The drivers of ethical culture change

by Dr Paul Vorster and Liezl Groenewald | Published on 26 June 2019 for The Ethics Institute monthly newsletter

The South African Business Ethics Survey 2019 is the fifth national survey of this kind conducted by The Ethics Institute since 2002. The findings of this year’s survey provide new, exciting insights into factors that have the biggest influence on shaping ethical culture in organisations. These findings are important. Though there is general agreement that an ‘ethical culture’ is critical to organisational success – indeed it is enshrined in the second principle of King IV – how to get it right is something of a mystery to many.

Using sophisticated statistical techniques to evaluate the data, we focused on this concept of ‘ethical culture’. We asked: which variables have the greatest impact on changing or influencing an organisation’s ethical culture? To start, we identified a total of seven culture-based constructs, which were distilled from a number of ethical culture/climate models1. Think of them as the theoretical ‘building blocks’ of ethical culture. They are:

  • Ethics Accountability: The degree to which the organisation holds employees accountable and responsible for their behaviours and decisions, and sanctions unethical conduct.
  • Non-Managerial Employee Commitment to Ethics: The degree to which employees (non-managerial) are committed to good and ethical conduct and take policies, rules and ethics seriously.
  • Middle Management Commitment to Ethics: The degree to which middle management (first line to middle managers) are committed to good ethical conduct; support employees to make better ethical decisions; enforce policies, rules and procedures; and role-model ethical behaviour.
  • Senior Management Commitment to Ethics: The degree to which senior management (executive and senior managers) are committed to good ethical conduct; support employees to make better ethical decisions; enforce policies, rules and procedures; and role-model ethical behaviour.
  • Ethics Talk: The degree to which employees openly discuss ethics and ethical challenges with one another and their managers; the degree of openness employees feel they can express in their communication with supervisors and other employees.
  • Ethical Treatment: The degree to which the organisation treats its employees with respect, fairness and dignity; and considers employees when making decisions that may affect them.
  • Ethics Awareness: The degree to which employees are familiar with ethics and ethical conduct; receive ethics training; are familiar with ethics policies (such as the code of conduct); and know what is expected of them in terms of ethical behaviour.

All of these constructs are considered pertinent and are required for an ethical culture or climate to flourish. Put simply, organisations with mature ethical cultures will tend to prioritise these on a day-to-day basis.

While all of these constructs are important for building a mature ethical culture, we wanted to ascertain which were the most powerful drivers of change. To do so, we used a statistical technique known as dominance analysis. A dominance analysis looks at which of these factors ‘dominate’ the overall change in culture, by representing their influence as percentages. The top five ‘drivers’ of the Total Ethical Culture Score were:

Big five of culture

Note that two constructs stand out in terms of their individual and joint impact. Ethics Accountability and Responsibility (20%) and Senior Management Commitment to Ethics (17%) together drive a 37% change in overall ethical culture.

So, if organisations want to substantially improve their ethical cultures, they need to focus first and foremost on these two drivers: accountability and visible leadership commitment to ethics. By prioritising these, organisations can maximally and positively affect ethical culture change by 37%. These two are further related: since accountability is not something that can exist without leadership commitment to ethics, it will need to be driven by a leadership that is, itself, held accountable to the same standards. If this is done effectively, it can positively and quickly impact overall ethical culture change in organisations.

Unfortunately, these results also provide some explanation as to why we are seeing unethical behaviour in both the public and private sectors in South Africa. It is being exposed, through the Commission of Inquiry into State Capture, and others, that many of the individuals identified as engaging in unethical behaviour have been senior leaders and managers. Furthermore, many of these leaders have not been sanctioned effectively and visibly for their actions – in some cases, they have even been rewarded. This is the recipe for a bad ethical culture: hold no one accountable and have very little leadership commitment to ethics.

Organisations should view the now well-known shenanigans as a cautionary tale of how an unethical culture can lead to things going badly wrong, but more importantly they should pour energy into the factors that cultivate an ethical culture where things go right: accountability and ethical leadership.

 

Notes:

1 For more, refer to Hunt et al., 1989; Kaptein, 2008; Mayer, 2014; Treviño & Beeghly, 2018; Treviño et al.,1998; Victor & Cullen, 1987

References

IoDSA (2016). King IV: Report on corporate governance for South Africa. Johannesburg, South Africa: Institute of Directors of Southern Africa.

Hunt, S. D., Wood, V. R., & Chonko, L. B. (1989). Corporate ethical values and organizational commitment in marketing. Journal of Marketing, 53 (3), pp. 79 – 90.

Kaptein, M. (2008). Developing and testing a measure for the ethical culture of organizations: The corporate ethical virtues model. Journal of Organizational Behavior, 29, 923-947.

Mayer, D. M. (2014). A review of the literature on ethical climate and culture. In, P. E. Nathan, B. Schneider, and K. M. Barbera, The Oxford Handbook of Organizational Climate and Culture, (pp.415-440). Cary, NC: Oxford University Press.

Treviño, L. K., & Beeghly, B. (2018). Ethical culture defined and measured. Retrieved from http://www.ethicalsystems.org/sites/default/files/uploads/EthicsByDesign_LindaTrevino_0.pdf

Victor, B., & Cullen, J. B. (1987). A theory and measure of ethical climate in organizations. Research in Corporate Social Performance and Policy, 9, 51-71.


 Paul circle

 

Dr Paul Vorster is a Research Specialist at The Ethics Institute. He holds a doctorate of Industrial Psychology, which he attained from the University of Johannesburg.  

  

Liezl BA Circle

 

 

Liezl Groenewald is Senior Manager: Organisational Ethics Development at The Ethics Institute. She holds a Master of Applied Ethics for Professionals from University of Witwatersrand and is completing a PhD in Applied Ethics at Stellenbosch University.