Headed for an ethics scandal

By Alison Taylor via hbr.org   Article

5 Signs Your Organization Might Be Headed for an Ethics Scandal

“… five traits of organizational culture that correlate with ethical scandals:

  • Urgency and fear: Following corruption scandals, leaders tend to describe events in terms of pressure, necessity, and what the company needed to do to ‘survive.’ This perception of existential competitive threats can be used to justify the creation and maintenance of toxic incentives, and it will undermine any efforts to raise concerns.
  • Isolation: Groups and teams that are far from headquarters—either in geography, access to information, or both—are vulnerable. When a team that is isolated (by accident or design) comes under the direction of an authoritarian, competitive leader, an enterprise has created the baseline conditions for corruption. People are far more influenced by their immediate surroundings than by a code of conduct set at the top.
  • Fragmentation and plausible deniability: When a corporate scandal occurs, it is common for leaders to deny personal knowledge. Sometimes these hollow-sounding explanations are literally true, if disingenuous. A leader does not need to personally sign off on a bribe payment to hold responsibility for how employees have been socialized into an organization and what behavior is sanctioned or rewarded. But organizational complexity, matrixed responsibility, and a lack of clarity as to roles can help feed and justify conditions in which each decision is judged in isolation, and no one is held broadly accountable.
  • Success and impunity: We have a tendency not to question success. When a team markedly outperforms its peers, it develops a mystique that serves to block scrutiny of the basis of that success. The reputations of other teams suffer as they appear to underachieve in comparison. If the high-achieving team’s success has been achieved by unethical means, a company has created a slippery slope by which conditions in one subculture spread to others.
  • In-group language: Humans need both to hide and rationalize unethical behavior, leading to the widespread use of in-group jokes and euphemisms. A rich terminology springs forth to describe bribes, from ‘gifts’ and ‘commissions’ to SNC Lavalin’s ‘project consultancy costs,’ TSKJ’s ‘cultural arrangements,’ and the funds Enron put aside to ‘educate Indians.’ Metaphors of war and sport, common in this context, help to shift the frame away from that of individual choice.

When one (or more) of these conditions is present, a team is susceptible to ethical violations. Although leaders often complain that company culture is hard to measure, it is far easier to seek employees’ input on team culture and norms than to ask them to report fraudulent practices or call out powerful wrongdoers.”


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