What’s HR’s role in ethical business culture?

Volkswagen’s woes highlight need for ethical culture, leadership
By Liz Bernier
|Canadian HR Reporter|Last Updated: 11/27/2015

Volkswagen made headlines  recently for less-than-savoury business practices — with the Wolfsburg, Germany-based automaker revealing it had intentionally programmed its vehicles to give false results on emission control tests — but it wasn’t the first and certainly won’t be the last incident of unethical business behaviour. 

So is it up to HR to be the business ethics police? Some would argue against the idea but as the HR profession takes on an increasingly strategic role, some experts feel ethics, and an ethical culture, are at the heart of HR. 

Continual process

Creating an ethical workplace is a process and not one that ends once the code of conduct or values statement is written and passed out, said Jim Ridler, assistant professor at the Smith School of Business at Queen’s University in Kingston, Ont.

“I look at the subject of how do you create an ethical workplace culture in three stages: the first being developing, the starting off; the second being once you’ve done that, continuing and maintaining, because there’s an operating activity, not just an activating activity; and then (thirdly), enhancing,” he said. “Because whether it’s safety or ethics or whatever, you never leave anything as it is — you continue to try to enhance it. So that’s how I look at it, it’s three stages.”

Depending on the organization’s circumstances, HR’s role can start at the very beginning — helping senior management develop the company vision, mission and core values, said Ridler, who worked as an ethics advisor for Imperial Oil. 

“Part of the way I think HR could support that activity — which I think has to be done at the senior management level, and I mean the president and CEO — is by surveying the employees anonymously to get a sense of how they feel about the current situation,” he said. 

“It’s one thing to have management saying what they feel it is; it’s another thing to go out and survey the various levels and functions of the employees. And I think that’s an appropriate role for HR.”

Once those fundamentals are in place, HR plays a really pivotal role in a couple of different ways, said Chris MacDonald, director of the Jim Pattison ethical leadership education and research program at Ryerson University in Toronto. 

 “Maybe the most obvious thing is — and this of course depends on the size of the company — but HR is very often the home of some of the core ethics policies and documents. 

“So, in many companies, HR is where the code of ethics and the code of conduct resides, and HR is maybe the home of things like a conflict-of-interest policy or those kinds of policies. So that means that HR plays a key role in determining the content of those policies, but it also means that HR has a key role to play in the approach that’s taken to setting policies, to training on policies, and to getting buy-in,” he said. 

For example, if an HR department is asked to devise or revise a code of conduct, there are two fundamental approaches to take, said MacDonald. 

“One is that you can pretty much buy a code of conduct off the rack,” he said, adding the other — probably better — option is to craft it in-house.  

“(That way), this is going to be our code of conduct, and it isn’t going to be handed down from head office or the C-suite, it’s going to be something we’re going to build together. But, of course, there are practical limits to that in terms of the number of employees and what do you do about new employees, said MacDonald. 

“The other big distinction is between what we tend to refer to as a ‘values-based’ approach or a compliance approach. And so a compliance approach says, ‘Here are the rules and we’re going to write as many rules as possible to cover every possible contingency,” said MacDonald. 

“The other approach, which really is the best practice, is to adopt some version of what’s known as a values-based approach, which is to say, ‘Of course, we’re going to have some rules — we need to write down appropriate procedures for dealing with things like conflict of interest — but really what we ought to do is to make clear that in our workplace, we adhere to a certain set of values. And when in doubt, think in terms of those values. When policies are unclear or need interpretation, you interpret them in terms of those values.’”

Of course, it’s going to be different in different companies, so it’s hard to generalize, he said. 

“But a lot of that gets handled through HR, so HR really has the opportunity to set the tone in the way it handles that policy function.”

Another key consideration for HR is having some sort of personnel resource devoted to ethics, said Ridler. 

That could be handled in a number of different ways, depending on the organization’s specific needs. 

“Sometimes, it’s an ethics advisor, sometimes it’s an ethics officer, sometimes — more in the (United) States — it’s called a compliance officer. And that somebody or some staff… would take what management has done and from that develop and review an ethics code incorporating those core values,” he said. 

“HR would have a role in recommending where these ethics people are positioned in the organization… and I would strongly suggest that at least the most senior of the ethics people be at a high level. And, in particular, wherever they’re placed in the organization, that they have what I refer to as a dotted line to the top — the CEO or president.”

Shaping culture

Human resources can also have a central role in shaping an ethical culture within an organization, said MacDonald. 

“The role of HR in building the kind of culture that sets the right kind of ethical tone, I think, really the sky is the limit… the open question is ‘How much impact would you like to have?’” he said. 

The first thing to do is exemplify the virtues and values you’re looking for, said Elaine Varelas, managing partner at Keystone Partners in Boston — which can help make HR a valued resource for senior management.

“I also find that HR people are often a sounding board for their senior leaders… and that becomes a significant part of the role that HR plays.” 

At the same time, there’s always that question of what’s driving organizations, said Varelas —  is it short-term gain or long-term relationships?

“Did we do the right thing for all our constituencies — not just for our employees, but for our shareholders, for our customers? And just being able to ask that question of ‘Did we do the right thing?’ everybody should be able to feel that the answer is yes,” she said.  

Also, when building an ethical culture, it’s important to involve every individual at every level of the organization, said Ridler — it’s not enough just to train senior leaders or managers and overlook other employees because ethical issues can affect anyone.  

“Have training workshops and have everybody all in. I don’t care what function or what level — I don’t care if it’s the janitors or the salespeople — everybody. Because ethics problems can occur anywhere in the organization — it doesn’t matter what function or what level,” he said.

“And they can end up being very important, and it doesn’t matter where they originated.”

When people discuss “ethics,” it often creates this perception it’s a philosophical discussion, not one based in everyday living, said Varelas.

“The more that those ethical conversations and discussions can be brought down to everyday reality, HR and all organizations’ leaders can help people understand that the code of conduct is part of ethics, that business rules, policies, are part of ethics,” she said. 

“It’s a discussion of ‘How do I want to show up personally in my life, in my workplace, in how I interact with colleagues? And how do I want the organization that I work for to show up in the world?’”

Sometimes that means making tough decisions and taking risks, such as when HR needs to manage up to correct a senior leader who is wading into an ethical grey area, said Varelas. 

“It’s really challenging and I do think that a strong HR person should do that. They should build their senior colleagues to support that same behaviour. But we all know that there are executive leaders in organizations that act unethically and that the senior leadership around them are afraid for their own positions,” said Varelas. 

“If you work from that position of fear, then you’ll be stuck not questioning those grey areas. And I think exceptional leaders want to discuss they grey — they want to be very conscious of the decisions that they’re making.” 

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