Basics of Financial Management in U.S. Small For-Profit Businesses

Employees going through a financial report

Basics of Financial Management in U.S. Small For-Profit Businesses

© Copyright Carter McNamara, MBA, PhD, Authenticity Consulting, LLC.
Applies to for-profits unless otherwise noted.

Sections of This Topic Include

Also consider
Related Library Topics

Learn More in the Library’s Blogs Related to Financial Management in Businesses

In addition to the articles on this current page, also see the following blogs that have posts related to Financial Management in Businesses. Scan down the blog’s page to see various posts. Also see the section “Recent Blog Posts” in the sidebar of the blog or click on “next” near the bottom of a post in the blog. The blog also links to numerous free related resources.


Description

The following basic overview will give you some overall perspective on the basic processes involved in financial management in small for-profit businesses in the United States. Key terms to learn are bolded. You’ll learn more about the key terms later in subsequent sections when you return to

The following activities described on this page occur regularly as part of the yearly accounting cycle. The accounting cycle includes bookkeeping, generating financial statements and analyzing information from the statements.

NOTE: Sole proprietorships do not have boards of directors, whereas corporations do. Therefore, any mention of boards of directors in the following, pertains to corporations.

Basic Bookkeeping Activities

Bookkeeping is basically recording various financial transactions. Bookkeeping activities can often by done by someone who’s doing basic clerical work in the business.

Fiscal Policies and Procedures Manual (or Accounting Procedures Manual)

As your business grows, it helps to develop a set of procedures for how your business manages its finances, including how the following activities are carried out by your business. You and your employee will be able to work from the manual to carry out financial management activities. You can also hire a finance professional to review the manual to ensure it’s up to date.

Type of Accounting System and Recording of Financial Transactions

Accounting starts with basic record keeping (or bookkeeping). When your organization is just getting started, your bookkeeping system will probably be based on what’s called a cash-basis accounting system, rather than accrual-basis system. Many organizations, when starting out, use the cash-basis system and a checkbook to track transactions. In the “memo” portion of the checkbook, they note if the amount depicted on the check is an expense or revenue, and where the amount came from or is going to. As your organization grows, you’ll begin using ledgers to track transactions, for example, you’ll post cash receipts to a cash receipts journal and checks you write to a cash disbursements journal.

As your nonprofit grows and as you begin using the accrual method, you’ll likely need more types of journals, for example, a Cash Receipts Journal, Cash Disbursements Journal, Payroll Journal, Accounts Receivable Ledger, Accounts Payable Ledger, Sales Journal, Purchases Journal and General Ledger.

(In an accrual-basis system, you post entries when you earn the money and when you owe it. Small organizations usually do not have the resources to use an accrual-based system. However, financial statements are prepared on an accrual basis. As a compromise, many organizations use the cash-based basis to record entries in journals, but get help to convert to an accrual-based basis to generate financial statements.)

You can do postings using a single-entry or double-entry method. Double-entry works from a basic accounting equation “assets = liabilities + capital”. The double-entry method makes sure that your books are always in balance. Every transaction has two journals entries, a debit and a credit. Each transaction effects both sides of the equation.

You’ll post your cash disbursements in a journal of entry. Each posting might refer to accompanying documents that you keep in a file somewhere. For example, postings about cash receipts might refer to invoices that you sent to a customers which prompted them to write checks to your business (checks which you posted cash receipts). For example, postings about cash disbursements might refer to invoices that were sent to your business which prompted you to write checks (checks which you posted as cash disbursements.) When you make a deposit to the bank, you’ll file the bank’s deposit receipt in a file.

Other record keeping might include posting (probably in an accounts receivable journal) what people owe you (accounts receivable), (and posting in an accounts payable journal) what you owe other people (accounts payable) and posting in another type of journal what assets (inventories, cash, facilities, equipment, etc.) you own. This information will also be used to compute and pay your taxes at the end of the year.

Manual or Automated Accounting System

Your initial record keeping system will probably be based on a manual system (where you make entries and total them by hand) or you might use a computer system. You might even choose to outsource your record keeping system to another business that manages your bookkeeping activities (along with other financial management activities) for you.

