Importance of Ethics to Business Organisations

Ethics are important to the business organisation as well as the whole community. Ethics should be implemented ideally throughout all aspects and operations within organisation. With successful implementation of ethical management, organisation can enhance the efficiency in the long run.

Unfortunately, many organisations cannot perform ethical management due to human nature and other inappropriate management control systems. Business organisation with successful ethical management can achieve superior performance because they can attract and retain those high quality staff, customers, suppliers as well as investors. However, establishing the ethical organisation needs time and effort.

It cannot be achieved automatically, because the human beings are not morally perfect. Those unethical staff, customers, suppliers, and investors are capable of preventing business organisations from achieving high integrity and superior performance.

Also, without the adequate ethical training, the culture of trust between the staff within the business organisation cannot be established successfully. Without the appropriate communication system within the organisation, those illegal or unethical conducts cannot be reported instantly and then carefully managed.

Without the ethical hiring system, hiring one employee with an unethical value system can corrupt an organisation. On the other hand, discrimination on an individual’s race, colour, religion, gender, national origin, physical or mental disabilities during hiring the staff could be an offence against the discrimination ordinance.

Ethical leadership performed by the management staff can generate high quality performance outcomes. It tends to attract, develop, and promote hard-working, conscientious, caring, and moral employees who generate high quality performance outcomes.

For treating fairly on each staff in the workplace, management should design and implement the code of ethic so as to abstain from any unfair treatment of customers, supplier, competitors, and employees, such as concealment, abuse of privileged information, and misrepresentation of material facts.

With considering the above issues and knowing why managing ethics is essential and the nature and negative ramification of unethical activities within business organisation, ethic management of organisation can be implemented in the appropriate ways.

Literature Review

Ethical Organisation Achieve Superior Performance in long run

Organisations of high integrity achieve superior performance because they can attract and retain high-quality employees, customers, suppliers, and investors according to Denis (2009). Organisations take time and effort to create high integrity. It is because human beings are not morally perfect. Without ethical employees, customers, suppliers, and investors, organisation cannot achieve high integrity and superior performance. Although unethical organisation can make profit in short term, it cannot be a long run

Ethical Organisation Competitive Advantages

Within the culture of trust between management and employee, the ethical organisation performs competitive advantages than others according to Denis (2009). An ethical corporate organisation attracts the high quality employees and leads all management staff and employees to a higher level of satisfaction and a sense of loyalty as Stewart (2006) stated. For the similar salary level, those job candidates will choose those ethical corporate organisations rather than those unethical organisations. Of course, someone will choose those unethical organisation if the salary and benefits are substantially higher according to Bob (1999).

Competitive Advantages of Being Ethical and Trustworthy

Ethical organisations, comparing with Unethical Organisations according to Denis (2009).

Attract and retain higher quality employees

Attract and retain higher quality customers

Attract and retain higher quality suppliers

Attract and retain higher quality investors

Earn goodwill with community members and government officials

Achieve greater efficiency and decision making, based on more reliable information from stakeholders

Achieve higher product quality

Need less employee supervision

Ethics Challenge

Ethics should permeate all aspects of organizational operations as Dennis (2009) stated. Unfortunately, due to human nature and inappropriate management control systems, many organisations are ethically challenged. An ideal ethical situation is one in which a person has good motives and the act results in good consequences. The most unethical situation is one where a person has had motives and the act results in bad consequences as Robert (1999) stated.

Hiring Ethical Staff

When an organisation employs someone, that individual brings to work not only unique job skills, but also his or her ethics. Denis (2009) stated that hiring just one employee with an unethical value system can corrupt an organisation. Efforts to maximize ethical behaviour and minimize unethical behaviour at work must begin during the hiring process.

Discrimination Ordinance

Unlawful discrimination can be apparent on the front end of the hiring process as San (1996) pointed out, wherein members of protected classes are intentionally excluded from the job candidate pool. Word-of-mouth recruiting, such as recommendations from other employees or colleagues, is often a very effective means of attracting high quality employees. However, Bernard (2000) stated that it is prohibits all businesses from discriminating base on an individual’s race, color, religion, gender, or national origin. Also it is prohibited employers from discriminating based on age and physical or mental disabilities.

