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Leadership Ethics Put to the Test

Written by Erika Heiskanen, the CEO of Juuriharja Consulting Group consulting on ethical leadership and management. 

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Given recent financial crises and scandals where a lack of ethics has produced both lack of trust as well as the rise of corporate social responsibility, few would disagree that the role of ethics has taken center stage in the management of organizations. There has been a dramatic change in the perception of what “good leadership” is at the onset of the 21st century. And that change is very much on-going. We are living in a time of new concepts about ethical leadership that acknowledge the economic needs of effective leadership and retains moral integrity in the light of ethical pluralism.

Organizations have found it extremely difficult to promote successful, ethical behavior, as this is difficult to measure and rarely results in short-term gains that can be appraised and rewarded. And we tend to think that everyone automatically knows right from wrong. In reality people disagree about the definition of right and wrong all the time. That is one of the reasons why the topic of business ethics is currently front and center in the media and in office break rooms.

When two companies merge, there is often a culture clash. The ethical codes, behavioral models and the way people communicate are different from each other. The same words have different meanings and carry different assumptions to the individuals from the two merging companies. It is often these differences that create many of the challenges faced in post-merger integrations.

A value-based code of ethics is a tool used in defining the kind of ethics expected of every member of the organization – what is right and what is wrong here. Professor Kaptein has defined this clarity: known, written and shared expectations, as the first step in steering organizational culture in the desired, more ethical direction. Studies warn us that if the code is drawn without broad participation, the personnel may well reject it. “All management can do is give us more rules!”

A code in itself does not guarantee the ethics of an organization; it is merely a tool, albeit a necessary one. The code can be rejected as well as buried and archived along with many other good intentions. That is why the ethics of an organization need constant attention.

In addition to clarity there is another crucial aspect in helping the code grow roots in the organizational culture: the example of leadership. If the organization has a code of conduct and ethical expectations, they indeed run a risk of becoming a joke if the leaders fail to live up to the code. Leaders that exhibit ethical behavior powerfully influence the actions of others. And the leaders who say they don’t have the time of day for ethics also send a powerful signal.

In a merger and acquisition process particular attention should be paid to the ethics, culture and codes of ethics. What will be the ability of the new whole to deliver trust? To map opportunities as well as risks it is wise to also measure the ethical culture of organizations, preferably during the due diligence phase. Measuring gives less room for cultural preferences and biases.

Your track record for ethical behavior and integrity are vital for establishing the trust that is the basis for all successful relationships, including those with your customers, your employees and your stockholders. Why would you leave something this important to chance?

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