Author: Dawn-Marie Hoffman

Christopher Norman, sitting before you in your office, seems to be a nice young man. His resume indicates he’s well qualified for the open position in your company and he answered your questions succinctly and with confidence. This is the last of a series of interviews and his references have checked out. You’re about to offer him the job, but before you do, you ask him the standard question you always pose to applicants.

“Chris, I know we’ve tried to answer all your questions about this position and our company. Are there others that have occurred to you throughout the interviewing process that you’d like to ask now?”

In your ten years of interviewing candidates for the company, not one prospective new hire has surprised you with an additional question. Christopher is no different. He accepts your offer and agrees to start in two weeks. That night, however, Christopher surprises his parents by his ambivalent attitude about accepting the new job.

“Dad, I know it’s a good offer, but I feel I missed a chance in the interview to ask the human resources manager some questions that were on my mind. I wasn’t sure if they were appropriate questions to ask, so I didn’t. But I sure wish I knew the answers before I begin work.”

“Well, why don’t you ask me, son,” his father replied. “Maybe I can be a sounding board about whether you should ask some more questions before you start there.”

Ethics statements: guidelines or gospel?
“Okay, Dad. They gave me the company’s ‘Code of Conduct’ book to look at, but it doesn’t tell me if employees can be or have been fired for ethical violations. It’s not clear to me if employees are disciplined for making a wrong decision. For example, are there penalties, who imposes them and do violators get a second chance? My fraternity brother Dave started work at a big company last year and, because he used a discount coupon that one of the software vendors dropped off at the company, he was fired. He just didn’t ask anyone and went out and bought some software for himself with it. He honestly didn’t know he was doing anything wrong.”

Chris’s father agreed that this was a ticklish matter. “Any other questions?”

“Well, I don’t know if the company is serious about some of the things it mentions in its Values Creed. I’m not sure I want to work for a company that has a double standard—one for the executives at the top and one for people at the bottom. My friend Susan is working for a major consumer products company. The company has a rule that says you can’t accept gifts from suppliers, customers or anyone—not even little gifts. But she works in marketing and sees that the company pays for senior executives from its vendors and customers to attend big golf tournaments. The company also sends out thousands of gifts at Christmas to everyone it does business with. That seems like a double standard to her, and to me, too.”

Does culture support values?
“But that’s not the only thing,” Christopher said, continuing. “We had a couple of graduates from our business school come back and talk to us about things they didn’t know before they accepted jobs but wanted to warn us about. One was the ‘hidden culture’ or unspoken rules at a company. These aren’t apparent to new hires, but they really influence the values and behavior of the place.”

“Like what, son?”

“Like a culture of silence, for example. Everyone sees what’s going on but no one says anything. Or tolerating a vindictive boss because he or she has the power and the resources to make or break you. Or the fact that a company will make all kinds of promises when it hires you, but you won’t get promoted unless you have a degree in a certain subject or have attended the boss’s alma mater. How do you find these things out before you take the job and end up wasting a lot of time there?

“One of my friends who worked last summer in retailing gave me another ex-ample. Her boss asked her to go to a competitor’s store and write down what they were selling and at what price. My friend felt uncomfortable about it, but she didn’t know whether this was an accepted part of aggressive retailing or if this was unethical. She didn’t have anyone to ask. Nowhere in the company’s code of conduct does it mention what kind of action is appropriate to question and what isn’t.

“We learned in business ethics class that after Northrop got in trouble with the defense department for falsifying test results, its new ethics’ code specifically told employees they had a responsibility to challenge anything they questioned. And it was okay to challenge it over their boss’s heads. I don’t see anything like that in this code.”

“I think that’s important, son. Any-thing else?”

Does ethical behavior outweigh results?
“Well, the HR manager told me we’d all have performance goals that we set with our manager, as well as quarterly appraisals. I understand that. But what I don’t know is how aggressively the company expects employees to act to achieve those goals. Will I get full credit if I try my best to meet the goals or are they really set in stone? I know companies have faced big ethical scandals because their sales representatives lied to customers to make a sale and get the commission, and other companies have bribed suppliers or stretched accounting rules to make their numbers. I don’t intend to do any of that, and if that’s the way people have to act to make their goals in the company, I’m not sure I even want to work there.”

