Building and Sustaining
Strong Ethical Cultures
American Society for Quality
April 9, 2014
Jim Nortz
jimnortz@builtonethics.com
585-260-8960
1
Built on Ethics
Advisory Services
Helping organizations thrive by building
sound internal controls and strong ethical
cultures.
Today’s Agenda
1. What is a strong ethical culture?
2. Why should I want a strong ethical
culture?
3. How can I build and sustain a strong
ethical culture?
3
1. I am an ethical person.
98%
Di
sa
gr
ee
2%
Ag
re
e
A. Agree
B. Disagree
4
2. It is very important to me that the
organization I work for is ethical.
98%
Di
sa
gr
ee
2%
Ag
re
e
A. Agree
B. Disagree
5
3. There have been times in my career
when I felt pressure to compromise my
ethical standards.
69%
A. True
B. False
Fa
lse
Tr
ue
31%
6
4. There have been times at work when I saw
things going wrong and even though I spoke
up, I was unable to get the organization to
change course.
86%
Fa
ls
e
14%
Tr
ue
A. True
B. False
7
5. Our organization has an accurate gauge to
measure the strength of our ethical culture.
88%
A. True
B. False
Fa
lse
Tr
ue
12%
8
What is a strong ethical
culture?
9
Strong Ethical Culture
A strong ethical culture is one in which the
dominant social dynamics consistently
encourage/reward ethical behavior.
10
Strong Ethical Culture
A strong ethical culture is one in which the
dominant social dynamics consistently
encourage/reward ethical behavior.
A culture in which it’s “cool” to be good –
where the odd person out is the one who
breaks the rules.
11
Why should I want a strong
ethical culture?
12
2006 LRN National Survey
“A majority of workers – 94
percent – say it is “critical” or
“important” that the company
they work for is ethical.”
13
Reduced Misconduct Rates
Percentage of Employees Who Observed
Misconduct
100%
88%
80%
60%
40%
20%
20%
0%
Weak Ethical Culture Strong Ethical Culture
2013 National Business Ethics Survey
A Strong Ethical Culture it Good for
Business
Benefits of a Strong Ethical Culture
Organizations with strong ethical cultures:
1. Minimize risks.
2. Maximize teamwork.
3. Recruit, retain and motivate the best in the industry.
4. Earn and sustain the trust of key stakeholders
(customers, shareholders, suppliers and communities)
5. Maximize opportunities for superior financial
performance.
16
2013 National Business Ethics Survey
17
The Big Question
How can I build and sustain a
strong ethical culture?
18
Organizational Behavior Distribution Curve
Unacceptable Behavior Zone
Acceptable Behavior Zone
Catastrophic
Behavior
Zone
Number
of
People
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
19
Organizational Behavior Distribution Curve
Unacceptable Behavior Zone
Acceptable Behavior Zone
Catastrophic
Behavior
Zone
Pressure
to Cheat
Number
of
People
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
20
Pressure to Cheat
External to Organization
 Shareholders
 Government Officials
 Customers
Inside the Organization
 Leaders
 Peers
 Job Demands
Inside Self




Desire to win
Desire to get job done
Desire to save time
Desire to look good
21
Organizational Behavior Distribution Curve
Unacceptable Behavior Zone
Acceptable Behavior Zone
Catastrophic
Behavior
Zone
Pressure
to Cheat
Number
of
People
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
22
Organizational Behavior Distribution Curve
Unacceptable Behavior Zone
Acceptable Behavior Zone
Pressure
to Cheat
Catastrophic
Behavior
Zone
Purpose
Structures
Systems
Number
of
People
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
23
A Live Demonstration
24
Organizational Behavior Distribution Curve
Unacceptable Behavior Zone
Acceptable Behavior Zone
Pressure
to Cheat
Catastrophic
Behavior
Zone
Purpose
Structures
Systems
Number
of
People
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
25
Organizational Behavior Distribution Curve
Unacceptable Behavior Zone
Acceptable Behavior Zone
Pressure
to Cheat
Catastrophic
Behavior
Zone
Purpose
Structures
Systems
Number
of
People
Individual
Attributes
(Knowledge, Attitudes,
Choices & Habits)
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
26
Organizational Behavior Distribution Curve
Unacceptable Behavior Zone
Acceptable Behavior Zone
Pressure
to Cheat
Catastrophic
Behavior
Zone
Purpose
Structures
Systems
Number
of
People
Individual
Attributes
(Knowledge, Attitudes,
Choices & Habits)
Social Dynamics
(Obedience to Authority
Conformity to Social
Norms)
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
27
Obedience to Authority
28
Conformity to Social Norms
29
Organizational Behavior Distribution Curve
Unacceptable Behavior Zone
Acceptable Behavior Zone
Pressure
to Cheat
Catastrophic
Behavior
Zone
Purpose
Structures
Systems
Number
of
People
Individual
Attributes
(Knowledge, Attitudes,
Choices & Habits)
Social Dynamics
(Obedience to Authority
Conformity to Social
Norms)
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
30
Organizational Behavior Distribution Curve
Unacceptable Behavior Zone
Acceptable Behavior Zone
Pressure
to Cheat
Number
of
People
Catastrophic
Behavior
Zone
Purpose
Structures
Systems
Leadership
Individual
Attributes
(Knowledge, Attitudes,
Choices & Habits)
Social Dynamics
(Obedience to Authority
Conformity to Social
Norms)
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
31
A Failure of Leadership
A Tale of Two Leaders
33
I wish my leaders were here to listen to
this talk because they need to change
for our organization to improve its
78%
culture.