A computer-based system greatly automates entry of transactions, updating of ledgers, generation of financial statements and financial analysis (more on these later), and generation of reports needed for filing taxes, etc. The only drawback to using a computer is that you might underestimate the importance of knowing how your accounting processes really work — that’s an advantage of doing the bookkeeping yourself, if only for a few months. You should also generate your own financial statements and financial analysis at least for a couple of months. Having this knowledge and experience helps you develop an instinct for getting the most out of your financial resources.

(We’ll talk more about that back in the topic , after we’ve reviewed the rest of the information on this page.)

Accounts and Chart of Accounts

You’ll post each entry according to the category, or account, of the transaction. Each account will be associated with an account number. These numbers are referenced when developing your financial statements (more on those later). You’ll refer to a chart of accounts which will tell you what account number to use when you post an entry. You can design your own chart of accounts, including coming up with your own account numbers. The chart should organize account numbers in the general categories of assets, liabilities, capital, income, and expenses. The account numbers you come up with should depend on the particular kinds of revenues and expenses you expect to have most frequently.

Budgets (Financial Forecasting)

You’ll have a an operating budget (or annual budget), which shows planned revenue and expenses, usually for the coming year. Budget amounts are usually divided into major categories, for example, salaries, benefits, computer equipment, office supplies, etc. You might also have cash budgets, which depicts the cash you expect to receive and pay over the near term, for example a month. You also might have capital budgets, which depict expenses to obtain or develop, and operate or maintain major pieces of equipment, for example, buildings, automobiles, computers, furniture, etc. Development of the budgets is usually driven by the chief executive. In the case of corporations, the board treasurer can take a strong role in developing and presenting the budget to the rest of the board. The board is responsible to authorize the yearly budgets.

Usually, each month (after you’ve done trial balancing — more on that later), you’ll update your budget report to include actual revenue and expenses. Then you can compare your planned revenue and expenses to your actual revenue and expenses. This will give you a good idea whether your operating according to plan or not, including where you need to cut down on expenses and build up on revenue.

Petty Cash

You’ll have a lot of small, recurring expenses that you’ll need to pay right away, for example, to buy a computer power cord, stamps, etc. You’ll probably work from a petty cash fund. You might establish this fund by writing a check to the fund, and noting on the check that it goes to the “petty cash” fund. You’ll withdraw from the fund by filling out a voucher that describes who took the money, how much, for what and on what date.

Trial Balances

Usually, once a month, you’ll do trial balances. This activity usually starts by totaling the entries from the journal(s) into a general ledger. (As your business grows, you may use other types of ledgers, too, for example for equipment, payroll, etc.) When using double-entry accounting, you’ll add up totals on both sides of the ledger to make sure that total debits equal total credits.

You’ll make sure that the individual postings and totals are correct by comparing each to its accompanying documentation. For example, your recording of cash disbursements will be compared to your bank’s monthly checking statement that indicates what checks you wrote over the month. Your recording of cash disbursements will also be compared to accompanying invoices and other forms of billing to your business, to verify there was a need for each check that was written to pay bills.

Internal Controls

You will have various forms of internal controls to ensure the business is following its plans, minimize the likelihood of mistakes, avoid employee thefts, etc. There are a wide range of internal controls. For example, you’ll be careful about whom you hire. You might have authorization lists about who can access which areas of the building, types of information, etc.

As mentioned above, you’ll carry over totals to various financial reports, including your budget, to see if your financial activities are according to plan or not. To minimize employee theft, the business’s mail will be opened by one person who logs in each check that is received. This person will be someone other than the person who deposits the checks to the bank. Disbursements of large amounts, for example, over $500, may require a secondary signature, for example, from the board treasurer in the case of corporations.

Another form of financial control is an audit. An audit is a comprehensive analysis, by a professional from outside the business, of your financial management procedures and activities. The auditor produces a report, with a variety of supplements, that indicates how well your business is managing its resources. It’s usually good practice to have an audit, whether you’re required to or not.

Financial Statements

In order to know how your business is doing, you’ll do some ongoing financial planning and analysis. In this planning and analysis, you’ll likely use your bookkeeping information to produce various financial statements, including a cash flow statement, and profit and loss (P&L) statement and a balance sheet.

