Date: 03/10/17 | Duration: 00:18:24

Businesses today are experiencing growing levels of distrust and disillusionment both internally and externally. Fuelled by high-profile stories of fraud and unethical behaviour from Volkswagen and Amazon to BHS and SportsDirect, customers, employees and investors are demanding greater transparency and stronger moral leadership from the organisations with which they do business.

But is ethical behaviour a personal choice or a business imperative? New research from CIPD suggests that leaders who display strong moral character are likely to inspire greater motivation, productivity and commitment. In this episode we talk to three HR and business leaders about the role HR plays in developing strong ethical leadership in themselves and their employees.

Philippa Lamb: So welcome to the podcast. Today we have a round table debate for you and a subject that's hot, whichever sector you work in – Ethics.

Now we’ve looked in general at ethics in business before. Today we’re going to narrow down the focus and discuss the role that ethics and moral character play in leadership. How can HR encourage a culture where those attributes are valued and how can they develop those values in their leaders and in themselves.

So Ruth Stuart welcome. You are head of strategy and development here at the CIPD. I think we all understand the backdrop to this discussion don't we? We have seen a growing culture of distrust of organisations internally, externally, that suggests to me that ethical behaviour is a business imperative but do you think it’s also important that it’s a personal choice?

Ruth Stuart: I think absolutely it’s a business imperative. If I look at some of the debates that we’ve had in the last couple of years or so there have been increasingly examples of ethical scandals, VW being the one that we’d probably both hear of. And I think there's this sense in the past that commercialism and ethics were somehow different things, now I think we’re moving towards a place where ethics and commerciality have to go hand in hand.

In terms of when the personal choice comes in I think how an individual thinks about their own values, their own morals is a personal choice. How those play out at an organisational level is absolutely a question of ethics and organisational ethics.

PL: Okay. Next let me introduce Tina Russell. She is professional conduct manager here at the CIPD and it does seem to me this is a good moment Tina for us to iron out the difference between morals and ethics.

Tina Russell: Sure so in terms of the difference and look at us from the HR profession perspective morals underpin ethics and they are, back to what Ruth was saying, a personal choice and it’s not necessarily the role of the institute for example to dictate or guide people in terms of what their morals should be but we can certainly help practitioners with a framework for ethics and ethics is a bit more something that we can codify, for example. So that's where we can give a steer, some guidance and direction.

PL: Okay so we could usefully think of morality as a foundation for ethical behaviour but what we’re primarily concerned with around this table I think is ethics isn’t it today?

Now our final guest today is Keith Watson, director of 360 HR Solutions. I mean as we’ve been hearing really current leadership we focus a lot on what leaders do, what tools leaders need, we haven’t thought so much about who they are have we and I'm wondering whether we’ve been looking through this telescope from the wrong end?

Keith Watson: Good point we have begun to focus on behaviours. Certainly my take on things that morals are perhaps our beliefs, ethics are the manifestation of the beliefs. So I think by focusing on leadership behaviours we’re beginning – I don't think we’re there yet – but we’re beginning to focus on things which are going to be, picking up on Ruth’s point, commercially viable in the long-term rather than in the short-term.

PL: Yeah short-termism is definitely something I want to talk more about later because I think it’s fundamental to this isn’t it. But before we get there Ruth I know the CIPD has been working on these questions, your purposeful leadership research is looking at the moral aspect of leadership’s characteristics now isn’t it beyond just behaviour. And that's new isn’t it?

RS: Absolutely. So this is a huge focus for us at the CIPD and we’ve been researching this on a number of fronts. Firstly that started with really looking at what does it mean to be a professional and what does it mean to have ethical behaviour. And then that's translated into what does it mean at a leadership level and how can we instil this sense amongst all leaders that we all have an ethical responsibility and in fact an ethical duty to make the right decisions, even when times are tough? And our purposeful leadership is really about bringing some of those conversations to the fore and really thinking about what does it take to have purpose as a leader and to really think through the decisions that you’re making?

PL: Yeah but as you say it’s all about decisions isn’t it and I've got a startling statistic here which is in the UK just a tiny, tiny proportion of leaders say that they’re holding themselves to a high moral standard, 8% is the figure I've got, amazingly low. Why do you all think that is?

KW: I think perhaps that morals became unfashionable at one point in life. So I think we’ve gone as a society where morals were held out to be a good thing to be something which are optional rather than necessary. A lot I think is a matter of semantics, so what do we mean by morals? Do we mean doing the right thing? So I think if we had asked that question we may well have got a different answer.

PL: All right.

KW: At the end of the day what we want, certainly as an institute in my view, and as a profession, is for our members to do the right thing rather than necessarily follow any particular policy process or code.

