Building an Ethical Work Culture in Indian Organizations

The Business Enterprise magazine published this article in July 2011 issue

I have often pondered on whether adults can be taught ethics. As per crime triangle a person commits a crime when three factors are present – opportunity, reward and rationalization. Hence, if the opportunity is available with a lucrative reward, psychologically a person can rationalize a crime. Due to this, in context of India, teaching business ethics is a seemingly impossible task. The psyche of the society shows that corruption is acceptable way of getting ahead in business. The 3.3 rating in Corruption Transparency Index indicates that people are unwilling to take a corruption and crime free road. In their minds there is no positive take-away or reward for becoming honest and ethical. Hence, the challenge is to change CXO’s and employee perception about business ethics through promotion and prevention tactics.

Every dark cloud has a silver lining. In light of recent corruption scandals in India, corporate honchos are now concerned about governance issues. Economic Times on 13 June 2011 published survey results  on impact of scams on Indian economic growth. CXOs of 75 companies participated in the survey.  “72% have that sinking feeling that this crisis in governance is going to hurt economic growth. A majority of those surveyed feel the situation is serious enough to affect their business and investment plans in some manner; and 15% expect their plans to take a major hit.”  In the scams Central Bureau of Investigation is investigating a few known groups – ADAG, Tata, Essar, Unitech, Cisco etc. Corporate bigwigs have finally acknowledged that they are part of the problem. The survey states that - “Some 72% of respondents to the ET-Ficci survey and 64% of the CXOs who responded to the ET-Synovate poll feel that business houses are also responsible for the crisis of corruption”

The business heads realization that both the supply and demand side parties are responsible for corruption and unethical behavior can down-rail economic growth of the country is a positive sign for business ethics managers in India. Finally, they can get budgets for business ethics programs and trainings approved. It is a good to strike while the iron is hot. Here are my top three focus areas for improving an ethics program

1.    Build ethical culture into business processes and strategy

One of the business attitudes in India is that business cannot be done without paying bribes, hence receiving kickbacks is justified. The mindset is that an ethics program is not practical as business will suffer. For business growth some compromises need to be done. This thinking makes a code of conduct a document without much strength. Ethical behavior is considered insignificant in evaluating managers’ performance.

Hence, the need of the hour is to build ethical culture as part of business strategy. Processes for monitoring ethical behavior need to be implemented. For example, performance appraisals of employees should incorporate bonus points for the ethical means adopted to meet targets. If unethical methods are used to achieve targets some penalty points should be awarded. In recruitment itself, reject candidates who have falsified information even slightly.

 Next, in a few cases senior managers formulate strategies considering the political connections and propensity of politicians to accept bribes. Ethics managers must change this attitude of senior managers. Do this by assessing growth and risks on parameters of clean business operations. Present a business case to senior management emphasizing the political, legal and reputation risks in case unethical practices are adopted for implementing business strategies.

2.    Change Mindset of Employees

In India, even a youngster will tell you that it is practical to be corrupt. If a person speaks of ethical behavior, the person is most likely to be viewed as an idealist with their head in the clouds. This cynicism makes it difficult to implement an ethical work culture.

I could not find India specific data to illustrate my point. However, I did find a report “Character Study Reveals Predictors of Lying and Cheating” conducted by Josephson Institute. The results indicate that cynics are -“Three times more likely to lie to a customer (22% vs. 7%), inflate an expense claim (13% v. 4%), or inflate an insurance claim (6% vs. 2%).  Additionally, cynics are more than twice as likely to conceal or distort information when communicating with their boss (24% vs. 10%).” India has a huge number of cynics. Unfortunately, the business cost of this cynical attitude is never analyzed by organizations.

Organizations need to give ethics training to change perceptions and thinking. Providing classroom training or e-learning is not sufficient. Ethical training should involve group discussions, case studies, brown bag sessions and 1 to 1 meetings with senior managers to emphasize the importance of ethics. Secondly, ethics managers believe that once training is given their job is done. This thinking is incorrect. They should implement measurement and evaluation methods to judge the impact of training in employee behavior and decision-making. Lastly, ethics training is an ongoing process, not once in a blue moon session.     

3.    Make Code of Conduct Relevant

In my opinion, most of the organizations have a code of conduct that employees sign at the time of joining the organization. New recruits receive a brief overview of expected business conduct in the induction sessions. However, rarely organizations’ code of conduct is a living document. It is not unheard of that the code of conduct is too old and policies mentioned in it are not complying with the prevailing business and legal laws. The situation is that nobody bothered to update it regularly. Hence, these documents are not taken seriously.

In my view, this is a good time to review the code of conduct and implement the policies properly. For example, although organizations have sexual harassment policies, India reports one of the highest cases of sexual harassment. As per a recent report India is the fourth threatening country in the world for women. This clearly indicates that most organizations prohibit sexual harassment only in theory. As the procedures for filing a legal case are long drawn out with high social harassment, organizations may not feel the need to implement the policies. This definitely harms the ethical culture of the organization and the business environment of the country.

Closing thoughts

To make Indian organizations globally competitive at par with the multinationals building an ethical culture is a necessity. The war of talent is won by organizations that provide a comfortable and secure work culture to employees. Multinationals invest in organizations where they are sure of the ethics of the management teams. Customers prefer organizations fulfilling their corporate social responsibility. Look from any lens, adopting ethics pays in the long-run. This is the right time to do some internal selling and get management commitment for building an ethical work culture.

References:

  1. Scams have hobbled reforms and economic growth is in peril: ET Survey
  2. Character Study Reveals Predictors of Lying and Cheating by Josephson Institute
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One comment on “Building an Ethical Work Culture in Indian Organizations

  1. I suggest you please have a look at this report, I am not sure whether I had posted to you earlier, of my analysis of SAP with available data from internet.http://bit.ly/lUyQS5 This would give a uniform measurement yardstick for every company vying for a Govt. contract or otherwise, to differentiate wheat from chaff enabling a transparent choice open to the public. I want all Indian companies of value to get assessed and first of all eliminate companies like Balwa or Reliance going by the back door to clinch contracts from the govt. The 2nd tier companies must fight for a space in the field, now dominated by ‘influential’ companies and that can be achieved by forming an elite set of corporate social responsibility companies with sustainability of values. Such companies must ‘influence’ FICCI/CII to approach the govt. to recognize such value-based companies alone for govt. dealings. In SAP analysis you will find the application of UNCAC, which is the Principle of 10 of UNGC, that they surely are the leaders & many companies globally fall short by miles.

    From what you have mentioned: “To make Indian organizations globally competitive at par with the multinationals building an ethical culture is a necessity.” It is the other way round as Indian companies can teach the multinationals on CSR & venture into Africa & other third world countries in a manner multinationals cannot. Because Indian companies values of several centuries have an edge that US companies have inherently denied themselves and will continue to deny for long. That’s for another report later, from me. The point is that I want Indian companies to come out of their slumber & get their values assessed, measured as in SAP and get moving. FICCI/CII have played into the hands of 1-tier companies & it is up to the 2-tier companies to emerge as a force to be reckoned with values.

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