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Business Ethics: Does HR Have a Role?

Posted by Elaine Varelas  February 6, 2012 09:00 AM

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By Elaine Varlelas

It seems as though we can’t open a newspaper or click on a news web site these days without reading about yet another business scandal--insider trading at prominent hedge funds, Ponzi schemes, falsified data at biotech companies, and breaches in accounting and reporting practices. It seems that fraud and wrongdoing have become commonplace in business.

Kenneth Lay of Enron, Dennis Kozlowski of Tyco, and Bernie Madoff, king of the Ponzi scheme, are just some of the most prominent poster boys for corporate scandal. Ethical gaffes are becoming so prevalent that it is no longer a matter of if another person will be added to this cast of characters, but who and when. Americans’ trust in business has eroded to a point of widespread dubiety. How does this phenomenon affect your organization? As an HR professional, what is your role in addressing ethics within your company?

Given the sheer amount of scandal lately, it would be irresponsible--and even dangerous--for HR professionals, or any business leader, to ignore ethics. Of course, it’s a slippery topic. It is difficult to define, and often can’t be categorized into neat boxes of right and wrong. The complexity and ambiguity of ethics could lead many HR professionals to want to avoid the topic altogether. Yet, addressing ethics is an important part of any business plan. If an organization’s leadership only focuses on results, the methods used to attain those results could be suspect. Even Bernie Madoff started out with good intentions!

Yet with such a lofty and complex subject, how can HR managers include ethics into company policy and strategies? The first step is to invite ethics to the table. Ethics need to be part of every organization’s culture, business plan, goals, and mission statement. It should be a focus of the onboarding process, leadership training, and board retreats. Ethics should help shape the organization’s values and culture.

It isn’t enough for a company’s mission statement to include a vague line about being ethical. HR professionals should help leadership and employees define what that means for the organization. Having real conversations about what could happen in a given organization or industry will help to bring the topic closer to home. What is happening elsewhere in business? Have any competitors been cited for ethical breaches? What types of ethical issues could unfold at this organization? What safeguards can we put in place to make sure that doesn’t happen?

The surest way to prevent ethical slips is to give it credence within an organization. Employees and company leaders can talk about it, evaluate how it can affect their roles in the company, and take steps to avoid questionable situations.

Of course prevention is the best option, but what can HR professionals do next? What if, despite having prevention practices in place, there are ethical breaches in the organization?

First, HR managers need to make sure that whistle-blowers are protected. Employees need to know that they won’t be punished if they report their serious suspicions to human resources. This will help create an environment of trust and transparency in the organization in a supportive manner. Many companies also have ethics panels to review problematic situations and recommend discipline. While this is a worthwhile effort, it’s important to assure that the disciplinary process is consistent, regardless of who may be the subject of the scrutiny. Are managers subject to review, but leaders exempt? Is a poorly performing CEO treated differently than a successful CEO?

It may seem logical to let small indiscretions slide or look the other way when a rock-star leader has methods that are less than ethical, especially if the results are fruitful. After all, who will know? Everyone, in reality. When the organization tolerates exceptions, sweeps things under the rug for certain people, or ignores ethical breaches altogether, these insidious behaviors become part of the organization’s culture.

One way to gauge a response to an ethical situation is to imagine that every employee, as well as the world outside the company, would find out. If it was certain that news of the breach would hit the Internet tomorrow, would you do anything differently? This strategy can help put the situation in perspective and can keep an organization’s solution to an ethical issue in check.

Ethics are part of every decision, every action, and every strategy within an organization Build high ethics into the core fabric of the culture so that it influences all behavior. This may seem like a “Pollyanna” view of the world and business. But we’ve seen many companies implode because of scandals. The tombstones in the businesses-that-were graveyard are numerous. By keeping ethical discussions at the forefront of your organization’s business strategy and addressing ethical breaches promptly and fairly, you can ensure a long and healthy life for your organization.

Elaine Varelas is Managing Partner of Keystone Partners, a Boston-based career consulting firm.

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Featuring human resources advice and columns from The Boston Globe's On Staffing and Hire Authority writers.

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