Why Invest in Ethics? It's Good for Business!

By Kelsey Medeiros, PhD
 
I’ve been asked several times over the past week – why should an organization invest in ethics? Unfortunately, each time, I stumbled over my words and spent far too long mumbling something bordering on coherent about a scientific study related to profitability and social responsibility. As is to be expected when one spews words at someone, I lost my audience and failed to communicate my point.
 
Since that encounter, I’ve spent time crafting my argument as to why investing in a program such as the one offered by Ethics Advantage is beneficial. I’ve begun a list of reasons which I hope to continue refining in the weeks to come. In the meantime, I want to share them with you (especially that person I was mumbling at last week…sorry!) in hopes that you may see the value of investing in ethics in your organization.
 
There are two primary approaches to organizational ethics – a compliance-driven approach and and an ethics-driven approach. A compliance approach typically focuses on meeting the established legal requirements such as outlining a standard of conduct and providing employees with ethics training. As we’ve discussed previously on this blog, research and practical evidence suggest that a compliance approach is not enough (even Enron met these standards!).
 
An ethics-driven approach, however, takes ethics once step further by enforcing the legal requirements but also considering an organization’s social responsibilities, maximizing benefits while minimizing harm, building up an ethical culture, and empowering employees to make good decisions. It is the second, more encompassing approach that reaps the most benefits for an organization. What kind of benefits? (I’m so glad you asked!)

1. Better Decision Making: Our research suggests that decision making styles such as those assessed by EA’s My Ethics Profile, are linked to ethical decision making and also cognitive processes related to more general decision making. Assessing and managing one’s decision making style should then not only impact ethical decision making, but decision making more broadly. For example, an employee’s decision making style influences their ability to identify a problem, gather relevant information, and forecast potential consequences. These are key skills for ethical decision making and have also been shown to be important in creativity and other forms of conflict problem solving. If employees are making better decisions on a day-to-day basis, they are enabling their supervisors to focus on their jobs rather than fighting their bad-decision fires. Every poor decision takes time away from someone’s job, which takes away money from that organization

2. Better Employee Engagement and Commitment: Several research studies have demonstrated the link between perceptions of ethical workplace environments and employee outcomes such as engagement and commitment. Generally, most of us want to work for an organization that is doing good rather than one marred in scandals or simply behaving badly. When employees perceive that their organization cares about ethics through investment in ethics-related programs, they respond in kind by engaging and committing to that organization and their work. Both of these attitudes have been repeatedly linked to increased employee performance.

3. Better Sales: Consumers like purchasing from ethical companies. If given the choice between two identical products at approximately the same price, consumers will typically choose to purchase the product from the organization with the more ethical reputation. By investing in more than just compliance, organizations are helping reduce the likelihood of scandals and the negative press and public attitudes to follow. Further, if organizations highlight their ethical practices and make it a part of who they are, it builds an ethical reputation which creates a positive public image and, in turn, can help boost sales.
 
Combined, these recommendations suggest that organizations who make ethics a priority should be more profitable. Thus, there is a strong case that investing in ethics is good for business!