DEFENSE CONTRACTING

Ethical Leadership in a Global Marketplace

11/1/2011
By Chris Raymond
“Relativity applies to physics, not ethics.”

Albert Einstein is credited with that powerfully simple statement, which helps explain how we must operate in an increasingly competitive global defense industry.  

Business has always been a contact sport.  However, winning at any cost isn’t winning at all. What’s more, cutting ethical corners simply isn’t necessary. We know, and research supports, that companies with strong ethical cultures outperform those whose ethical cultures are weak.  

The Corporate Executive Board recently released data showing companies with strong ethical cultures, open communication and managers who model corporate values, delivered shareholder returns that averaged 5 percent higher than peers; improved worker productivity of more than 12 percent. And such companies were 67 percent less likely to observe instances of business misconduct than those at companies with low integrity cultures.

Shaping an organization’s culture is a fundamental leadership task. When it comes to ethics that involves:   

Establishing and supporting a formal ethics program by committing the necessary resources to ensure a robust program; a written code of conduct, ongoing training, an ethics hotline with anonymous reporting (where permitted), periodic reviews of business policies, procedures and internal controls, dynamic internal communications and giving the ethics organization the necessary independence to fulfill their responsibilities.  

Modeling ethical leadership, especially when the going gets rough, can be seen as leading ethics and modeling company values. Keeping promises and commitments, to your team, your customers and your shareholders, is important — especially when there is pressure to compromise values. Tony Simons, in the Harvard Business Review, stated, “Organizations where employees strongly believed their managers followed through on promises and demonstrated the values they preached were substantially more profitable than those whose managers scored average or lower.”

Setting clear expectations of employees for ethical behavior for both modeling and explaining company values, and desired conduct. Ensure that tools and training are provided to help employees make the “right” decisions.  This includes maintaining clear and accessible policies and procedures as well as knowledgeable ethics and compliance personnel who can coach and guide employees who have ethical questions — especially where international customs or business practices fall into “gray” areas.

Promoting a culture of openness and transparency and making intentions and motives clear. To the extent possible, share business information with team members. Leaders must not only be willing to raise difficult issues themselves but also make it easy for employees to voice questions and concerns. Demonstrate that retaliation is not tolerated and act on issues that are raised.  

Holding themselves and their teams accountable for ethical conduct and demonstrating expected ethical behaviors should be linked to performance evaluations at all levels in the organization. Recognize employees who demonstrate desired behaviors. Rewards should be based not only what goals are achieved, but also on how goals are achieved. Policies on ethical conduct should be enforced consistently over time and regardless of the person’s position within the company.

Maintaining vigilance to avoid ethical risks by including a structured risk assessment process, especially in developing markets. Policies and procedures should be periodically reviewed to ensure compliance with current domestic and international laws.

With such a framework in place an organization can help its employees properly handle the pressure to win business and the requirement to conduct business properly.

It is important for leaders to set the tone by reinforcing a strong ethical culture. Maintaining universal ethical values and being sensitive to the laws and customs of a diverse global customer environment can be a competitive advantage. An advantage that is sustainable and more important than ever given the realities of today’s global defense market.

Einstein, not surprisingly, was correct.

Chris Raymond is vice president of business development at Boeing Defense, Space & Security.

Topics: International

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