How sure are you that your staff meet required ethical standards?

As you know it is important to take references, before finally appointing a preferred job applicant.  It enables you to check if the person has represented themselves fully and truthfully; that they are, in fact, who they say they are.  If the selection interviewers have done their job properly, this stage should prove to be a formality; but it is always a useful factor in making the final decision, along with other checks to determine “suitability” and “fit and properness”.  If, at this stage, you find someone has lied, they are essentially untrustworthy.  Clearly that is a good indication that their ethical standards fall well below what you would expect and you would not employ them.

But are references a good enough filter? How sure are you of everyone who, having passed this test, now work for you? How do you know? What would give rise for concern? Why does ethical behaviour matter?  What does this mean for your company?

Does ethical behaviour matter?

Yes, I believe ethical behaviour matters.  It is a prerequisite in our personal lives and at work, in every aspect of our daily life. A belief in the essential goodness of others, ie that they will behave ethically towards us, is the foundation of trust. If we cannot trust others we would forever have to be on our guard, not just not to be taken advantage of, or made a fool of, but for our very lives.

Some people are naturally more trusting than others and will trust even complete strangers; but many people are quite cautious, choosing to trust perhaps only close family and friends.  However when we have given our trust, and put our faith in someone, we feel commensurately more let down if our trust turns out to have been misplaced and even worse if it is abused and we suffer loss and/or are actually harmed

In the main, ordinary openness and transparency in our dealings with others enables our interaction with them to go smoothly.  Clear and realistic expectations on both sides are usually met satisfactorily and responsive dialogue resolves any problems that might arise.

In business, as in sport, professionals deal with each other on an equal footing.  Where everything is open and above board and the rules of interaction are clear, people know and accept that “all’s fair in love and war!”  It is expected that competitive advantage will be gained or lost depending on how well the players use all the resource available to them. Their personal competence differentiates them. Their expertise and commitment in applying their knowledge and skill determines their relative success. It’s business, it’s not personal”, is a tough message but fair.  Those who want to engage professionally with other professionals need to know how to take care of themselves.  If they are to survive and thrive professionally and personally as individuals and for the companies they work for they need to be able to manage the fiercest competition.  The boundaries of what is acceptable can be pushed to the very limit.

Cynical behaviour, on the other hand, the business equivalent of professional fouls in sport, is taking competition too far.  It should never be condoned because it can have an insidious effect on corporate culture, undermining and corrupting sound ethical values and practice. It is essential to nip any such behaviour in the bud and impose heavy penalties to ensure there is no repeat offending.  Companies that fail to act in this way are at best incompetent and at worst unethical.

All organisations have a duty of care to their customers but it is greater for those operating in the retail market because we are not engaging on an equal footing. No matter how alert we are as customers it can be hard fully to understand all the ins and outs of the service or product we are being sold. This is likely to happen for example when we are dealing with something quite complex such as buying a car, arranging a mortgage, taking out life assurance, investing our savings for a rainy day, negotiating house insurance, putting in new central heating, planning to build a new extension.  As we cannot always make an informed decision we look to the seller to work out and understand our needs. Bearing in mind “caveat emptor”, we can do some homework to ascertain the probity of the person or company we deal with but we simply cannot check everything out.  Retail customers ultimately make a decision based on the company’s reputation and the trust they place in the person they are dealing with.  We put our faith in the knowledge skill and expertise of the person we are dealing with and trust that they will do the “right” thing by us is that we will not be taken advantage of and that we will be treated fairly.  Retail business is personal for us

It behoves the expert professional therefore to accord us a greater duty of care than if they were dealing with another expert as an equal.  They carry an extra responsibility to behave well towards us, despite also maybe facing challenging sales targets.

This is why, I believe, in addition to the focus on the integrity of Approved Persons, the FSA has created two distinct definitions of competence.

• The competent employee rule, effectively covering professionals dealing together, requires jobholders to demonstrate “skills, knowledge and expertise”.
• The definition set out in the T&C Sourcebook, covering a specific set of job roles where complex transactions with retail customers are involved, explicitly includes reference to “achieving a good standard of ethical behaviour” in addition “skills, knowledge and expertise.”

