What are the key steps in building an ethical organization? Is this important in today's companies?

As you may be aware, there have been a myriad of books written on the topic of ethics – religious – social – business – personal – professional – medical – legal – etc. In the 1960’s, Joseph Fletcher developed the theory of “situational ethics” based upon Christian doctrine [http://en.wikipedia.org/wiki/Situational_ethics]. Unfortunately, this was often defined by many as being limited to Fletcher’s Fifth Proposition (“the ends justify the means”). Adopting this mindset gave people (self issued) ‘license’ to use whatever tactics were required to achieve their business goals.

I know of one company that use to place all of their end-of-quarter shipment in a semi truck and parked the truck just off-site in order to fulfill the legal requirement of having “shipped” the products before midnight on the last day of the quarter. They would place both good and bad products in the truck, knowing in advance that the bad products would be received by customers only to be returned to the factory in the following weeks. What this allowed them to do was to meet their sales goals while also buying time necessary to replace the bad products with good ones that were manufactured in the less demanding time period of the first weeks of the following quarter. From speaking with other executives, I hear that this was/is not an uncommon practice in industry to achieve the expected earnings-per-share (eps) targets expected by analysts.

During a normal business day, these same companies would not conduct themselves in such a manner and might even dismiss an employee caught committing a similar ethical violation. But at the end of the quarter, all bets were off as they sought to achieve the expected eps targets.

This “what happens in Vegas stays in Vegas” mindset corrupts the rest of the organization. The level of employee ethics will rarely rise above that level demonstrated by management. While you will have some employees who will refuse to play along or leave the company rather than compromise their beliefs, the vast majority will adopt the same level of ethics or turn a blind eye to corporate miss-deeds.

Therefore, to have an organization in which ethical behavior is an esteemed virtue (as per Merriam Webster: “conformity to a standard of right: morality; a particular moral excellence”), it is necessary for C-level management vocalize, demonstrate, and practice the ethical behavior expected from the rest of the organization, with no tolerance for recalcitrance. Second, ethical expectations should be incorporated into employee training. Third, the benefits of practicing ethical behavior (doing the right thing, honesty, integrity) should be rewarded.

In summary, ethics needs to be a part of the company culture for it to thrive, prosper, and propagate.