Your cash flow statement depicts changes in your cash during the year. Your profit and loss statement depicts the changes in your assets over the past year. This statement is particularly useful to tell you if you are operating with extra money or at a deficit. This gives you a pretty good impression of your rate of revenues and spending. It signals areas of concern, as well.

Your balance sheet depicts the overall value of your business at a given time (usually at the end of the year), including by reporting your total assets, subtracting your total liabilities and reporting the resulting net assets. Investors often want to see the balance sheet. You’ll learn a lot more about financial statements, including examples, later on back in the topic All About Financial Management in For-Profits.

Financial Analysis

By themselves, numbers usually don’t mean much. But when compare them to certain other numbers, you can learn a lot about how your business is doing. For example, you can compare the planned expenses depicted on your budget to your actual expenses in order to see if your spending is on track.

Another form of comparison is by using ratios. A ratio is a comparison made by mathematically dividing one number by the other. The interpretation of results from various types of comparisons depends on the nature of the business. For example, a wholesale business might have different types and ranges of expenses than a retail business. You’ll learn a more about financial analysis back in the topic
All About Financial Management in For-Profits.

Financial Reporting

The types of frequency of reports depend on the nature of the business and its situation. For example, if the business is in some sort of crisis, management, bankers, etc., may require frequent reports of various types.

In the case of corporations, your board typically will require regular financial reports at each board meeting. When your business just gets started, the chief executive might prepare and present financial reports to the board. When the business develops, a board finance committee can be a big help. The committee, led by the board treasurer, ensures that reports are complete and helps present them to other members of the board.

The board may require a cash flow statement, profit and loss statement and balance sheet at each meeting. They also may request descriptions of finances for upcoming, major initiatives. They may request information prior to filing taxes. They will certainly need to see any results from financial audits. You’ll learn a more about financial reporting back in the topic
All About Financial Management in For-Profits.


For the Category of Financial Management (For-Profit):

To round out your knowledge of this Library topic, you may want to review some related topics, available from the link below. Each of the related topics includes free, online resources.

Also, scan the Recommended Books listed below. They have been selected for their relevance and highly practical nature.

Business Development — Growing Your For-Profit or Nonprofit Organization

Young Business People in a Meeting

Business Development — Growing Your For-Profit or Nonprofit
Organization

© Copyright Carter McNamara,
MBA, PhD

Whether your organization is a for-profit or nonprofit, you
have to address certain considerations and make certain decisions
if you set out to intentionally expand — or grow — your organization,
products and/or services. You can grow your organization, products
and/or services just by managing them well, for example, by having
very good products and services that are sold with strong sales
and customer service. However, this topic in the Library is for
those with an explicit goal to intentionally grow the organization,
product or service.

Notes About Terms:

  1. The phrase business development is so common and broad
    in nature that it means many different things to many different
    people. In this Library topic, the phrase means growing — or
    expanding — an organization, product and/or service, including
    by starting a new product or service, if necessary.
  2. The phrase “business development” traditionally
    does not refer to starting a new organization. For information
    relevant to that activity, see Entrepreneurs — Are You Really Ready to Start
    a New Venture?
    , Starting
    a Business
    or Starting a Nonprofit.
  3. The term “development” could mean strengthening,
    rather than expanding, the organization, products or services.
    However, business development traditionally has not meant primarily
    the process of strengthening; rather, it’s meant growth or expansion.
  4. Certainly, many people would agree that it’s more important
    to be sustainable than to grow (although growth could be done,
    but sustainably). For those people, see the topic Organizational Sustainability.
  5. Although the guidelines in this section apply to growing
    an organization, product or service, the term “organization”
    is used to apply to either of these three — this is to avoid
    tedious duplication of terms throughout this topic.

Sections of This Topic Include

Understanding Life Cycles of Organizations,
Products and Services

Deciding Whether to Grow or Not
Evaluate Your Organization — What Are
You Starting From? What Do You Need to Fix First?

Growing Your Organization — Are You Personally
Ready?