Knowing what is ethical

Ethical behaviour involves doing what is right as opposed to what is wrong.  However we are not the sole judges of our own actions. Others’ perceptions also have a bearing.  It is a hallmark of civilised, democratic societies that everyone abides by certain agreed rules and standards of behaviour, addressing every aspect of our dealings with others.  Sometimes these are codified in law, and sometimes they are just customs and practices that have gradually developed over time, evolving in the light of changing opinion about what is and is not ethical. Different societies have developed different codes of what is and is not ethical and within communities individuals often hold differing views.  There is no single, simple answer as to what is and is not ethical.

But deep down every one of us has an intuitive sense of right and wrong. It is based on how safe we feel.  It is a legacy of our cave dwelling past; but it is nonetheless valid, for each of us personally.  This inner voice guides us in our actions and informs our perception and judgement about others’ behaviour.  However we may not always hear it and we may not always follow what it tells us. We live in challenging times and face many competing priorities and calls on our time. We can lose sight of what the right thing is and sometimes our instinct for self preservation can cause us to become less open and trusting and perhaps tempted to avoid or fudge some issues. This can cause others to feel uneasy and react more negatively towards us and they in turn may feel unfairly, treated cheated or even threatened.  Such feelings are all indications that there has been some kind of unethical behaviour.

I don’t know what motivates each one of us to be “good” or ” bad”, to do the “right” thing or to do the “wrong” thing. Nor do I know if we are all intrinsically good and altruistic or naturally selfish, self-interested souls.  But I offer the thought that society would not function if we acted without any regard for others.  Some people might be naturally altruistic and look to do the best for others, without any regard for their own interest. Others, more pragmatically, might choose to act altruistically because they perceive it to be the best way of achieving their own agenda.  But I would suggest that anyone who just wants to serve their own ends, and has no compunction to do whatever it takes to achieve that (including by taking unfair advantage, lying and cheating) regardless of the impact they have on others, is operating outside what society would consider acceptable.  I deem that to be unethical.

I suggest ethical behaviour requires individuals to:

• be clear in their own mind about what is right and wrong before they act
• mean what they do, ie do what they do for a considered reason and purpose
  
• take others’ needs and wants into account as well as their own in deciding a course of action
  
• do what they say
• take due care and attention to do it to the best of their ability
  
• take responsibility for their own actions, which means they honestly assess their own performance and seek feedback from others to improve
• accept accountability for the impact of their actions on others, which means they will acknowledge and incorporate feedback to inform their next action.

In short they need consistently to demonstrate personal integrity in all their dealings with others.

An ethical company is one that builds trust in everything they do. They have a clear purpose. It is well articulated and communicated internally across the organisation to all the staff and externally to all customers and wider stakeholders and members of the public. There is no doubt what they are in business to do, what they will deliver and how. Employees know what is expected of them and are supported in their role to develop the confidence, motivation and ability to at least meet, and even exceed, customer expectations and to be actively responsive to their needs.

What would give rise for concern?

Direct evidence that something has gone wrong and/or is not working, especially if there have also been attempts to hide the fact, indicates issues that may give rise for concern.  However, we always need to be careful no to jump to conclusions.  People are not usually totally open, honest and truthful with everyone all the time. We do not trust everyone equally and good manners alone militate, on occasion, for some tact and diplomacy! However when someone seems to be less than open, honest or fair in their dealings with others it is likely to cause suspicion and cause others to wonder what is really happening, triggering their intuitive sense of wrongness.

We need to check our intuition against the facts in each case.  While there may be a clear clash of values there may have been no actual wrongdoing in fact. A tendency towards secrecy and concealment is often simple self-preservation.  Something may have gone wrong but there may have been no deliberate intention to do wrong. There may just have been an “honest” mistake, a “genuine” error, arising from a lack of skills, knowledge or expertise. This is a competence issue.

We are moving into ethical territory when someone:

• does not know the right thing to do,
• does not do what they say or mean what they do,
• makes frequent mistakes and does not take care to rectify them,
• does not take responsibility for their actions, for example voluntarily owning up to their mistakes when something they do does not work out as it should,
• lacks any concern for what happens as a result of what they do.

