Nothing keeps a business owner up at night like the nagging feeling that ethical time bombs are ticking somewhere in his or her company. Human nature being what it is, no company is immune from problems--from the deliberate frauds and rogue actions of traders gone wild to the gradual erosion of values and ethical standards because “everyone does it.” As the owner, it's your responsibility to sniff out lingering problems before they explode. The good news--such as it is--is this: If there is a time bomb in your company, people know about it. You just need to get them to tell you.
The roadmap to high integrity and vigilant leadership consists of three main avenues: (1) prevention, (2) detection, and (3) remedy.
An ounce of prevention...
Traditional ethical strategies focus on compliance programs, ethics training, and traditional operational risk assessment. But you should focus instead on:
How to learn about problems faster
Traditional tools of detection include hot lines and analysis of compliance data. They're not nearly enough. Newer tools emphasize:
For example, KPMG has created a central data base about individual employees that can be used for risk assessment when making new assignments or promotions.
How to fix them when they occur
Traditional approaches emphasize the role of HR, legal and compliance programs. Newer tools emphasize:
But the best solution lies in your attitude. Don't treat ethics as something for your lawyer to worry about, and don't assume that you have done all you need to do by writing rules that comply with ethical guidelines. People break rules, and lawyers are most useful only after the problem has become public. After all, most companies with scandals surging all over the Web did have top lawyers and did maintain complex compliance programs. You yourself have to set the tone of integrity and keep open the lines of communication that prevent smarmy behavior from festering. It's your company. Its reputation is yours, and preserving it is ultimately your responsibility.
This article was co-authored with Prof Tom Donaldson of the Wharton School.