TR: Sure and I would say to that in terms of becoming a slave to the market that's influenced a kind of turning the back on morals potentially. So we need to be careful that the market is the servant and actually in terms of practice whether you’re a leader or actually anyone within the world of work and so on you've actually got a responsibility not just to think about how you make your decisions but the impact of those decisions and so the impact beyond the bottom line and profits and upon the community for example.

PL: Yeah I mean as you say there's more going on here than might meet the eye because we’ve got 90 odd percent of people saying they don't think of themselves as being morally guided in the course of their work which is astonishing isn’t it? I think if we take the view these people are not all just bad people it’s just that they feel, and probably quite rightly that maintaining high moral and ethical standards in the course of the way we all work now, demands of business, it’s a really big ask isn’t and we’ve got one in three business leaders in HR saying they’ve had to compromise their principles to meet current business needs. And I'm not surprised by that are you?

TR: And I would certainly say in the work that I do for example in terms of managing the Code of Conduct and dealing with complaints about members for example that there’s often an accusation that people have behaved unprofessionally or unethically and actually when you boil down to the detail it’s a questioning of decision making or actions that have been taken and what is the experience of the accused, for example, if you like, or the member at the end of the process is actually there probably was some benchmark and there was some research, there was some consultation but they’re not communicating that and they’re not being seen to consult. And there's also a view that there's a conspiracy with management and so on. So I think that not just from the HR profession but management and leadership need to really communicate how decisions are reached and also how the benchmarking and informed decisions have been made.

PL: So this is about clarity, discussing these things more openly?

KW: I think if we can substitute clarity for transparency because if decision making is transparent then it’s much more likely to be appropriate and justifiable. I think one of the great difficulties we’ve had, and still do in many respects, is our tendency to want to focus. So we want to focus on making money, we want to focus on this, we want to focus on that, whereas an ethical approach requires us to be much more holistic and not to do what’s right for one individual or for one group of stakeholders but to do what’s right for the range of stakeholders.

PL: Directors are going to respond to that and say there's commercial imperative stuff they can't discuss. They can't be as transparent as perhaps they might want to. And of course they do hold a duty to shareholders don't they to maximise financial outcomes so they're conflicted aren’t they?

RS: There are some very interesting findings from the research that looks at how people make decisions and particularly from our research back from 2015 looking at the profession for the future has highlighted that generally business leaders and HR leaders and line managers want to make good decisions, they want to make ethical, fair, transparent decisions, but when it comes in terms of how that plays out in practice there's often things that get in the way, whether that's pressure to meet current business needs, whether it’s a fear about how their career trajectory will go forward if they make certain choices and I think we all collectively have a responsibility to create the environments where people can do the right thing, where there aren’t negative consequences either for their business or themselves and that we find more creative ways to really thinking through creating the right conditions for people to make good decisions.

PL: But that's obviously the situation most people are in right now, that's not the ideal scenario. It’s not the case they’re living with is it? As you say everyone’s worried about their career trajectory, their jobs, so whose job is it to carry this ethical organisation forward then? Is it HR? Who is it?

RS: I think HR has an absolutely massive role to play and if I think about the expertise that they bring it is in people, work and change. And if I think about the sort of environments that people find themselves in when they can't make good ethical choices then there's absolutely an imperative for HR to be able to create that culture through understanding how organisations behave and how individuals behave in those contexts, in those environments. That being said it’s not their role alone. I think it’s the responsibility of each and every one of us to make ethical choices in our day to day lives. That can't sit with one particular profession but I think we can be at the forefront of this area.

PL: But in terms of organisational messaging I mean HR does it have sufficient clout?

KW: I think we’re in danger of going off at a tangent. Ultimately ethics is a business matter. If HR were to pretend to take responsibility for a company’s ethics then you’re absolutely right it ends up being something which is side-lined and it isn’t mainstream to the business. Ultimately ethics is a business issue and it’s one which HR can assist and it can be involved. It cannot own ethics, that's a matter for the business and what we have been saying is that acting in an ethical manner from a business perspective makes good long-term commercial sense.

PL: And the key word there is long-term isn’t it?

KW: Long-term, and by not focusing on short-term gain businesses will, and have been, very successful. We only have to look at any number of scandals which have been in the papers over recent years; we now have an industry in the UK for people reclaiming what was now deemed to be mis-sold for PPI. That's a whole new business which made people millions of pounds. Now there is nobody who would suggest for a moment that selling PPI made commercial sense in the long-term.

PL: It may have made good sense for the people responsible for it at the time in terms of short-term bonuses though mightn’t it?

KW: Very much. It did make very good sense for short-term bonuses. Businesses if they want short-term profits may well not act with the lens for future growth and long-termism.

PL: That's the crux of this don't you think?

KW: That's absolutely the crux.