It is an ethical issue when there is a conscious, deliberate intention to act without due care and attention, incompetently, and knowingly against the best interests of another person.  Even if no one ever finds out that someone has acted unethically, or if no one in fact loses out as a result, or if the unethical act is condoned and/or forgiven, the fact remains that there has been unethical behaviour.

The problem is that we can never be sure of another person’s intentions. We might suspect deliberate intention, and therefore unethical behaviour, but we cannot always be sure, it can be hard to prove and we might be wrong.

How might we address ethical concerns?

It is essential not to prejudge issues.  We can only ever start with what has been done and what happened as a result. We can then progressively explore what the recipients expectations were, how the matched what happened and whether the output and its impact were or were not genuinely intended to turn out as they did.

This is a standard part of performance management and it is a good maxim when dealing with poor performance to “criticise the behaviour and not the person”. The problem with ethical concerns is that we are actually making a negative judgement about the person.  Possibly we are also emotionally engaged as we ourselves might have suffered in some way as a result of their actions.

This can be a very charged situation that is not always consciously acknowledged on either side. The problem is further exacerbated where mutual trust is low because people will be more suspicious of others’ motives.  Then when something has gone wrong, rather than having an open and honest conversation where differing views are expressed and acknowledged, people have a tendency to look to blame others for the problem rather than working together to find a solution. Our instinctive fight and flight mechanism kicks in and we can hit out and respond angrily and aggressively, or close in on ourselves becoming withdrawn and unresponsive.

However, without open dialogue about differences, positions become entrenched and the path to mutual trust and positive outcomes is blocked. This is true in every aspect of our lives and at all levels of interaction from the personal and individual with family and friends, to corporate arenas, local community contexts as well as national and international interactions on a global scale.

What does this mean for your company?

Every employer wants their staff reliably to give of their best but not every employee loves their job and is committed to it 100% all of the time. Even if they were, they cannot always do so and sometimes they do not always receive the direction, encouragement and reward to keep them sufficiently motivated to operate at that level.  Firms always need to achieve a balance between generating voluntary alignment with the corporate values and purpose, exercising sufficient control to get a fair day’s work for a fair day’s pay and giving employees sufficient freedom and trust to harness their natural talents and release their full potential to deliver what is required of their own accord.

When so many problems in business nearly always come back, somewhere along the line, to a breakdown in communication I wonder if, despite its critical importance, the need to establish and maintain trust is undervalued at work. Is enough thought given to the personal nature of the relationships being forged between individuals at work and between them and your customers?  What kind of balance is there between freedom and control in your company? How well are you challenging and motivating your staff to deliver excellence and holding them accountable for their actions?

Increasing standardisation and automation of business processes brings the benefit of increased consistency and better compliance but at the price of thoughtful and mindful employee action.  If employees begin to care less about what they do individual responsibility and accountability are eroded and that is ultimately detrimental to providing a good service. All firms, but especially those in financial services, should not think that parroting a prescribed script when talking to customers and including lots of important detail in very small print lets them off the hook as far as their obligations to treat customers fairly go. Simply recording a passport number and looking at a utility bill cannot meet the “know your customer” requirement.

Firms need a really effective way of ensuring their customers have a clear understanding of the product and service they are buying, that it is indeed right for them. There should be absolute transparency about what they are being offered and the potential risks involved. Having completed the transaction there also needs to be a genuinely satisfactory means of assessing customer satisfaction and taking their feedback on board to improve the business offering. This requires much more engagement with customers than just managing formal complaints.

Leading edge firms, who understand their ethical obligations, know that the customer relationship continues after the immediate point of sale. They have already mastered managing inputs up to the moment of output delivery and are now also taking into account how the outputs are received. They see their customers as well as their employees as trusted partners and seek to build their relationship with them. Through encouraging open and frank feedback, being willing to discuss it and adapt what they do in the light of what they hear, these firms are creating an ethical dynamic that can have enormous benefit for all concerned.

It’s no longer just business - it is personal!

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