Employees look to leadership to guide them on how to engage in the correct behaviour
A number of years ago, Bernie Ebbers, co-founder of WorldCom said this: A Proposed Code of Ethics "Was a Colossal Waste of Time".
We all know where that statement got him and the company. Every employee under Mr. Ebbers got the same message - find creative ways to make the numbers work.
Sadly, this push to achieve no matter the cost is still common in business practice today. The process of 'cooking the books' is evolutionary, accomplished over time by the pressure of meeting analysts' expectation, wanting to achieve certain compensation and incentives, and the pressure to reach financial goals.
Those caught up in this evolution of illegal and unethical behaviour don't see it as such. What they see is an immediate problem that needs to be fixed, and pressure from upper management to make it happen. They see it as a little white lie that can be remedied over the long term.
But what employees under management see is direction to engage in wrongdoing.
Lead by Example
Employees take their cues from leadership. How a leader behaves, or what messages they are communicating, reflects in the general ambiance the of the company culture within an organization. If management does not lead with integrity, employees are not likely to report on any unethical conduct. Here's why:
They don't believe any corrective action will be taken by management
They don't believe their reports will remain confidential
They fear retaliation by supervisors
They fear retaliation by co-workers
They don't know who to contact
Something else to note is that employees who participate in wrongdoing approved by management, tend to take their actions outside the organization if they feel they aren't getting feedback or compensation they believe they deserve. A negative workplace culture can increase the risk of fraud. So now the situation can shift from defrauding clients, to defrauding the organization for personal gain.
Once employees start accelerating their fraudulent actions, it become harder to hit the brakes, and the wrongdoing will only escalate.
It's important that organizations clearly communicate their Code of Ethics and Organizational Values, and of course, management needs to abide by this as well. It's up to leaders and managers to believe in the organization's values, and share this belief with employees. They aren't just meaningless words in documents. Employees need to believe that their actions play an important role in guiding the organizations internal culture.
Implementing an ethics hotline where employees can come forward and report any wrongdoing they see helps to build trust and a more positive work environment. Employees need to know that when they see wrongdoing, those unethical actions negatively affect everyone in the organization. And for those who do live by the organization's ethical playbook, let them know how valued they are.