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Defining Ethical Behavior in the Workplace

The Importance of Ethical Behavior in the Workplace

The plot of good versus evil, good guys versus bad guys, or right versus wrong has played out in books and movies for ages. It is arguably the most common struggle at the center of narratives of all types. So it should be no surprise that the same struggle is prevalent in corporate environments under the umbrella of ethical or unethical behavior. It’s certainly no secret that the desire to be perceived as ethical is important to organizations as we consistently see narratives surrounding potentially unethical behavior within organizations play out publicly. Thus, it is critical for businesses to foster an ethical workplace through the development of their culture, employees, and leadership.


There are strong indications that employee concerns of unethical, illegal, or fraudulent behavior is on the rise in the workplace. Work Institute conducts over 20,000 exit interviews annually and included in most exit interviews is a question related to whether the former employee is aware of unethical or illegal behavior. In 2023, 6.3% of former employees indicated that they were aware of some type of compliance issue. This is a 62% increase over the number reported in 2021.


Headlines are riddled allegations of unethical behavior in the workplace which can create public relations crises, operational distractions, financial liabilities and in some cases lead to the total collapse of organizations. Given the severe financial and reputational consequences of unethical behavior, and the mere allegations of unethical behavior, it is no surprise that organizational efforts to prevent, detect and respond to it are consistently scrutinized by stakeholders. The intense scrutiny makes it critical to understand the definition of business ethics, why ethics are important in the workplace, what organizations can do differently to encourage ethical behavior, and most importantly how employers can encourage reporting of unethical or illegal behavior. Improving your workplace culture by reducing ethical concerns will contribute to higher retention rates and employee engagement.


Defining Ethical Behavior in the Workplace

Ethics in the workplace is defined as the moral code that guides the behavior of employees with respect to what is right and wrong regarding conduct and decision making. Ethical decision making in business considers the individual employee’s best interest and takes into account the best interest of those impacted. The latter definition is often where individual employees struggle to act ethically. Furthermore, ethical behavior doesn’t only apply to individual employees, the organization itself should exemplify standards of ethical conduct.


The Value of Good Business Ethics in the Workplace

It is important to understand that ethical behavior in the workplace can stimulate positive employee behaviors that lead to organizational growth, just as unethical behavior in the workplace can inspire damaging headlines that lead to organizational demise and even influence employees to quite their jobs.


Simply put, organizational stakeholders that include individuals, groups and organizations of various types enter a relationship with a business organization for that business to protect their interests in a specific way. Therefore, there is a mutual expectation that stakeholders and business organizations act in an ethical manner and in each other’s best interest.


Business Implications of Unethical Behavior

A decision to act unethically, by the organization or a stakeholder, can strain the relationship and damage the reputation of the organization. The increased risk of reputational damage and harm from negative headlines is often the catalyst for organizations to promote and encourage ethical behavior and why employees are encouraged to report unethical behavior. Furthermore, where many individuals are connected to social media with mobile technology, the risk that unethical behavior will cause reputational damage to an organization is arguably much greater that in decades past, as behavior is more easily recorded on video, captured in photos, shared online and often propelled into headlines.


Benefits of Ethical Behavior in the Workplace

However, there are benefits of ethical behavior in the workplace beyond the avoidance of reputational harm. An organization that is perceived to act ethically by employees can realize positive benefits and improved business outcomes. The perception of ethical behavior can increase employee performance, job satisfaction, organizational commitment, trust and organizational citizenship behaviors. Organizational citizenship behaviors include altruism, conscientiousness, civic virtue, sportsmanship and courtesy.


What Can Organizations Do To Encourage Ethical Behavior in the Workplace?

The good news is that organizations can take steps to create a good narrative around their reputation by implementing measures that help ensure ethical conditions and perceptions of organizational support are present in the workplace. Many organizations implement reactive systems to report unethical behavior. However, the single most important thing organizations can do different to promote ethical behavior is to implement a proactive approach and use voice of the employee tools like employee surveys and exit interviews to proactively give employees the capacity to be heard.


Utilize a Comprehensive Approach to Business Ethics in Your Workplace

As previously stated, workplace development tools are essential parts of creating a healthy work environment and fostering a unified approach to sustaining ethical behavior. These should include things like performing exit interviews as well as stay interviews to gain insight into what things are causing your employees to move on or stay with you. Additionally a key piece to creating an ethical workplace is a top-down approach, prioritizing leadership development and most importantly of all, onboarding new employees properly.


It is important to note that utilizing an objective third-party increases the likelihood that current and former employees will report ethical issues. Here at Work Institute, we offer professional assistance with these workplace development services from workforce experts and experienced consultants. To learn more about the impact of a holistic approach to creating an ethical workplace, reach out to our team today or browse our success stories and retention reports to get a better understanding of how these professional development services could benefit your business.


Leveraging the Voice of the Employee

Voice of the employee systems that effectively promote ethical behavior and encourage reporting unethical behavior meet five key criteria:


  1. Elegance: be easily understood, applicable to the entire organization and all employees and effectively diagnose issues
  2. Accessibility: be easy to use, widely promoted, accessible to all employees
  3. Correctness: be well-administered and include follow-up to complaints
  4. Responsiveness: be timely, be responsive, be used by management and show results
  5. Nonpunitive:  be free of retaliation – managers and employees must be protected


The challenge is that many organizations implement voice of the employee systems with good intentions, but the voice of the employee tools used are not effective. Voice of the employee tools, like interviews and surveys, that proactively seek to uncover and stop unethical behavior should be conducted:


  • Externally: to ensure accuracy, the surveys and interviews should be conducted through an independent third-party to remove biases and remove barriers to employees feeling they can express their true perceptions related to unethical conduct in the workplace. When conducted internally, it’s likely that true perceptions aren’t revealed because employees aren’t being honest with the organization. Employees may not want to risk burning a bridge or disappointing a manager. When conducted externally, data is systematically collected and thoroughly reported.
  • Compliance and Ethics Question: it is important to specifically ask the question “have there been any compliance issues related to fraud, abuse, unethical or illegal practices or any other misconduct at your organization.” Many of the compliance and fraud reporting systems in place at organizations is passive. Specifically asking the question in a proactive manner often revels issues that otherwise would not have been reported.
  • Exit Interviews are Critical: Often times employees won’t report potential issues until they have left the company. Have a proactive mechanism such as a high quality exit interview utilizing an objective third-party provides former employees a safe place to report compliance, fraud, illegal, or unethical behavirs that occurred while they were an employee.


The struggle between right and wrong amongst your stakeholders and the perception of good or evil about your organization are a constant. And the implications of a perceived ethical or unethical reputation could be helpful or harmful to your business. Your reputation is on the line and your employees provide valuable information when given a true voice. It’s imperative to proactively promote ethical behavior in your organization before you are potentially destroyed by tomorrow’s headlines. If you’re company needs help with professional engagement and retention services which can help create a more ethical workplace, contact our team today.


Updated: 11/29/2023