“Chris,” his father said, “I think you have raised enough good questions that you should call the HR manager and make one more appointment before you start working there. If she thinks these are inappropriate questions, then I agree with you—you don’t want to work there.”

What should HR do?
Christopher Norman will make an appointment to get his questions answered, but he’s an unusually thoughtful young man. Not all applicants will take the initiative, and in a time when the competition for outstanding candidates is fierce, human resources representatives may need to double their efforts and anticipate such questions.

While some might argue it’s the applicant’s duty, if not responsibility, to raise questions, it’s more likely that HR managers, experienced at interviewing techniques, will be comfortable addressing ethical concerns. We feel that HR should be proactive about encouraging applicants to think about ethics. For ex-ample, the interviewer might speak to the candidate along these lines:

“Chris, one area that I haven’t heard you raise any questions about is the subject of our company values and practices. I know you have our Code of Conduct book, but I would be remiss if I didn’t take the opportunity to emphasize how important our ethical culture is at this company. It’s something we’re all very proud of and we’ve worked hard to make sure that no employee has a single doubt, question or concern about the way we do business.

“You may not have any questions now, but I can guarantee you will have some in the future when a situation arises on the job or you hear about a problem at another company. Our ethics office is prepared to answer any kind of question and to help you sort out any situation you may be facing. In my experience, most employees do have questions and they’ve found that the ethics office is very responsive about getting back to them if their own supervisor can’t address the issue or isn’t available.

“Meanwhile, as you’re considering our offer, if you have any questions about how we treat employees, or how we meet our goals or anything at all, please feel free to call me. It’s a subject I’m happy to discuss at any time.”

We recently received a call from a friend and associate who has enjoyed a long career in human resources. Formerly a human resources manager in a division of a large national company, she just accepted a challenging position as vice president of human resources at a smaller but rapidly growing firm.

“The CEO hired me because he knew I could professionalize the department and the company,” she said, “and one of the first things I noticed was the absence of any type of ethics or compliance initiative. It’s up to me to put one in place. Where do I start?”

Before giving her our specific advice on how to start, we assured her this was an appropriate role for her position. Increasingly we’ve found that human resources managers are taking the lead in recognizing the need for such programs and in making them happen. The reason may be that, like our friend, those in leadership positions in human resources are highly respected within their organizations for integrity, have the ability to solve complex ethical dilemmas, understand the company’s culture and communicate well at all levels. These traits are good ingredients for leading a successful corporate ethics initiative.

“HR as the ethics office” isn’t an oxymoron. Indeed, a recent national survey of ethics officers by the 500-member Belmont, Massachusetts-based Ethics Officer Association revealed that the most frequently reported internal working interaction was with the human resources function, equaled only by the legal office. Furthermore, human resources managers were cited as more supportive than either the security or finance functions.

This message—that human resources managers were cited as supportive—bears repeating. Recently, we have seen a shift in employee sentiment that does not perceive human resources as being trustworthy or sympathetic to ethical issues. Perhaps this is because the human resources office—operating as a strategic business partner—is viewed as bottom-line oriented only and a tool of corporate management. It might also be a result of human resources still being perceived as having no clout and unable to influence corporate policy regarding core ethical issues. Or there’s the perception that the very compensation systems designed by human resources are the root cause of many corporate scandals and employee wrongdoing.

But reality is debunking this myth. In large companies that support a separate ethics/compliance function that reports directly to a senior vice president or the CEO, the ethics officer today is likely to boast an HR background. This group of professionals—which includes Jerry Guthrie, corporate ethics director for BellSouth; Liz Gusich, ethics program director at USAA; and Gretchen Winter, vice president of business practices at Baxter International—is proving that HR people are well-equipped to deal with the myriad issues that arise. Furthermore, they claim the vast majority of calls coming into an ethics “helpline” are personnel-related. Thus, even in smaller companies that don’t have the resources for a separate ethics function, ethics initiatives properly fit as part of the human resources department.

Decide if HR is the place for your ethics program. For these reasons, we advised our friend to seize the moment and be proactive in playing a major role in developing an ethics culture in her firm. We suggested she ask herself seven basic questions, which are adapted from recommendations by former NYNEX Ethics Officer Graydon Wood, to see if she would be an effective corporate ethics/compliance officer:

1. Do I hold an influential enough position in the company?
2. Do I have or can I get unrestricted access to the CEO and the board?
3. Do I have a high degree of trust and respect with my senior management team and with employees?
4. Can I assemble the resources for effecting internal procedural change and carrying out investigations?
5. Do I have or can I get access to information and support mechanisms that will provide monitoring, measuring, early warning and detection?
6. Can I be assured of being rewarded for proactively carrying out the ethics/compliance role?
7. Do I have the skills to operate effectively with the press, public forums and the legal process?

