders including people and wider society. The HR or people profession is uniquely placed to embed principled decision-making into daily organisational practice. Ethics are at the heart of professionalism, and practitioners need to demonstrate strong standards of integrity when advising leaders on the people implications of business decisions, in order to create cultures of transparency and trust.
This factsheet explores what ethical practice means and why it’s important in an organisational context. It outlines the trade-offs involved in upholding ethical values and the challenges faced by HR professionals. Finally, it looks at the role of the profession in creating ethical organisational cultures through key practices and systems.
We believe that work can and should be a force for good, for everyone involved in the world of work. When work is good, people are more likely to be happy and fulfilled, businesses are more likely to be productive and profitable, and communities are more likely to flourish.
The problem is, work isn’t always a force for good. Corporate scandals involving workplace harassment and poor treatment of workers have shone a spotlight on what can happen when ethics aren’t integral to the way organisations operate, raising difficult but necessary questions. How do we stop the same things happening again? Do we simply write more rules? How do we embed ethical behaviour in our organisations?
Ethical cultures are vital in helping organisations shift focus from short-term profits to long-term sustainability, ensuring that work benefits everyone – from employees to shareholders. We know this isn’t solely an issue for the HR profession, but HR or people professionals do have an important role to play. As the experts on people and organisations, people professionals have unique access to staff throughout their careers, as well as opportunities to influence the organisation’s strategy and the way it manages its workforce.
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What is ethical practice?
Ethical practice in organisations includes the application of ethical values (such as fairness, honesty, openness, and integrity) to organisational behaviour. Are colleagues treated with dignity and respect? Are customers treated fairly? Are suppliers paid on time? Does the organisation acknowledge its responsibilities to wider society?
Ethical practice applies to all aspects of organisational conduct, from corporate governance, employment practices and sales techniques to stakeholder relations, accounting practices and issues of product responsibility. It concerns discretionary decisions that organisations and the people who work for them make in the day-to-day situations they face.
Establishing high standards of practice based on ethical principles requires organisations to actively nurture an open and ethical culture. This goes beyond being values-based: organisations should articulate what ethical principles mean in day-to-day practice and support employees in embracing them, as well as working with individuals to recognise when an ethical dilemma arises and how to deal with it.
People management decisions often involve trade-offs between different needs or priorities. Being aware of and understanding the outcomes of alternative courses of action will enable HR professionals to make sound judgements. According to the philosophy literature, there are different perspectives or ‘lenses’ to be considered when making ethical decisions in the workplace. These do not represent ‘right’ or ‘wrong’ judgements, but rather, alternative ways of looking at a situation. For example, one lens says that work should be good for people, whereas another lens suggests that long-term interests are more important than short-term gains.
Our Ethical-decision making research informed the development of our principles for the profession, which are designed to guide practitioners’ decision-making in any given context and when faced with unprecedented situations. The principles represent higher-level value judgements which go beyond prescriptive rules, signalling what an individual should take into account when deciding how to act in practice.
Why is ethical practice important?
Organisations should ‘do the right thing’ because it is the right thing to do. The Institute of Business Ethics' research supports this view, and demonstrates the benefits to organisations when they take their ethical values seriously:
- An open culture improves morale.
- Good relations with customers lead to an enhanced reputation.
- Ethical companies outperform their peers financially in the long term.
Reputations are based not only on an organisation’s delivery of its products and services, but on how it values its relationships with its staff and stakeholders, and how it demonstrates responsibility and accountability towards them. Demonstrable ethical practice is not only an effective insurance policy, mitigating risk; it gives organisations a competitive advantage. The success of any organisation depends on trustful relationships with employees, customers, suppliers and the community.
Serious risks can occur when an organisation’s culture is at odds with its stated ethical values. The ‘say/do gap’ – where leaders say one thing but do another – is harmful to their credibility and leaves workers cynical and disengaged. As a result, the organisation is susceptible to ethical lapses and damage to its reputation. Leaders should be clear on what the organisation’s ethical values are and set expectations with employees so that they reflect these values in their behaviours. In our Purposeful leadership report, we investigate what business ethics means for leaders at various levels of the organisational hierarchy, and the extent to which these leaders can help organisations articulate and embed ethical values. Listen to our podcast Ethics: a leadership imperative.
