SYMMETRA

BUILDING A MORE ETHICAL CULTURE THROUGH INCLUSION

The public’s trust in many industries is at a low point. The World Banking Commission’s findings, reporting widespread cultural failings and misconduct within the financial services industry, followed by the Royal Banking Commission in Australia has contributed to less than one in five (20%) Australians stating that they believe banks can be trusted (as found in Deloitte’s survey of over 2000 customers for its 2018 Trust Index).

To address this problem all roads point to culture. Why does culture, as opposed to governance, systems, controls or incentives, play such an important role? The answer is that to actually have people behave in an ethical way is really quite difficult, even with all these other things in place. To understand why this is so, we need to look a bit into the psychology of ethics.

How we take ethical action

There are several steps people need to go through in order to take ethical action.

Step 1: Having an awareness of ethical components in a decision.

The first step in moral behaviour requires individuals to have an awareness that there are ethical components or ethical ramifications to a decision they’re about to make. This is often in and of itself a very big problem as there is a common human tendency to fade out or blur consciousness of the ethical components of a problem, particularly if it stands in the way of the objectives that we want to achieve.

Step 2: Reaching a sound ethical judgement or decision.

Let’s say we are aware of the ethical components in an impending decision, the next step is to reach a sound ethical judgement. A range of ethical traps can prevent us from managing this, including obedience to authority (the tendency to accept the rationalisation of someone in authority over us, even if we feel something is amiss), slippery slope (the tendency to fail to notice the gradual erosion of other’s ethical standards as long as each violation is only incrementally more serious than the preceding one) and bystander effects (the tendency to diffuse responsibility when many parties are involved and to wait for someone else to deal with it).

Step 3: Ethical intent.

We then have to translate our ethical judgement into ethical intent, meaning we have to decide that our ethical objectives and ethical values will take precedence over all the other values. In other words, being honest, or trustworthy, or having integrity is going to take precedence over wealth, fame, success, or achieving our KPIs.

 Step 4: Taking ethical action.

After all this, we finally have to translate ethical intent into ethical action. Quite often we will know what the right thing to do is, but because of the context or situation we don’t have the courage to follow through and take the ethical action that’s in line with our ethical intent.

The importance of culture

At any point this four step process can break down, which is why it is both hard to train someone to make an ethical decision, and explains how ‘good people do bad things’. Here is where culture can play a really important role in keeping us on track, prompting and reminding us that ethics is important, when designed to operate in such a way that will help us work through each of the four steps effectively.

So what does an ethical culture look like?

The Financial Stability Board identified the key drivers of misconduct in its Toolkit for Firms and Supervisors for Strengthening Governance Frameworks to Mitigate Misconduct Risk, grouping them under the categories of leadership, decision making and behavioural norms.

Symmetra analysed this list of behaviours, and through comparison with its own model, which defines the 10 competencies that constitute inclusive behaviour in the 21st century, identified that more than half of the behaviours listed by the Financial Stability Board are explicitly related to inclusive leadership and inclusive behaviours. This includes behaviours such as leveraging diversity of thought, creating psychological safety to express divergent views, creating constructive conflict, adopting a learning mindset, being curious and open to new ideas, counteracting bias and group think, and many others.

Symmetra therefore argues that an ethical culture will manifest many inclusive behaviours, and urges integrity and inclusion teams in organisations to work closely together.

There’s a wide range of research that evidences this link. Of course Symmetra is not saying that certain diverse groups are better at making ethically sound decisions. Rather, research shows that having diversity of thought in teams leads to more ethical decisions than those decisions made by homogeneous groups, with diverse teams having more robust debates and coming better prepared to listen, argue and counteract group think (where groups influence their members to all align their thinking without sufficient questioning or challenge). So for all these reasons the broader range of perspectives diverse groups bring enables organisations to reach better solutions to ethical problems, which is highly beneficial for organisations.

Real world examples can also testify to the link between inclusive behaviours and ethical cultures. Ethisphere, which votes into its membership the most ethical companies in the world, has found that in the last five years the companies they’ve voted in have had a better gender balance than Fortune 1,000 companies. In PwC’s 2018 Corporate Directors Survey, 84% of directors said their boards were performing better when they had become more diverse. A study undertaken in the UK involving over 900,000 companies showed similar results, with gender balanced boards resulting in better risk management, and companies with at least one female on the board 20% less likely to go bankrupt.

For Symmetra, whilst ethics training should not be dismissed, the key to embedding a more ethical culture is building inclusive leadership capability, which will permeate across the whole organisation. When you build leaders’ skills, knowledge and awareness so they behave in a more inclusive manner, they understand that they have to take into account the interests, motivations and contributions of others (employees, shareholders and customers) not just themselves when making decisions. Inclusion is thus the antithesis of greed and self-interest, which can so often lead to unethical behaviour.