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Business Ethics

How to Create An Ethical Culture with “Tone at the Middle”


By Josh Young May 15, 2017

middle managers ethics

By now, you've probably heard about "tone at the top" and the crucial role that C-Level executives and senior management play in creating an ethical culture. But these leaders cannot carry the burden of corporate compliance solely on their shoulders.

Without the ongoing support of middle managers, any top-driven ethics or compliance program will quickly stall.

In its most recent National Business Ethics Survey, the Ethics & Compliance Initiative (ECI) reported that 60 percent of workplace misconduct involved someone with "managerial authority." It should come as no surprise then that only 33 percent of reported misconduct was a one-time event, while 26 percent was part of an "ongoing pattern of behavior."

Now that you have your managers squared away, how can you help your front-line staff make sound ethical choices? Read: Why Do Employees Make Unethical Decisions?

This alarming trend was further reflected in the organization's 2016 Global Business Ethics Survey, which found that in the private sector, a majority of bribery incidents also involved management -- senior managers in 23 percent of cases and middle managers in 32 percent of cases.

What Support Can Upper Management Provide? 

Behave ethically

This concept may seem a bit oversimplified, but one of the keys to encouraging ethical behavior among your middle managers -- in fact, throughout your entire organization -- is for upper managers to behave ethically. Corruption has a trickle-down effect that can quickly spread through the entire business. 

In fact, the Association of Certified Fraud Examiners (ACFE), the U.S. Department of Justice (DOJ), the U.S. Securities Exchange Commission (SEC), and the Organization for Economic Co-operation and Development (OECD) all cite "tone at the top" as a primary ingredient for an ethical corporate culture.

Reward ethical performance

While your business may already track the financial performance of your middle managers, it should also closely track their ethical performance. And these ethical decisions should be discussed regularly, including during performance reviews.

If your organization is willing to award and promote managers that bend conduct guidelines for an improved bottom line, don't be surprised when other managers and front-line employees begin to outright break them. According to research produced by behavioral economist Dan Ariely, employees (including managers) are more likely to engage in increasingly dishonest behavior when exposed to existing corruption. 

Empower them

Middle managers will routinely be faced with real-world ethics and process questions -- both from their direct reports and senior managers -- that they will need to be able to answer these questions. To help guide them to the proper choice, establish and document clear corporate guidelines that outline what is and is not appropriate behavior for your organization.

In addition, provide ongoing training that acquaints them not only with company policy but also the federal, local, and international regulations that apply to your industry. 

What Actions Should Middle Management Take?

Prioritize compliance

Depending on the size of your organization, most employees will rarely, if ever, have a conversation with the CEO or board or directors. However, they will interact with their direct manager, and likely their manager's manager, on a regular basis. 

Any company-wide guidelines or ethics policies will be viewed through these interactions, so if an employee's direct supervisor acts dismissively towards an upcoming ethics training session, most employees will follow suit. Conversely, if their manager regularly emphasizes the ethical facet of day-to-day business activities, most staff will quickly realize that ethical behavior is one of their core job responsibilities.

Communicate

Ethics should be a common topic in departmental and team meetings, especially when new processes or other business changes are being considered. In particular, you should regularly discuss:

  • Ethical dilemmas that may typically arise for the team or department
  • Consequences of violating established guidelines
  • Updates to company policies
  • Mechanisms for reporting misconduct

Reasonable expectations

While stretch targets are a laudable strategy to encourage business growth, when these goals are unreasonable, employees will often stretch ethics guidelines to meet their quota.

For example, when administrative staff of the Veterans Health Administration in Phoenix, Arizona faced increasing pressure to reduce wait times for medical appointments for veterans but were unable to meet these more stringent requirements, they began keeping "secret" waiting lists and not entering patients into electronic tracking systems.

While employees would report an average 24-day waiting period, some patients were actually waiting 115 days for appointments. And 40 veterans died while awaiting care. 

The Next Step

By establishing the proper "tone at the middle" of your organization, your senior executives can rest a little easier, knowing that business ethics are a priority for more than just your company's compliance team.

To learn more about how our code of conduct and business ethics courses can help your organization build a strong tone at the middle, request a demo today.

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