Typical Challenges in Growing
General Advice to Grow Your Organization
Getting Professional Help
Planned Growth — Strategic and Business
Planning

Planned Growth — Organizational Change
and Development (Managing Change)

Ways to Grow — Organizational Alliances
Ways to Grow — Buying a Franchise
Ways to Grow — Buying a Business
Ways to Grow a Product and/or Market Development
You May Need to Increase Staff
Leading and Supervising Staff, and Managing
Resources

Financing Growth

Also consider
Related Library Topics


Understanding Life Cycles of Organizations, Products and Services

Organizations go through certain life cycles just like other
systems, including people, plants and animals. When setting out
to intentional grow, it really helps organizational leaders to
understand the nature of each of these cycles and the challenges
in moving from one cycle to another. When reading the following
articles, think about what life cycle your organization, product
or service is in.
Find Your Business Life Cycle
Basic
Overview of Life Cycles of Organizations

Founder’s
Syndrome — How Organizations Suffer — and Can Recover

Deciding Whether to Grow or Not

There are certain considerations that must be made when deciding
whether to grow or not — you don’t have to grow it if you don’t
want to.
To Grow or Not to Grow

How to Expand Without Losing Your Indie Culture
Are
You Ready to Grow Your Business?

Evaluate Your Organization — What Are You Starting From?
What Do You Need to Fix First?

Before you start major activities to grow your organization,
you should first get a realistic impression of how your organization
is doing now. There are a variety of tools that you can use to
get a quick impression.
Organizational
Assessments (For-Profit)

Organizational
Assessments (Nonprofit)

Growing Your Organization — Are You Personally Ready?

There are certain considerations about yourself that also must be made when
deciding whether to grow your organization or not — again, you don’t have to
grow it if you don’t want to.
Are
You Personally Ready to Start a New Venture?

Taking Risks: Your Attitude Toward Business Growth
33 Small Ways to Expand Your Comfort Zone

Typical Challenges in Growing

Organizations often face the same types of challenges when growing. Organizational
leaders often face the same types of challenges, as well.
Founder’s Syndrome (founders
sometimes struggle to change themselves)

Getting Over Growing Pains
The Perils of Expansion
Busting
Down the Obstacles to Growth

General Advice to Grow Your Organization

Keep in mind that the following general advice can apply to
nonprofits, as well as for-profits.
3 Ways to Grow Your Business
Alternatives to Hiring Employees
10 Steps to Grow Your Business in a Difficult Economy
How to Scale Up Your Service Business
Don’t Take the Sales Order
10 Tips on How to Get More Clients
Getting that Sales Growth!
Got Structure? Need it?
Marketing’s the Engine of a Growing Company
Are you an Innovator, an Entrepreneur, or a Manager?
The Data-Backed Secret to Sales Growth
Gain Insight – Get a Board

Getting Professional Help

There are many sources of help, especially for small to medium-sized businesses.
Many of these sources are the same as those for helping you to start a business.
This link is to many free sources of help.
Free
Help to Start a Business

If you hire a consultant, the following link may be useful.
All About Consulting
– Types, Skills and Approaches

Lastly, you might need an account and lawyer, for example, to review contracts.
Getting
an Accountant
Getting
a Lawyer






Planned Growth — Strategic and Business Planning

One of the best ways to carefully think through how you want
to grow your organization, product or service is through the use
of business planning — many people might refer to this as business
development planning to produce a Business Development Plan. Business
planning applies to for-profits and nonprofits (in the case of
nonprofits, business planning is sometimes associated with Social
Enterprise
.) (Many people believe that strategic planning
should focused on the entire organization, while business planning
should be focused on a particular product or service — thus,
business planning is repeated in the section, below, about growing
a product or service.)
All About Strategic
Planning

All About Business
Planning

New Business Models in Emerging Markets
Finding the Hidden Gems in Your Business Model

Guidelines, Methods and Resources for Organizational Change Agents

Significantly developing an organization involves significant organizational
change. Organizations are changing today like never before. Over the last ten
years or so, there has been a dramatic increase in the amount of literature
about accomplishing long-lasting successful organizational change.
Guidelines, Methods and Resources for Organizational Change Agents

Ways to Grow — Organizational Alliances

Another way to grow your organization is to merge with another
organization or form a joint venture.
Organizational
Alliances (collaborations, joint ventures, acquisitions, mergers)

Ways to Grow — Buying a Franchise

In some cases, you may be better off to buy a franchise, that
is, a business strategy and structure that has been proven to
work in other markets and your challenge is to set up your franchise
in your locale. Many people might assert that this is not a form
of business development; rather, it’s entrepreneurship in starting
a new organization.
All
About Franchising

Ways to Grow — Buying a Business

You can also grow your organization by buying another organization,
or one or more of its product lines. Note that a nonprofit typically
cannot be “bought,” as it is owned by the public, not
by individuals or stockholders. Similar to buying a franchise,
many people might assert that this is not a form of business development;
rather, it’s entrepreneurship in starting a new organization.

