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BUSINESS CONDUCT: ... the leverage for a performance advantage...

Decades of evidence have demonstrated that an organization's culture is a strong predictor of how much market value that firm will create. A key part of culture is the conduct being exhibited by its leaders and managers. The cost of unethical conduct can be staggering, as has been witnessed since the start of the 2008 Financial Crisis.

A Code of Conduct is a common artifact in most medium and large organizations that strive to develop a reputation for honesty, integrity and principled business behaviour.

Merely having a Code for business conduct is no assurance that it will be observed. Where a Code is created simply to fulfill a regulatory obligation or fear of stakeholder reprisal, without embedding principles and accountabilities will achieve little, if anything, in steering ethical business conduct. From a managerial perspective, the paradigm shift towards proactive conduct requires a holistic change in values and practices.

Witness, in the early 2000's, Starbucks provided an example of how proactive ethics served its business strategy of ethical sourcing. The company has maintained a focus on ethically sourced coffee as one of its material issues and has worked to embed it as a priority across the business. In 2018 though, the company faces a Conduct Crisis with discrimination at the counter; the resultant cost in terms of financial and reputational impact will be long lasting despite their track record on ethics.

If business leaders, strategists and managers are to embrace an Ethical Code for Business Conduct, it can be most successful if they ensure that the change towards positive ethics is strategically sound and methodically implemented.

To do this, I've relied on a handful of maxims. While some may seem cliche, they can be useful if leaders put real muscle into them. Here are a few I've found most useful in fostering a healthy ethical culture where senior managers demonstrate ethical leadership and raise the level of performance.


CEOs often speak about the importance of ethics and the commitment to lawful and ethical conduct, yet few spend any time on its compliance. CEOs are not naturally inclined to learning the nuances of compliance, dismissing details as too 'in the weeds' for their attention--they rely on others for that. It is the Board's obligation and challenge to define their expectations of the compliance and ethics program, then give the CEO specific directions to ensure that compliance is on their radar and from it, to provide periodic, substantive reports.

A clearly communicated 'Tone at the Top' in terms of business conduct and practices is reflected in a culture of accountability, founded on a bedrock of norms that progress to a high degree of ethical self-awareness.

1. Freedom to Speak out: Employees do not fear speaking out or fear discrimination or termination. Meetings are engaging and open to participation. There is healthy debate on workplace, client and 3rd party issues and opinions are respected. Individuals at all levels are transparent.

2. Information Sharing: Managers distribute information to facilitate others in doing their jobs. They release information as it becomes available and when it is helpful. Information is transparent.

3. Risk Taking: Risk based decision making that allows people to bear the upside and downside of risks taken. Root out organizational blind spots and shine a light on unsupervised or under-staffed areas where risk can be easily hidden.

4. Professional Development: Management encourages training and developing new skills at all levels across the organization.

5. Accountability: Each employee is accountable and responsible to report any acts of transgression they may become aware of inside the organization or by third parties which may harm the firm's reputation. They are accountable for mistakes made. They accept consequences for any acts that breach the Code.

6. Fair Employment Practices: No preferential treatment, no cliques - fair distribution of opportunities to work on special projects/assignments. Skills relevant to the firm's objectives are highly valued.

7. Behaviour With Integrity: Positive attitudes abound with evidence of willing collaboration; internal coopetition is courteous and respected.


A fundamental premise of good management, is holding people accountable and themselves, being accountable to others. At a time when trust of employees and stake-holders is being eroded it is crucial to have a strategy to rebuild the trust. By implementing accountability in a positive and principled way you will see the trust rebuilt. Greater trust is not the objective, it is the outcome of efforts.

The effort will take time, persistence, follow through, ownership and a great deal of employee and executive engagement. It's not just about a framework, it needs to be an effective management tool.

We recommend placing culture at the centre of the framework. By doing so, it demonstrates a defacto acceptance that employees are a priority and everything else is second. Making this commitment is the most important part of the process to build trust. This type of culture will determine how value is generated and measured over time.

When people feel accountability is exemplified, encouraged, and followed-up on in a predictable way, trust is strengthened, even when they fail to perform. As a manager, holding people accountable to agreed terms allows you to form a unique connection with each of them.

If people feel you have dealt unfairly with them, they will undoubtedly think of the connection in negative terms. If, however, people feel you have treated them fairly and in a supportive manner, they will think of the connection in positive terms. The more positive your connections, the more success you'll have in holding others accountable for achieving results, and the more trust you'll build along the way.

Remember, trust is an outcome of greater accountability when it is done the right way.