Ethical values are the compass by which we live our lives. They are what is important to us. For example, is it important to you that you give an honest quote, even if that means losing out to the competition (who may not be so honest)? Would you stand up to your boss if you felt they were asking you to do something unethical?
Core values exist in most organisations, whether they’ve been consciously created through many years of leaders behaving in a certain way or left to chance, and whether or not they are formally articulated. Whatever policies and programmes are in place, it’s the organisation’s values that provide the framework for the company’s culture and decision-making. These core values will be the foundation of any ethics programme.
The personal values of employees may or may not align with organisational values, therefore organisations may need to provide support for employees in how to deliver them. Some organisations provide individuals with 'ethical tests' to help them make decisions and navigate ethical values and principles. These might involve a series of questions, such as:
- Is it legal?
- Is it consistent with the organisation's code of ethics?
- How would I feel about it being on the front page of tomorrow's newspapers?
Ethical dilemmas can arise in many situations and at all levels within organisations, from those related to strategy and policy in the boardroom to those faced by managers or individuals in their day-to-day work. While the boundaries of right and wrong as defined in law are clear, behaving ethically is discretionary. Dilemmas arise when what’s right and wrong are not clear; for example, when an individual is faced with a choice between the least wrong options, or when the needs of different stakeholders are in conflict.
Our discussion forum, Workplace dilemmas in confidence, offers CIPD members facing challenges the opportunity to post anonymously and seek valuable guidance and peer support from the member community.
HR or people professionals have both a responsibility to the organisations they work for to contribute to organisational objectives, and a responsibility to the profession to contribute to the public good. In any profession, practitioners will inevitably face situations characterised by conflicts of interest between different stakeholders, where there’s no clear solution. For example, should people have a say in matters that affect them at work, when that would conflict with efficient business operations? In the rapidly changing world of work, there is not always a ‘golden rule’ or ‘best practice’ to help practitioners navigate workplace dilemmas. The ability to exercise situational judgement is critical to operating effectively in this environment and making the best possible decisions, by drawing on both one’s knowledge and sensitivity to the ethical choices.
In 2015, our Best to good practice HR research found that while HR professionals want to make ethical decisions, there’s often a gap between that ambition and actual practice. Practitioners sometimes feel they have to compromise on their principles because they feel under pressure from the business. Since the remit and identity of HR has been closely tied to organisational goals, the ability of people practitioners to operate as independent professionals, with the power to challenge organisational decisions when they violate ethical values, has been questioned.
Our People profession in 2018 survey found that most people professionals believe that their jobs gives them the opportunity to fully express themselves as a professional. However, nearly three in ten feel that there’s a conflict between their professional beliefs and what their organisation expects of them. Developing a strong sense of purpose and identification with the people profession can equip practitioners with the courage to challenge unethical organisational practice.
Establishing an ethical culture
The term ‘ethical culture’ refers to how ethical values are brought to life in the day-to-day running of the organisation. So, for example, a company may have ‘excellence’ as a value. But how is excellence defined in that organisation? How is it achieved? Is it with integrity, or is it at the expense, for example, of child labour or poor working conditions?
To operate ethically, an organisation needs an ethics programme to support and bring its values to life. This may be a formal or informal programme depending on the size of the organisation, but it should include a code of ethics as the key element. If values are a compass to guide behaviour at work, then a code of ethics is a map that helps individuals navigate ethical dilemmas in the workplace. It reflects the organisation’s values and is a useful tool to guide staff in decision-making, by helping them handle day-to-day dilemmas. When done well, a code articulates expected behaviours and brings the organisation’s values to life – and is not merely seen as a compliance-driven initiative. To understand the expectations and ensure they are achievable, staff will need guidance from leadership on indicators and contra indicators of the organisational expectations.
Listen to our HR and business ethics podcast which discusses HR’s role in creating an ethical culture.
If an organisation has an ethical code, it should regularly reviewed and interactively discussed with employees. It should not be covered only on a passive learning basis during induction. Talking internally about ethical values will also enhance the employer brand.
Communicating the organisation’s values indicates a long-term strategic commitment to building and maintaining an ethical culture. Regular internal communications should regularly refer to the values and ethical expectations. Where there has been an ethical lapse or scandal, communications can help rebuild internal trust by revitalising the commitment to behaving ethically.