Buying
a Business

Ways to Grow — Product and/or Market Development

Quite often, the best way to grow an organization is to grow
your markets. For example, organizations can generate revenue
from understanding the Product/Market Grid:

  1. Selling more of the current products to more of the current
    customers (customer maximization)
  2. Selling more of the current products to new customers (customer
    development)
  3. Selling new products to current customers (product development)
  4. And/to selling new products to new customers (diversification).

Product and
Service Development

You May Need to Increase Staff

The following link is to a collection of well-organized articles
in regard to staffing planning, recruiting, screening applicants,
hiring applicants, training them and managing their performance.
Staffing

Leading and Supervising Staff,
and Managing Resources

Development won’t be successful unless the people in the organization
are successfully led and supervised, and the organization’s resources
are successfully managed.
Leadership
Management
Supervision

Financing Growth

It’s very likely that you’ll need some form of financial assistance from investors
or funders to help fund the growth. Many of the sources of funding to start
a business are those that might fund expansion of a business.
How
to Get Money to Start a Business
Financing and Managing Growth
Fundraising
in For-Profits

Fundraising
in Nonprofits


Learn More in the Library’s Blogs Related to Business Development

In addition to the links on this current page, also see the following blogs
that have posts related to Business Development — Building a Business. Scan
down the blog’s page to see various posts. Also see the section “Recent
Blog Posts” in the sidebar of the blog or click on “next” near
the bottom of a post in the blog. The blog also links to numerous free related
resources.

Library’s
Business Planning Blog

Library’s
Building a Business Blog

Library’s
Consulting and Organizational Development Blog

Library’s
Strategic Planning Blog


For the Category of Business Development

Related Library Topics

Recommended Books


MAP for Nonprofits’ Team Values

Colleagues having a Team Building

MAP for Nonprofits’ Team Values

(Also see Ethics:
Practical Toolkit for Business
).

This document serves as an example
of a code of ethics. As well as having corporate codes, codes
can be geared for specific purposes and be focused on various
relationships. The following code is geared to support the working
relationships among staff at MAP
for Nonprofits.

These team values guide how we MAP
staff members interact with each other in our workplace. The integrity
of these values rests on how consistently we apply them. We regularly
review and update these values to reflect current priorities in
our workplace.

– Actively work for the common good –

LEADERSHIP

· Model MAP’s corporate vision, mission and values, as
well as these team values

RESPONSIBILITY & INTEGRITY
· Participate — say what you believe
· Work to know who will do what and by when
· Do what you say you’re going to do when you say you’re going to do it
· Take initiative!

RESPECT
· Actively listen and acknowledge my viewpoint
· Recognize the value of my job — ask for my help and
realize that I have other priorities
· Be sensitive to my values, my culture — reap the richness
of diversity
· Be friendly and thoughtful to all

TEAMWORK
· Recognize others’ contributions and successes
· Cooperate with fellow staff members and support their efforts
· Support MAP decisions and strategic objectives
· Don’t take ourselves too seriously — have fun!

CREATIVITY
·Encourage thinking “outside the box”
·Encourage discussion around points of disagreement or uncertainty
·Challenge the status quo
·Envision possibilities
·Allow yourself to experiment, fail and try again

– Respectfully hold people responsible for these Team Values –

1997

This document can be copied; please cite MAP for Nonprofits in St. Paul, Minnesota.


For the Category of Ethics:

To round out your knowledge of this Library topic, you may want to review some related topics, available from the link below. Each of the related topics includes free, online resources.

Also, scan the Recommended Books listed below. They have been selected for their relevance and highly practical nature.

