How To Create Organizational Ethics for Your Business

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Saphia Lanier
Saphia Lanier

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In order to succeed, every business has to prove its value to customers. If a business doesn’t provide some sort of value to its customers, there would be no reason for those customers to choose them over a competitor. 

How to create organizational ethics

Some businesses provide value by having the best product. Others provide value by offering the lowest price, or more reliable customer support. Some businesses provide value in more surprising and unexpected ways — for example, by building memorable ad campaigns to draw laughs, tears, or curiosity. 

But when you’re a small business with a limited budget, you have to rely on more than just your offer and marketing savvy to earn a customer’s loyalty. 

Today’s customers want to buy from brands they connect with on a personal — and, increasingly, on an ethical — level. 

With this in mind, many businesses can benefit by embracing and displaying strong organizational ethics that their target customer can align with.

What are organizational ethics?

Organizational ethics is a term used to refer to a company’s moral compass. It acts as a guiding light for how everyone in the business should behave toward one another and outsiders, and is embodied not just by a company’s executives but also its rank-and-file employees. 

It’s also been shown to help with decision making, policy setting, and performance evaluation. For example, an organization may implement an ethical code that requires employees to avoid conflicts of interest (e.g., a business attorney refuses to represent a client that’s suing a company the attorney holds shares in). 

Importance of organizational ethics

“Organizational ethics play a crucial role in establishing a firm foundation for the culture and values of our business,” says Andrii Gurskyi, co-founder of the home-cleaning service business HomeClean. “It sets clear standards of behavior and decision making, ensuring everyone within the organization operates with integrity, fairness, and accountability.”

When an employee engages with other workers or customers, they’re acting as representatives of the company. If they’re offensive or embark on unethical behaviors, it paints a bad image for your business. By instilling organizational ethics in your business, you can ensure everyone’s on the same page about what’s considered proper behavior in different situations. 

Displaying good organizational ethics builds trust with stakeholders, such as employees, customers, and partners, and can enhance a company’s reputation and bottom line. This potentially reduces or prevents employee turnover and complaints revolving around unfair treatment or ethical disagreements. 

Without organizational ethics, companies risk reputational damage, especially in the age of social media where news of toxic workplaces can spread fast. Companies with companywide ethics handbooks can more easily steer clear of these problems. 

For example, consider a company that prioritizes hard work and seniority when choosing which workers will receive a promotion. If these qualities are built into the business’s ethics handbook, it forces managers to consider those qualities when making hiring/promoting decisions. 

Without a code of ethics for promotions, they may promote a new employee to a leadership role because they feel it’s the best choice. 

This can cause talent that has been around longer to bump heads with the manager about not receiving the promotion they feel they deserve, and may even lead to disgruntled workers posting complaints on social media and walking out, hurting your chances of finding a suitable replacement. 

Individual ethics vs. organizational ethics

Individual ethics are your personal views and morality that guide how you perceive and react to situations. Organizational ethics is a collective view and morality that determines how all employees must behave in certain situations.

A person can have their own ethical views that differ from the ethical guidelines of the organization. For example, an individual’s ethics may involve being respectful and honest with friends and strangers. Then a company’s organizational ethics could require all employees to abide by a code of conduct, like avoiding bribery and fraud, not discriminating against loan applicants, and being respectful to colleagues and customers.

Ethics for both are similar — being fair — but the context determines who must follow the ethical codes (yourself or an entire organization) and when. 

Organizational ethics examples

What does organizational ethics look like in the workplace? It depends on the industry and the values of the company. Here are several examples:

  • Family law firm: Attorneys must act in the best interest of their clients. So a law firm may employ organizational ethics like treating all clients with respect, maintaining confidentiality, and avoiding conflicts of interest. If a lawyer ignores ethics and is caught, they’re terminated immediately.
  • Building contractor: A building contractor may have a code of ethics like being honest with clients about the building process, providing quality workmanship, and adhering to safety regulations. Some may require all contractors to provide transparent pricing sheets to show there’s no nickel-and-diming or overcharging. 
  • University: A university may have an organizational ethics policy that includes respecting the rights of all students, faculty, and staff; maintaining a safe learning environment; and adhering to anti-discrimination laws. This is critical to prevent favoritism in the admissions and hiring process. 
  • Auto mechanic: An auto mechanic may have a code of ethics that includes being honest and transparent with customers about the repair process, providing quality workmanship, and adhering to safety regulations. To go the extra mile, they may allow customers to be present while working on vehicles or have cameras to show no shady business is happening under the hood. 
  • Beauty brand: A makeup company may rebrand into a cruelty-free and sustainable business. So they re-create products using ingredients sourced from eco-friendly manufacturers to minimize pollution. 

Patagonia is an excellent example of a company with strong organizational ethics in that the company publicly and officially promotes sustainability. As an extension of these ethics, unlike other fashion retailers, Patagonia promotes “buying less” to combat the overconsumption mentality consumerism has created.

For example, one of its ads said “DON’T BUY THIS JACKET” in large bold letters in a Black Friday campaign (which they also condemned in the ad).

Of course, they want customers to purchase their goods, but only if they actually need the item. So you can imagine their salespeople are a lot less… salesy. 

Challenges with implementing organizational ethics

A lot can go wrong when implementing organizational ethics. You may receive pushback from employees with differing individual ethics.

In these scenarios, a feedback loop will be useful. This will allow everyone to evaluate ethical policies, and for management and workers to gauge one another’s ethical practices in the workplace. 

Then there’s deciding which issues will build the foundation of your organizational ethics guidelines. Unless you plan to develop an encyclopedia-size policy book, you’ll need to single out the most important to your organization. 

For example, will you stand behind worldwide sustainability issues, diversity and equality, community involvement, or a mix of several matters?

Once you decide on the ethical focus of your organization, you can use the following tips to make it work.

Creating an ethical workplace

Creating a workplace with strong organizational ethics starts with the leadership team. They must set the tone and provide clear expectations for employees. 

This includes having a clear mission statement, setting goals and objectives that align with the company’s values, and providing ongoing training to ensure everyone is on the same page.

“In addition to providing clarity on behavioral expectations in our employee handbook, we use our values to showcase what we expect from corporate citizenship,” says Mark Frein, chief workplace officer at employment platform Oyster. “Our values are ‘we elevate talent,’ ‘we thrive together,’ and ‘we build trust.’”  

Whatever your values, be explicit in what they are and detail exactly what you expect of employees and the company. Everyone in the organization, including marketing, sales, and product development, should understand their role in following your ethical guidelines. 

But simply creating ethical standards for your company to follow won’t guarantee compliance. Enforcement should be a mix of management and supervision. And not just from leadership:  when any employee sees something wrong, they should feel comfortable enough to report it. Support this by offering an open-door policy or anonymous reporting system to encourage workers to report incidents.

Over time, you may find the need to revise your ethical policies. Maybe there’s a change in the organizational culture or new laws and regulations to abide by. For instance, respecting pronoun selection and gender identity is now an ethical boundary businesses must address in their policies. 

Aside from enforcing and supervising ethical behaviors throughout your organization, you can use other tactics to encourage good ethical behavior. For example, rewarding employees for having no ethical incidents over a period of time. 

With consistency, you can build a company where workers and customers feel proud to be a part of your organization. But it begins with building an ethical team of leaders that act as representatives of the company and its values. Having people your teams can look up to and admire may increase the odds of them following suit. 

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