Where different cultures have merged (for example, in an acquisition), internal communications of ethical values can help develop cohesion, consistency in behaviours, and common purpose. Global companies will find this approach helpful as it supports the task of uniting different cultures in the corporation behind one set of values. A useful way to do this is to nominate ethics ambassadors and obtain case studies from each business area.
The HR and people profession is responsible for key systems and processes underpinning the effective delivery of an organisation’s ethics messages. With its expertise in change management and internal communications, and by working in partnership with those responsible for ethical performance within their organisation, the profession can help to integrate ethics into the following organisational processes:
- Recruitment and induction
- Diversity and inclusion
- Learning and development
- Performance management
- Reward, including bonuses and incentives.
People professionals can also introduce specific activities to familiarise staff with ethical issues, for example anti-bribery, modern slavery and data protection training.
Finally, people professionals should ensure they understand the governance structure of the organisation and enable full transparency by implementing confidential ways for employees to raise concerns.
Assessing and reinforcing ethical behaviours
In addition to establishing and communicating ethical values, organisations should assess and reward ethical behaviours. Performance management requires commitment to organisational ethical values, and performance appraisal should look for ways in which employees and their departments have supported these values. For example, how have difficult decisions been made? As with other performance measures, these can demonstrate how staff have contributed to the organisation’s ethical performance and can be included in decisions regarding bonuses or promotions.
Assessing employees’ application of ethical values can encourage them to behave ethically, as well as monitor the effectiveness of the ethics programme to see where further training should be focused. HR professionals and senior leaders should agree on the extent to which ethics are core expectations of employees and any organisation’s representatives, and what consequences might arise if those ethics are not upheld.
Developing a rewards system which promotes ethical behaviours is another way of encouraging and reinforcing expectations. For example, this could include ethics awards, or remuneration and promotion based on ethical behaviours.
Useful contacts and further reading
Books and reports
BARR, D., CAMPBELL, C. and DANDO, N. (2011) Ethics in decision-making: good practice guide. London: Institute of Business Ethics.
DONDE, G. (2018) Ethics at work: 2018 survey of employees, Europe. London: Institute of Business Ethics.
FRANCIS, R. AND MURFEY, G. (2016) Global business ethics. London: Kogan Page.
INSTITUTE OF BUSINESS ETHICS (2014) The collaboration between the ethics function and HR. Briefing 40. London: IBE.
Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print.
COVENTRY, P. (2016) A question of ethics: what went wrong at VW? HR Monthly. February. p12.
GRAVE, K. (2018) HR must speak up about ethics. PM Daily. 10 September.
Half of staff ‘witness unethical behaviour at work. (2017) PM Daily. 31 October.
KARLSSON, P-O., AGUIRRE, D. and RIVERA, K. (2017) Are CEOs less ethical than in the past? Why more chief executives are losing their jobs after scandals and corporate misconduct. Strategy + Business. Issue 87, Summer. Reviewed in In a Nutshell, issue 71.
VAN PROOIJEN, A-M. and ELLEMERS, N. (2015) Does it pay to be moral? How indicators of morality and competence enhance organizational and work team attractiveness. British Journal of Management. Vol 26, No 2, April. pp225-236.
CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.
Members and People Management subscribers can read articles on the People Management website.
This factsheet was originally written by Institute of Business Ethics and revised by Louisa Baczor and Tina Russell.
Louisa Baczor: Research Adviser
Louisa joined the CIPD in 2015, specialising in research for the CIPD’s Profession for the Future programme. This research explored what it means to be a professional, key drivers impacting the future of work, and how practitioners apply ethical principles when making people management decisions.
Louisa’s current research is investigating the future of voice in the workplace, and how organisations can enable people to have a meaningful voice at work. Prior to this, she worked on workplace well-being, employability, and professional identity streams.
With an undergraduate degree in psychology, Louisa studied the changing roles of HR and impact on trust during a Master’s at the University of Bath.
Tina Russell: Professional Conduct Manager, CIPD
Tina spent her first four years at the CIPD managing membership upgrading and continuing professional development. For the last five years as Professional Conduct Manager, Tina's led the implementation of the CIPD Code of Professional Conduct. She has reviewed complaints of alleged breaches of the Code, managed investigations and conduct hearings, and been responsible for the management of over 60 volunteers. Identifying insights from complaints, Tina contributes to the development of the institute’s standards by balancing a range of stakeholder and public interest.