Managers exercise great influence on employee attitudes and behaviours. They play an essential role in creating, nurturing, and sustaining an ethical workforce and an ethical culture. It does not happen overnight.

While Business Conduct may be designed at the Board level with Senior Executives, it must have buy in and be implemented and reinforced by management, middle managers and employees at all levels.

So how do organizations help managers to actually align the Business Conduct with integrity and the desired level of transparency? They do it with a combination of role models, training, communication and consequences--good or bad.

The building blocks to align the culture to integrity and transparency include:

* Compliance Norms: Communicated in terms that every employee and third party can relate to their daily work activities, services and products provided to the company.

* Policies and Procedures (P&P): Should be perceived as fair and comprehensible. P&Ps should support decision making, risk taking, innovation, interactions, information-sharing, incentives, compensation, resources and more.

* Action Based Trust: Trust based on evidence and actions of managers and leaders. Their willingness to listen to criticism, take responsibility for mistakes and take corrective action.

* Ethical Self-Awareness: Employees take on the mantle of the ethical culture. They become aware of how it aligns with their own sense of values and behave in accordance with those values.

Ethical companies focus on training and empowering managers. Training that is specific for managers, is an increasingly important vehicle for propagating the culture of ethical conduct. As managers grow increasingly proactive, the degree of compliance is raised and the overall cost to the company decreases. Once clear goals are set and feedback mechanisms are established, you can begin to measure and maximize performance.


Imagine a world where teams, comprised of all types and levels of employees are structured in a way that makes work easier to get done, leveraging exponential technologies and applying the core skills of each individual. A place where persons are motivated to perform, regardless of their employment relationship with the company, because they believe in its strategy and purpose. This reality does exist in many high-performing organizations. And those organizations have earned the trust that their reputation has. It's time for the rest of us to get on board.

The primary business issue impacting trust and reputation is the security of data. It has become the greatest ethics and compliance alarm of the 21st century. The companies that will succeed in building trust with their stakeholders' data are the ones that structure themselves as agile teams. With organizational agility, the company builds the capability to respond swiftly, ethically and accordingly move on, minimizing rework; which is what stakeholders demand.

The second most important business issue, despite all the technological innovations, is the uninspiring productivity increases. This is largely attributed to the speed of innovation versus the capability at which business can be transformed to match; the two are moving at different rates of motion and with different priorities, creating misalignment between expectations and capabilities. Such issues have a direct impact on stakeholders' trust, both internal and external. In more agile organizations, teams are built around a different business model; one that allows a more intimate user and customer experience, enhancing trust and greater acceptance of change. If we look at the way most organizations and teams are structured, and the way we set goals and measure and manage performance, there is ample opportunity to increase productivity and reduce overload, creating time to nurture the trust and reputation.


Business Conduct manifests itself in all areas of an organization; its people, processes and systems and is acknowledged as one of the greatest risks that can erode trust and performance. Building an ethical workplace culture requires equal skills in policy-making and relationship-building, and equal emphasis on procedures and values. Structural concerns like codes, training and clear criteria matter, but so do storytelling, mentoring and presiding over a company's services and products.

In the ethical workplace, structures and relationships work together around core values that transcend self-interest. Core values do inspire value-creating efforts as employees do what is right, even when it's least convenient.

The ethics of our workplace cultures matter because the work itself matters. Achieving the highest levels of compliance keeps us out of trouble, but an ethical culture creates value and advantage for all stakeholders.

Companies that may refuse to change will face disapproval, breakage in trust and disappointing performance that the local, regional and global community will not tolerate. They will lose opportunities.

As with other corporate issues, the prevailing obstacles are with the lack of leadership to raise the flag on ethics to drive conduct. They need a clear understanding of how important their ability to communicate and demonstrate their accountability to their stakeholders is.

History and current day practices reveal that when a company has overcome the 'Ethics Barrier' and adopted ethical behaviour with a scorecard, they have earned a decisive competitive advantage that contributes to enhanced performance. Business Conduct based on an accountability framework is not only leverage, it is a performance advantage.

Dragica Grbavac is an internationally recognized expert in leveraging risk and compliance to raise the bar on individual and organizational performance. She helps clients to overcome business challenges associated with change and achieving strategic objectives. She helps them solve complex issues, reduce risk, design relevant solutions and manage programs. She guides them to execute strategy by reducing risk and making risk-based decisions that are aligned to their organizational values.
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Author:Grbavac, Dragica
Publication:Canadian Manager
Geographic Code:1CANA
Date:Jun 22, 2018
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