Ethical Behaviour is a Matter of Competence
By Sheena Bigland, Consultant
Did you know…?
The competent employee rule, set out in the FSA’s Senior Management Arrangements Systems and Controls, (SYSC) requires all firms to:
“…employ personnel with the skills, knowledge and expertise
necessary for the discharge of the responsibilities allocated to them.”
SYSC (3.1.8 and 5.1.4) also commends the Training & Competence Sourcebook:
“…Firms which are carrying on activities that are not subject to TC
may nevertheless wish to take TC into account in complying with
the training and competence requirements in SYSC.
Thus, the meaning of competence, given in the Training & Competence Sourcebook in TC1.14G has wider relevance than might at first sight be imagined:
“Competence means having the skills, knowledge and expertise
needed to discharge the responsibilities of an employee's role.
This includes achieving a good standard of ethical behaviour.”
While the first sentence matches almost exactly the wording of the competent employee rule in SYSC, the second sentence introduces an additional ethical dimension that, I suggest, is important for all firms when assessing employee competence– not just those subject to TC.
Considering the ethical dimension
Over time therefore, with the best intentions of providing greater certainty and protection, more and more rules and regulations have been created, in response to past problems and misdeeds. The end result is a complex labyrinth that few can navigate without expert help. Individual intuition about what is right and wrong can easily be confounded. In the face of uncertainty about what is the right thing to do people can do the wrong thing in error or just stop taking any action at all. So though there may be no deliberate intent others lose out.
In a rule-based world, where compliant conformity is the desired norm, the safe strategy is to do what everyone else does. There is no need to think about what to do because there is no choice. Creative innovation becomes a risk that is barely tolerated, indeed may be actively discouraged. Senior management responsibilities count less and less as individual accountability is diminished in the face of the pressure to comply with prescribed rules.
This is a very odd state of affairs. In trying to give greater protection and certainty the opposite is achieved. In promoting “good” behaviour people have lost sight of what it is.
As FSA regulation becomes progressively more principles-based, this changes. The role of senior management in setting the cultural tone assumes greater importance as more consideration is given to how firms meet the ethical concepts in the high level standards such as integrity, trust, openness and cooperation and, of course, treating customers fairly.
That the ethical dimension is made explicit for firms subject to TC is because of the disequilibrium in the market. Retail consumers, quite simply, are not sophisticated participants with equal knowledge and understanding of the products being sold to them. The scope for mis-selling is very real. So there is a greater duty of trust on practitioners in this regard not to abuse their power. It is also in their interest actively to take steps to encourage consumers to act responsibly too. As well as highlighting the benefits, it is incumbent on firms to give equal weight to spelling out the risks and exclusions.
What is ethical behaviour?
A dictionary definition of ethics is
“The science of morals, or of conduct as right or wrong, system of moral principles”
Deciding what is right or wrong, good or bad, moral or immoral is a value judgement.
Even if we lived entirely alone we would unconsciously create our own ethical code - a set of rules to live by, to achieve more of what we want and avoid/prevent what we do not want. As we come into contact we others we have a choice about how we interact and how we adapt our rules of behaviour to accommodate others’ preferences. Fight or flight are the instinctive responses in the face of perceived danger; but, one cannot continually fight or run so people eventually work out rules of engagement to minimise danger, to build trust and work together. Recognising that actions have consequences people develop codes of behaviour to enable the community to achieve more of what they want and avoid/prevent what they do not want. With the growth of shared values, rewards and penalties for conforming and transgressing evolve.
In close-knit communities, the shared values are easily communicated and reinforced.
Ethical codes embrace the “good” values. The problem is that there is no single, universally agreed code of ethics that everyone abides by. Different religions, laws, rule and regulations, social customs and practices create a complex array of possible rights and wrongs.
In today’s world little can be taken for granted. We cannot assume that others share our values based on our personal experiences.
The consequences for assessing competence
Introducing an ethical dimension in assessing competence of firms and individual employees both raises the bar and introduces a criterion that is subjective and personal.
While there may be no single definition, I would suggest that ethical behaviour requires clarity and openness about what you stand for and a willingness to be differentiated according to the values you ascribe to. So it is imperative that firms define explicitly for themselves the ethical standards they expect of staff in their dealings with all stakeholders including customers, and shareholders.
Most firms have already done this in their corporate statements but that is where it sometimes rests. Where the fine words are not followed through, employees have no clear leadership. At best, good intentions may not always be followed through and, while behaviour may not be unethical, mistakes creep in, the motivation to do the right thing ebbs and standards fall. At worst, poor behaviour is not challenged and may even paradoxically be rewarded. Over time such firms lose competitive edge but in the meantime many consumers will have received a poorer service than they rightly expect.
So firms need to go one step further. The ethical dimension needs to be integrated into the competence frameworks used to recruit staff and assess employee performance.
Using a competence framework
In developing competence frameworks, in looking at the required skills, knowledge and expertise for specific roles, we seek to be as objective as possible. The focus of discussion about competence, performance, ability, is on what the person does, or does not do, and not on whether the individual is intrinsically a good or bad person. The judgement is about the action and not the person as an individual. Statements about performance, based on specific job-related criteria - “This is wrong /not good enough” do not mean “You are bad/ I do not like you”.
That’s the theory anyway! Training can help people handle performance management conversations constructively but in reality it is always hard to be objective and impersonal when giving feedback and even harder to receive it neutrally. However, the more there is mutual trust and a shared goal, the easier working together to improve performance becomes.
When we add the ethical dimension, we bring what people believe and their personal values into the equation. Employee motivation and intention now has a direct impact on competence. Wanting to do the right thing for the right reason is part of the competence assessment. This is very hard to know from observation of behaviour alone. However if the corporate ethical code is clear, then conversations about what people do and how become manageable. Individuals are free to believe what they choose but at work they must meet corporate expectations.
The bottom line
Everyone should know what is expected of them and how to meet those expectations.
Good management is about helping staff meet their responsibilities by ensuring they build their knowledge, enhance their skills, and learn from experience so that doing the right thing well becomes second nature.
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London August 2008
Sheena Bigland
sheena@bigland1.orangehome.co.uk
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