A. Agree
B. Disagree
gr
ee
Di
sa
Ag
re
e
22%
34
Avoid the
Blame and Change Game Trap
35
A Path to Ethical Leadership
1. Focus on yourself - Take personal
responsibility for modeling and promoting
ethical behavior.
2. Reflect on a significant failure of
leadership and re-write the story.
3. Look for and emulate role models.
36
Two Leadership Challenges
1. Good intentions alone are insufficient
to secure the “good” in organizations.
2. The primary behavioral drivers are
invisible.
37
Two Leadership Challenges
1. Good intentions alone are insufficient
to secure the “good” in organizations.
2. The primary behavioral drivers leaders
seek to influence are invisible.
38
Important Leadership Tools
Unacceptable Behavior Zone
Acceptable Behavior Zone
Pressure
to Cheat
Number
of
People
Catastrophic
Behavior
Zone
Purpose
Structures
Systems
Leadership
Individual
Attributes
(Knowledge, Attitudes,
Choices & Habits)
Social Dynamics
(Obedience to Authority
Conformity to Social
Norms)
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
39
Leadership Tools
1. Purpose – Define the “why,” “what” and
“how” of your organization in ethical terms
and integrate it into all aspects of your
operations.
2. Structure – Ensure spans of control and
accountability are designed to promote
ethical behavior.
3. Systems – Evaluate your key systems to
ensure their reliability.
40
Two Leadership Challenges
1. Good intentions alone are insufficient
to secure the “good” in large/complex
organizations.
2. The primary behavioral drivers leaders
seek to influence are invisible.
41
The Key Behavioral Drivers Are Invisible
Unacceptable Behavior Zone
Acceptable Behavior Zone
Pressure
to Cheat
Number
of
People
Catastrophic
Behavior
Zone
Purpose
Structures
Systems
Leadership
Individual
Attributes
(Knowledge, Attitudes,
Choices & Habits)
Social Dynamics
(Obedience to Authority
Conformity to Social
Norms)
Ideal Behavior
Organizational
Behavioral
Boundary
Industry
Behavioral
Boundary
Legal
Behavioral
Boundary
Catastrophic
Behavioral
Boundary
42
The Primary Behavioral Drivers
are Between Our Ears
Perceived pressure to cheat
Perceived leadership
Knowledge
Attitudes
Choices
Habits
Perceived pressure to do wrong.
Perceived encouragement to do
right
43
Measuring the Invisible
44
Revealing the Invisible
Anonymous Polling
45
Essential Information
1. Do employees know the rules associated with
their jobs?
2. What are employees’ attitudes toward the rules?
3. Are employees pressured to violate the rules or
encouraged to follow them?
4. How frequently do employees see misconduct in
the workplace?
5. What kind of misconduct are they seeing?
6. When they see misconduct, do they report it? If
so, to whom? If not, why not?
46
Key Takeaways
1. Focus on yourself - Take personal responsibility for
modeling and promoting ethical behavior.
2. Reflect on a significant failure of leadership and re-write
the story.
3. Look for and emulate role models.
4. Optimize your chances of building and sustaining a
strong ethical culture by:
a. Periodically
evaluating
and
improving
your
organization’s purpose, structures and systems; and
b. Measuring the direction and magnitude of the invisible
key behavioral drivers using anonymous polling.
47
Thank You
48
Building and Sustaining
Strong Ethical Cultures
American Society for Quality
April 9, 2014
Jim Nortz
jimnortz@builtonethics.com
585-260-8960
49