The New Frontier of Business Ethics

This article is from The Real Future of Work: The Trust Issue. Download the full digital publication today.

Organizations need to rethink the way they approach ethics to meet the demands of new business realities.

On one hand, the business case for adherence to a clear ethical code has never been stronger, thanks to globalization and the fact that the internet has given consumers unprecedented access to information that helps them gauge the trustworthiness of companies and products.

These factors, plus heightened consumer concern for social responsibility, have resulted in greater attention to ethical issues among executives, investors and governments.

On the other hand, the "supply side" of ethics -- i.e., organizations' ability to avoid ethical lapses -- has never been more challenging.

Innovation and data-driven solutions power business success today, and these solutions often require organizations to make tough ethical judgment calls where industry best practices have yet to be established, regulators can't provide comprehensive guidance or the cost of a single mistake can be devastating.

So what are the best practices at the new frontier of business ethics? Here are a few considerations for business leaders grappling with these issues:

1. Ethical standards need to be at the core of an organization's purpose, brand and culture.

They should be part of every employee's concept of "what our company stands for." The notion that transgressions can be glossed over by a crisis communications agency in a bad publicity moment is outdated and dangerous.

Only by aligning their purpose, brand and culture around ethics can organizations ensure their actions and communications are consistent and reliable across all channels, geographies and stakeholder groups.

2. In an era of data- and innovation-powered business growth, the idea that "everyone is in sales" should be complemented by the notion that "everyone is in ethics."

The biggest ethics and compliance risks are no longer coming from a small group of employees with access to cash or trade-floor decisions.

Today, the ethical track record of many organizations is in the hands of data scientists, engineers and programmers, as well as all frontline employees who have access to customer data.

Many of the ethical decisions these employees face in their day-to-day jobs require more than simple adherence to a corporate code of conduct. They need to be enabled and incentivized to apply their own moral compass at work, to guide the business through ethical gray areas by doing what they know is right for customers.

Cultivating a "culture of ethics" is therefore increasingly linked to workplace characteristics like employee empowerment, trusting relationships between employees and managers and a non-hierarchical mindset.

Employees need to feel they can freely and safely raise ethical concerns, and that their own efforts to do the right thing will be supported.

3. The biggest ethical challenges are those that are emerging from new technological capabilities.

The fact that there is no precedent for dealing with these issues doesn't make them any less impactful.

For example, while organizations should embrace the risk-management capabilities offered by big data and people analytics (such as early warning systems for high-risk areas and decisions), they need to be careful not to slide into Big Brother-like surveillance systems that violate the trust of their employees or customers.

That's why leaders must nurture the conditions for ethical decision-making throughout their organizations, so employees have a robust framework for navigating the challenges associated with every new innovation.

Businesses that proactively place a premium on asking challenging questions and behaving ethically are most likely to prove themselves trustworthy amid coming technological revolutions, such as the one being driven by advances in artificial intelligence (AI). They are the organizations that will not only survive constant change, but will take competitive advantage of it.

Agile organizations need a new approach to ethics.

Many organizations are currently rethinking their structures and mindsets to become more agile amid rapid technological and commercial changes, increasing authority for local decision-makers, encouraging trial-and-error in product development and accelerating speed to market.

With these new strategies, a fresh approach to managing ethics and compliance is required as well.

Reconciling the need to experiment, take risks and make mistakes with zero tolerance for ethics transgressions is not a trivial task. Failing to take that task seriously, however, can result in disaster.

Organizations embracing an agile transformation need to ensure their leaders are equipped to manage ethics and compliance risks in the new, faster-paced and more fluid environments.

Gallup's research indicates that about 70% of variation in employee engagement comes down to local team factors, as opposed to company-wide conditions.

When teams are formed rapidly, as they often are using agile processes, team leads simply have less time to ensure they are fostering an open and inclusive trust-based environment.

They require skills and tools that help ensure all team members feel they can freely speak up and ask challenging questions.

Building this leadership capability often requires changes to the way employees are selected, developed and incentivized, and should be part of the organization's overall people strategy, rather than relegated to its compliance department.

This may require a high degree of effort, but the stakes involved are at least as high, especially when it comes to digital business models.

Empowering local teams to be guardians of ethical compliance is a prerequisite for the "ethical-by-design" solutions that must be incorporated into commercial applications of AI and other new technologies.