Code of Ethics

Employees of high integrity do not necessarily share the same ethical points of view. Frank (1994) stated that each person develops a unique ethical point of view, a perspective shaped by parents, siblings, friends, teachers, religious leaders, political leaders, other moral role models, and culture. An ethical dilemma arises because situations are ambiguous, and two people of high integrity might disagree on the best ethical response. Therefore an organisation’s code of ethics minimizes ethical ambiguities by communicating guidelines for employees to apply when making decisions according to Denis (2009). The general principles embodied in a Code of Ethics such as respecting all owners, customers, employees, suppliers, community members, and the natural environment. Mark (2005) briefed that an extensive review of corporate Code of Ethics, global Codes of Ethics, and the business literature found the following six universal moral values including Trustworthiness, Respect, Responsibility, Fairness, Caring and Citizenship. On the other hand, Dennis (2009) provided an example of a Code of Ethics that high lights four guiding principles including open communication, respect for others, personal integrity, and performance excellence. Communication means employees have an obligation to communicate with others. It needs to take time to talk with one another and to listen. Respect means everyone should treat others as like to be treated themselves. Everyone should not tolerate abusive or disrespectful treatment. However, ruthlessness, callousness and arrogance should not be adopted in organisation. Integrity requires employees to work with customers and prospects openly, honestly, and sincerely. Moreover, Excellence means that employees should satisfy with nothing less than the very best in everything they do. They should continue to raise the bar for everyone so as to discover how good they can really be.

Creating Codes of Ethics must be followed by effective implementation. Effective implementation of a Code of Ethics increases employee job satisfaction and organisational commitment, enhances ethical performances, and impacts how employees assess the organisation’s ethics according to Randi (2000). Effective implementation requires support from senior managers, employee training, and management enforcement. Widely distribute the codes and accompany them with a letter signed by a high-level executive that emphasizes the importance of applying the codes on a daily basis. Employees should sign the codes after they have been introduced during orientation or an ethics training workshop.

Ethical Training

Without having been trained in philosophy, few managers realize that almost every business decision has ethical ramification. Sean (2004) pointed out that ethics training helps to create a culture of trust. People employed in organisations with formalized ethics training have more positive perceptions about their organisation’s ethics and greater job satisfaction. Jean (2007) addressed that ethic training should be conducted throughout the organisation. All employees, ranging from the CEO and Board of Directors to the janitor, experience ethical dilemmas on a daily basis. Bob (1999) pointed out that both new and long-term employees need ethics training. Making ethics training part of a new employee’s orientation process demonstrates the importance of ethics to the organisation. Conduct a follow-up session six months later to reinforce the importance of ethics and explore ethical issues they have experienced at work up to that point as Bob (1999) suggested. On the other hand, Denis (2009) noted that long-term employees significantly shape the organisation’s ethical tone. One long-term employee denigrating the organisation’s ethical efforts can destroy all the managerial effort put into aligning a new employee with the organisation’s ethics. Therefore, training long-term employee to lead ethics training sessions is essential so as to share stories on how the organisation’s code of ethics was upheld in difficult situations.

Ethical Obligation to Various Stakeholders

Ethics is the set of principles a person uses to determine whether an action is good or bad. Ethics permeates every stakeholder interaction involving owners, customers, employees, lenders, suppliers, and government officials as Denis (2009) stated.

Communication within Organisation

If the organisation allows management staff and employees to share the information and doing so improves the subordinate’s performance, then it is very ethical. However, if sharing the information violates a confidentiality agreement and the subordinate is likely to misuse the information, then it is very unethical according to William (1990). Organisations must open avenues of communication among all management staff and employees to discuss ethical issues as they arise as Stewart (2006) pointed out. A failure in internal communication system within organisation can result in external whistle-blowing, which is damaging for both the organisation and the whistle-blower as mentioned by Denis (2009). According to Ethics Resource Center’s 2005 National Business Ethics Survey, this is because 59% believe no corrective action will be taken, 46% fear retaliation, 39% fear no anonymity, 24% assumed someone else would report it and 18% did not know who to contact. The survey concluded and recommended that organisation must establish communication systems for receiving this information. Someone in the organisation must be held accountable for overseeing that the ethical problem are addressed, the information is held in confidentiality, and the employee providing the information is protected from retaliation. If an appropriate ethics reporting system is not available, employees are left with two options damaging to the organisation. The employee can either remain quiet as the situation worsens or damage the organisation’s reputation by blowing the whistle to a public authority according to Margot (2009).

Ethical Leadership

Managers are role model, and the ethics of their actions are constantly being evaluated by subordinates according to Denis (2009). The way a manager treats owners, customers, and employees sets the standard for acceptable behavior within the manager’s work unit. A manager’s behavioral commitment to ethical principles or lack thereof, filters down to subordinates and other as James (2007) briefed. Paul (2007) pointed out that Hard-working, conscientious, caring, and moral managers who generate high quality performance outcomes tend to attract, develop, and promote hard-working, conscientious, caring, and moral employees who generate high quality performance outcomes. Also, James (2007) pointed out that honesty is a mutually reinforcing ethical bond between managers and their subordinates. Dishonesty by either the manager or employees punctures the ethics bond between them.

Discussion and Analysis

In most of the workplace, implementation of ethical management may find very difficult. One of the difficulties is to gather the information from the employees.