Once she affirmatively answered these questions, we helped her establish three objectives for her company’s ethics program: 1) establish standards and procedures reasonably capable of reducing the likelihood of criminal conduct; 2) promulgate and enforce the standards throughout the company; and 3) continually re-evaluate the program’s effectiveness and timeliness.

Lead the design of an ethics program. Once our friend determined her objectives, we cautioned her that although there are many good programs available as a model for her company, the most effective ones we have seen start with a blank-slate examination of the present operational culture. This includes a risk assessment of both the company itself and the business climate in which it operates. Industry practices and problems, the history of the company, geographic considerations and regulatory issues are all factors she will want to consider as she designs an ethics/ compliance program.

Finally, we suggested she begin by forging partnerships within the company to enlist support, share information and resources and drive the responsibility for an ethical culture to all parts of the organization. Whether the ethics function resides in HR or elsewhere within the company, the most effective ones are led by a committee of senior managers, including human resources, serving as a “kitchen cabinet” and a sounding board for the ethics/compliance officer. We believe this committee approach to instilling an ethical culture throughout the organization is essential if all facets of the business operation are to claim ownership of the values and standards articulated in the program.

Successful programs increase employee morale and foster a corporate culture that values honesty and integrity. Says Nicholas G. Moore, chairman and CEO of New York City-based Coopers & Lybrand LLP, “We have 70,000 people worldwide. A values program is the ‘glue’ that holds widespread organizations together.”

Workforce, April 1998, Vol. 77, No. 4, pp. 121-123.

All your compliance programs are in place, the sexual-harassment policy is posted, and you’re pretty sure every department understands its legal and financial responsibilities. But the stories in the daily newspaper about companies that have fallen into ethical dilemmas remind you that bad things do happen, even to good companies. Sears, Texaco, Avis and CNA Life Insurance have dominated the headlines with allegations of illegal collection practices, race discrimination and sexual harassment. Such examples make you wonder about the ethical health of your own company.

We suggest there’s one more bit of analysis that’s necessary. Close the door, hold your calls, clear your head and think hard about where you, your training programs and your organization fall in the realm of ethical behavior. How prepared are you and your colleagues to deal with an ethical crisis? A business without ethics is a business at-risk. Legal compliance is the lowest common denominator. The one element that prevents major mishaps is producing results continuously in an ethical manner.

To visualize the structure of an ethical environment, imagine a pyramid divided into four parts:

1. Base: Ethical Awareness
2. Middle: Ethical Reasoning
3. Top: Ethical Action
4. Peak: Ethical Leadership

The broad, base level is Ethical Awareness.
HR professionals should ask themselves questions such as: Do employees recognize ethical problems when they occur? Some employees concentrate on their duties so intently that they miss an obvious ethical situation when it happens. People need to be wearing their ethical glasses to see moral dilemmas in their midst.

In hindsight, of course, a lack of ethics is recognizable. But the slide on the slippery slope to immorality is often well-hidden. Recall the days when Honda Accords were the hottest cars in the land. Customers were lining up to buy them at more than full price and dealers were scrambling to find inventory. Yet, by all accounts, the salaries Torrance, California-based Honda paid its zone managers were mediocre, and the company went as far as taking away their company cars as a penny-pinching exercise.

Is it any wonder that seven of 10 regional managers and 12 Honda sales executives were convicted in a kickback scheme for pocketing $15 million in cash and valuables given by grateful dealers? As one Honda senior exec said on his way to jail, “My sense of right and wrong went right out the window the first year of my career as an automobile dealer.” With that lack of moral vision, he probably still doesn’t understand what he did wrong. It was just the way business was done.

One way to test employees’ awareness is to plan a discussion about a hypothetical situation and pose the question, “Is there an ethical issue here?” If the discussion includes responses like, “What’s the problem? We don’t get hurt,” “The important thing is delivering results,” and “Everyone does it,” these are red flags indicating the company might need a course in “Ethics Awareness 101.”