PL: But that's the issue isn’t it because turning that ship around I mean that really is a super tanker isn’t it, how do you shift away from that sort of short-term perspective which absolutely we can all agree is not the way forward but it is the way most people are working isn’t it? It’s how they’re remunerated; it’s how their bonus systems work. And that's an HR issue isn’t it?

TR: And HR certainly have a unique opportunity to act as police, as judge and to coach development of ethical competence but that has to be borne out by the leadership in organisations.

PL: And of course we’ve touched on this issue of ethics. It’s a moveable feast before the culture, I mean the fact that there's no gold standard of what morality actually represents is there? If we think globally, if we think across different faiths, different belief systems, with no gold standard how do organisations embed what is required?

TR: I find that one an interesting question because I don't see that there should be a conflict. There will be a common ground upon which it doesn’t matter how the organisation have translated their values if you've recognised your own individual values they can be in congruence with your work and they can absolutely match and affect the influence that you have on others. That there's a commonality.

PL: Do you think so right across countries, across national borders and cultures and faiths?

TR: When you certainly look at the codification for example of whether it’s codes of ethics of values that there is a commonality there and I think that sometimes we try to over-engineer it and make it sound more complicated than it really is

PL: That's a good point because I think there is a lot of sensitivity around that isn’t there?

RS: And I think there are some really simple questions that we can ask ourselves. So for example just because we can do something should we?

KW: Absolutely and most certainly if you take the perspective, I'm making this decision would I be happy for my family to read what I have done? And if you’re happy for everybody to know you made that decision and why, then it’s probably a good decision.

PL: The voice of conscience sitting on your shoulder.

KW: Absolutely.

TR: Can you look someone in the eye and explain that policy or decision and justify it as well. I think that's a crucial question, not just is it legal?

PL: Yes and actually honestly talk about your thought process, about how you got there rather than an embellished version of how you got there.

TR: Sure.

PL: So looking specifically at HR people, professionals have got a double challenge haven’t they? They’ve got to find leaders with strong moral and ethical codes and of course they’ve got to meet the development needs of those leaders when they’re actually in the course of their work. So how do you identify leaders with strong ethical behaviours and moral codes? I mean we all know how to look good don't we? We all know what to say, how do you actually really look into someone’s heart and see who they are?

TR: What’s quite crucial I think the definition of professionalism has many iterations but it’s beyond technical knowledge and competence, it’s actually how you live and breathe your practice and ethical leaders should certainly be able to, for example, walk through dilemmas and be able to coach and mentor others in terms of how to do that, be comfortable with exercising their moral muscle.

KW: What you’re looking for is somebody who has robust situational judgements. Now at the end of the day we don't all live in the world where we always make the right decision, we simply don't, so what you’re looking for from a leader is somebody who can make a justified decision which is for the general good rather than the good of particular stakeholders or particular parties and certainly not for self-interest.

PL: I mean thinking about leadership and our preoccupation, in this conversation at least, with who people are rather than just what they do is there a question to be asked around personal life and personal values outside the organisation and behaviours? Do they play into your judgements about who people are? And I'm thinking about obvious examples like infidelity, does it matter if your CEO is conducting an affair? Does it impinge on their behaviour at work?

KW: I think ultimately no. In some countries yes, in some cultures absolutely, in others not in the slightest. I think we have to be very careful when looking at, so whilst our personal beliefs and moral will impact to an extent on how we conduct business I think we have to be very careful at making judgements based on people’s personal lives. Ultimately what we want is somebody who will act in the best interests of the business. That's what we’re looking for in leadership. Now as a profession we can encourage people to act in the best interest, you mentioned earlier about our reward policies and the fact that they tend to reward short-term benefits rather than long-term. That can be changed. That's quite easy. I think that it’s perhaps a slippery slope, shall we say, to start looking at people’s individual morals and beliefs because ultimately how are we going to know what they are rather than what they tell us? And what we are paying for as a business is what people do in the business and their outputs.

PL: These are complex and subtle issues aren’t they? I suspect this discussion may prompt some soul searching amongst listeners about their own behaviours so I'm wondering whether we should wrap this up with some guidance actually. Shall we have a go at summing up the characteristics of an ethical practitioner?

RS: I think for me it would be first and foremost somebody who’s prepared to take quite a hard and honest look at themselves and reflect on the decisions they’ve made, their own behaviours and the choices they’ve made.

PL: So it starts with them?

RS: Yeah.

TR: I would also call on our courage to challenge, steer as well, being able to do that in a constructive and productive way, you know you can bring in the ability to coach and mentor and influence, the ripple effect essentially.

KW: For me I think it has to be transparency and accountability.

PL: Well I don't know about you my head’s still full of questions I’d like to chew over but as you know we try and keep these podcasts short so that people actually do have time to listen to them every month. So for now Ruth Stuart, Tina Russell, Keith Watson thank you all very much indeed.

All: Thank you.