Why Do Leadership And Organisational Integrity Matter?

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8th Dec 2016

3 min read

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In 2015, Malaysian Anti-Corruption Commission (MACC) started investigation into alleged complaints surrounding corruption in the Sabah State Water Department. As a result, this year, the MACC’s investigation uncovered that almost 60% of the fund dedicated to developing clean water treatments for locals in remote villages were embezzled by its officials.

Last year also saw Volkswagen under fire when the car company allegedly installed software that defeated emission testing. Now, Wells Fargo bank is currently under fraud allegations for opening unauthorised accounts without customers’ knowledge.

There is a common denominator that binds these events together, i.e. the lack of integrity and ethics within the organisations and individuals. It is baffling to hear that even as the world becomes increasingly global, abuse of powers in organisations persist. It appears that there is still a lack of understanding within companies on the importance of organisational integrity and business ethics.

 
Recommended reading: Understanding The Traits That Cultivate Bad Leaders
 

Researchers believe that integrity and an ethical-based approach to business are the cornerstones of any organisation’s sustainable success.

One of the ways companies can ensure they “do the right thing” is through values-based leadership. When leaders act with integrity and implement processes and policies with good ethics and values in mind, it creates a company culture where organisational integrity becomes part of the company’s core DNA.

As the world becomes increasingly borderless and with greater access to technologies, there is an enormous responsibility for companies, big or small, to uphold a high standard of integrity and ethics.

Here are three reasons why integrity matters in companies.

 

1. Ethical business makes profits

Many business leaders tend to believe that the only way they can increase market share, out-beat competitors and get to the top is by being brutal and ruthless when doing business.

It is this dog-eat-dog mentality that got Volkswagen in hot water. According to Fast Company, the leadership of Martin Winterkorn, chief executive officer (now former) of Volkswagen, could have led employees to cheat.

A recent study into unethical businesses unveiled that dishonest practices in companies can lead to a phenomenon known as moral muteness, where managers actually make an economic case to justify unethical business practices.

Conscious capitalism

Businesses thrive when they do business the right way as represented by a concept termed by business researchers as conscious capitalism. It is the idea that when business integrates ethics and morals and care about their customers and stakeholders, companies multiply monetary gains and profits.

Conscious capitalist companies outperform their market by 10.5% and they even outperform many great companies, i.e. companies with outstanding financial performances, by 300% just by doing the right thing!

In short, when companies find a way to converge ethics and profit, everyone thrives – stakeholders, customers, employees and communities. This clearly shows that ethics and profits are not mutually exclusive.

 

2. Bulwark against legal and compliance risk

This is an obvious reason. Companies integrate ethics and integrity when doing business as it acts as a preventive mechanism for possible legal actions.

Research shows that the only way companies can prevent any legal risk from unethical practices is by adopting a comprehensive approach to organisational ethics and integrity. Relying solely on company’s compliance team to keep a watchful eye on organisational management is inadequate. Instead, companies should put in place an ethical awareness framework that encompasses a clearly defined ethical and integrity-based principles, processes, core values and culture.

Regular compliance and accountability awareness programme can help companies circumvent any untoward consequences from unethical practices. As the legal environment becomes increasingly competitive, there is a higher demand for a risk-averse and full proof ethical framework.

 

3. Higher employee engagement level

When a company prioritises ethics and integrity, it has a direct impact on the employees’ productivity levels and welfare.

Employees who worked in Wells Fargo recently came out and described the horrors of working in the bank. They faced immense pressure to reach sales targets and number of new accounts that it took a huge toll on their mental well-being with many of them suffering from depression, anxiety and attempted suicide.

Creating conducive environment where employees of all ranks are respected and people adhere to the highest possible ethical standards when conducting business will influence how employees engage with their customers and with each other. When leaders treat all employees fairly regardless of positions, it cultivates a company culture of meritocracy and fair treatment.

Ethics

 

Concluding thoughts

No doubt that businesses are major key players in economy today. But when businesses act unethically, its ripple effect can have a major impact in the regional and global levels of communities. As quoted by Uncle Ben, Peter Parker’s uncle in Spider-Man:

“With great power comes great responsibility.”

 
This might interest you: 7 Leadership Lessons From Spider-Man
 

Being anchors in the organisation, leaders need to ensure that every practice, policies and people are in alignment with the organisation’s overall ethical framework. That being said, everyone has due diligence to uphold organisational integrity the best possible.

To empower your managers and executives with an understanding, experience and application of sound values in an organisation to drive business results, write to us at training@leaderonomics.com for details. For more Hard Talk articles, click here.

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