The next level of the ethics pyramid is Ethical Reasoning.
When employees recognize an ethical problem, will they be equipped to think through it? Part of the process of building an ethical infrastructure is to provide everyone with the proper tools: a common language and method of sorting through the courses of action open to them when an ethical problem occurs.

Dow Corning certainly had the right programs in place when its silicone breast-implant controversy surfaced, including an ethics committee and a long-standing code of values. But arguably, those inside the Midland, Michigan-based company who might have suggested alternative courses of action throughout the lengthy litigation and public relations nightmare were drowned out by the voices of the company’s lawyers, who saw the crisis as a legal, not an ethical, matter. As long as the issue was framed as defending a product that the company executives believed wasn’t harmful, other decisions were precluded. A brainstorming exercise in ethical reasoning might have produced ideas that ultimately would have helped Dow Corning avoid more than 400,000 claims of injury and inevitable bankruptcy.

The third level is perhaps the most difficult: Ethical Action.
The ability to recognize and understand an ethical problem is essential, but unless managers provide the mechanism for solving the problem, the company is still in a fix. This is a management problem that’s solved by creating the structures and approach to allow employees to convert decisions into reality.

If employees feel the corporate culture doesn’t encourage full disclosure or allow individuals to freely debate and resolve ethically sensitive issues, all attempts at integrating ethics into the organization will be viewed as the sham it probably is. Here are some red flags that signal a company’s ethical action level is deficient:

• Are high-potential employees leaving the company?
• Are exit interviews notable for their lack of information or candor?
• To what degree do employees at all levels feel they have a stake in owning the company?
• With what degree of respect do company executives consider ideas that pose ethical issues and resolutions when implementing those ideas will result in a loss of revenue?

When Vienna, Virginia-based America Online launched its new surf-all-you-want pricing plan and then to its surprise discovered that its eight million customers clogged the system, the company certainly hit a crisis. Some dismissed it as a technology issue, which could be solved given time and resources. Others saw it as a business-strategy issue; AOL didn’t think through the obvious ramifications of its single-price plan. Lawyers saw the crisis as an opportunity to sue; AOL didn’t deliver what it had promised. Marketing gurus saw the disaster as a comedy, watching AOL continue to pitch for new customers even as its existing ones rang up busy signals.

It would be interesting to know if anyone inside Chairman Steve Case’s inner circle framed the issue for what it really was: an ethical question. AOL developed a huge following based on a good product, ease of service and trust. Millions ran their businesses and communicated to their customers through their AOL addresses. Millions more invested in AOL stock. Case lured more customers in the door with free software. Then in less time than it takes to surf the Net, AOL’s commitment to customers crashed, betraying their trust.

Case and AOL didn’t exactly rush to provide refunds, postpone the pricing plan or solve the service issues until pushed. To outsiders, it appears that AOL’s interests were paramount and that its customers—stuck with their AOL addresses and accustomed to its Internet access—could wait.

The peak of the ethics pyramid is Ethical Leadership.
The individual or organization reaching this top level is a moral compass for others’ actions. In the best companies, every individual on the corporate ladder—from the mailroom clerk to the CEO—has a shared responsibility to be a moral leader. HR can recognize ethical leadership in an individual if he or she’s among the people who come to mind when a tough question arises and co-workers ask, “What would you do?” Ethical leadership isn’t reserved only for those at the top, rather it’s a quality held by individuals and organizations with the moral courage and diligence to talk and walk ethical values. This is what is meant by having individual and institutional integrity.

At its recent board of directors meeting, Michigan Physicians Mutual Liability Company located in East Lansing, Michigan pushed the envelope of ethical leadership by devoting precious board time to a free-wheeling discussion of what it means to act as an ethical director. The directors tackled ethical issues confronting boards today in the presence of company executives and invited guests. Board members weren’t shy about proclaiming their commitment to ethics at all levels, examining their own practices and thought processes, and disagreeing among themselves. It was a stunning example of ethical leadership at the very level where the ethical buck stops: the board of directors.

Hundreds of companies have developed and put into practice ethics programs which exemplify the ethics pyramid. We invite you to join in this movement. Start by developing a foundation of ethical awareness and work your way up to the top, cultivating ethical leaders throughout your workforce. Strengthen the ethical environment of your organization.