Improve Communication System

Employees may hesitate to reveal those ethical problems to their supervisor or senior management or they may think that nothing will be improved even though

those unethical events have been reported. For doing the better in communication within organisation, senior management may establish the proper communication system for receiving those ethical problems. Organisation may appoint an individual person to act as the Ethics Compliance Officer to gather that ethical information within the operation of organisation. The Ethics Compliance Officer gives confidence to those employees who want to report the ethical problem. The officer should be held accountable for overseeing that the ethical problems and relevant information should be held in confidentiality. Also the officer should review regularly the ethic standard and activities of organisation. In some circumstances, the officer should oversee the ethics communication strategy and the ethic training program for the new coming employee.

In the case of receiving unethical information and compliant, the officer should analyze that information and make the decision to improve and report to the senior management if required. With the Ethical Compliance Officer playing the role of bridging the internal communication channel within organisation, everyone working in the organisation can report those potentially illegal or unethical conduct. The officer provides employees with an institutional mechanism for reporting unethical or illegal behaviour. Hence the difficulties of gathering ethical information can then be minimized.

Ethical Training within Organisation

Ethics training can initiates dialogues at work around argumentative ethical issues and greater impact on employee behaviour than the presence of Code of Ethics. Ethics training helps to create a culture of trust. Ethics training is not only provided to the junior staff, it should be provided to the all member within organisation including the management staff as well as the board member of corporate organisation. At the time of economic recession, organisation may be attempted to eliminate ethics training as an extraneous expense when budgets are tight, but this is exactly when ethics training is need most.

Many organisations recognize the need to conduct ethics training for employees at all level of organisation and should be reviewed regularly. However, difficulty may be found in this stage because not enough information for reviewing the ethical standard and training. Then the senior management should assign create a safe learning environment by choosing someone the participants trust to facilitate the ethics training workshop. The responsibility should be assigned to a trustworthy human resources department staff person who has a solid understanding of human resources issues. Of course, some employees will not speak honestly with the human resources staff, particularly about those ethical issues. It is because they fear of being fired or may be their comments will have a negative impact on their future performance evaluations.

If it is the case, the senior management should assign one with facilitator role to someone both the senior management and the employees trust. This facilitator can play the role of informal leader within all working place. This facilitator already has a good feeling of the key ethical issues and can make sure the discussion is realistic and relevant. Also this facilitator can inspire self-learning among participants by keeping everyone focused on the main issues while being flexible to new issues as participants arise. The existence of this facilitator is capable of encouraging participants to analyze and modify their own point of views.

One of the self-learning experiences among participants is the discussion training. The discussion training is by means of creating some business ethics scenarios for participant discussing. The most meaningful ethical issues to explore are those employees observe, experience, unfair treatment, or hear about while employer either in their current organisation or for a previous employer. Those participated employees should develop written scenarios about these ethical issues and share them with others. Throughout this discussion training, the ethical issues information can be obtained. Then the ethical management can be implemented and under review more easily. On the other hand, it can create a team-building sprite among the employees.

Discrimination within Organisation

Discrimination on gender, race, age and physical or mental disabilities is offence against discrimination ordinance in Hong Kong. However, many business organisations may perform a certain extent of discrimination during in the employee hiring process, particularly in those small and medium business organisations. It is because those small size business organisations’ hiring method is most of time by means of word-of-mouth recruiting, such as recommendations from other employees. Of course, ethical management should be starting from the employee hiring process. However, many small business organisation focus on the employee’s technical skill and rather than ethical skill. Therefore those job candidates with recommendation from the ethical employee will have more chance in job application.

Good Reputation from Avoiding Discrimination

Instead, in the large scale business organisation, discrimination on age, gender, race and physical or mental disabilities may be found in the more fair treatment in workplace. The organisation may arrange different kind of job to suit those job candidates. On the other hand those business organisations showing without discrimination during the employee hiring process will have a better reputation in community. For the consequence effect, the organisation with the better ethical image in the community can attract more high-quality staff and perform a better and better in the long run.

Conclusion and Recommendations

It is concluded that the ethical management of a organisation can be improved by creating the appropriate Code of Ethic. The Code of Ethic should be implemented throughout all members including those senior staff and junior staff. With the executing of ethical training continuously within the operation life of the organisation and with the involvement of the ethic facilitator, more information about the ethic and unethical issue will be gathered so as to improve the ethic management of a organisation.

Another main point is that is that the senior management must clearly signal on a daily basis that ethical behaviour is expected, and unethical behaviour is unacceptable. Employees learn more about what types of behaviour are acceptable by observing the actions of their direct supervisors, rather than just from listening to inspirational words coming from the senior management.

Formally appraise and appreciate the employee’s ethical performance on an annual basis and link these results to merit raises and promotion will have the positive effect on the whole ethical management of a organisation. Organisation of superior performance places a high value on trust and responsibility. Trust increase when employees are treated fair like all managers and the senior management staff and so the barrier between management and non-management employees will to be minimized.

Therefore the organisation will have a better achievement both in the business development and the ethic management development. Organisation of high ethic will continuously attract and retain more and more high quality employees, customers, suppliers, and investors and make more profit in the long run.