Related Library Topics

Recommended Books


Business Ethics and Social Responsibility

Business ethics written on a note

Business Ethics and Social Responsibility

Sections of This Topic Include

Also consider
Related Library Topics

Learn More in the Library’s Blogs Related to Ethics and Social Responsibility

In addition to the articles on this current page, also see the following blog that has posts related to Ethics and Social Responsibility. Scan down the blog’s page to see various posts. Also see the section “Recent Blog Posts” in the sidebar of the blog or click on “next” near the bottom of a post in the blog. The blog also links to numerous free related resources.

Library’s Business Ethics Blog


About Ethics, Principles and Moral Values

See a video about managing ethical and legal risks and boundaries, and what to do if you encounter ethical or legal issues. (The video is in the context of consulting, but applies to leading, as well.) From the Consultants Development Institute.

Simply put, ethics involves learning what is right or wrong, and then doing the right thing — but “the right thing” is not nearly as straightforward as conveyed in a great deal of business ethics literature. Most ethical dilemmas in the workplace are not simply a matter of “Should Bob steal from Jack?” or “Should Jack lie to his boss?”

(Many ethicists assert there’s always a right thing to do based on moral principle, and others believe the right thing to do depends on the situation — ultimately it’s up to the individual.) Many philosophers consider ethics to be the “science of conduct.” Twin Cities consultants Doug Wallace and John Pekel (of the Twin Cities-based Fulcrum Group; 651-714-9033; e-mail at jonpekel@atti.com) explain that ethics includes the fundamental ground rules by which we live our lives. Philosophers have been discussing ethics for at least 2500 years, since the time of Socrates and Plato. Many ethicists consider emerging ethical beliefs to be “state of the art” legal matters, i.e., what becomes an ethical guideline today is often translated to a law, regulation or rule tomorrow.

Values which guide how we ought to behave are considered moral values, e.g., values such as respect, honesty, fairness, responsibility, etc. Statements around how these values are applied are sometimes called moral or ethical principles. (Extracted from Complete (Practical) Guide to Managing Ethics in the Workplace.)

What is Business Ethics?

The concept has come to mean various things to various people, but generally it’s coming to know what it right or wrong in the workplace and doing what’s right — this is in regard to effects of products/services and in relationships with stakeholders.

Wallace and Pekel explain that attention to business ethics is critical during times of fundamental change — times much like those faced now by businesses, both nonprofit or for-profit. In times of fundamental change, values that were previously taken for granted are now strongly questioned. Many of these values are no longer followed.

Consequently, there is no clear moral compass to guide leaders through complex dilemmas about what is right or wrong. Attention to ethics in the workplace sensitizes leaders and staff to how they should act.

Perhaps most important, attention to ethics in the workplaces helps ensure that when leaders and managers are struggling in times of crises and confusion, they retain a strong moral compass. However, attention to business ethics provides numerous other benefits, as well (these benefits are listed later in this document).

Note that many people react that business ethics, with its continuing attention to “doing the right thing,” only asserts the obvious (“be good,” “don’t lie,” etc.), and so these people don’t take business ethics seriously. For many of us, these principles of the obvious can go right out the door during times of stress. Consequently, business ethics can be strong preventative medicine. Anyway, there are many other benefits of managing ethics in the workplace. These benefits are explained later in this document.

(Extracted from Complete (Practical) Guide to Managing Ethics in the Workplace.)

Managing Ethics in the Workplace

Managing Ethics Programs in the Workplace

Organizations can manage ethics in their workplaces by establishing an ethics management program. Brian Schrag, Executive Secretary of the Association for Practical and Professional Ethics, clarifies. “Typically, ethics programs convey corporate values, often using codes and policies to guide decisions and behavior, and can include extensive training and evaluating, depending on the organization. They provide guidance in ethical dilemmas.” Rarely are two programs alike.

“All organizations have ethics programs, but most do not know that they do,” wrote business ethics professor Stephen Brenner in the Journal of Business Ethics (1992, V11, pp. 391-399). “A corporate ethics program is made up of values, policies and activities which impact the propriety of organization behaviors.”

Bob Dunn, President and CEO of San Francisco-based Business for Social Responsibility, adds: “Balancing competing values and reconciling them is a basic purpose of an ethics management program. Business people need more practical tools and information to understand their values and how to manage them.” (Extracted from Complete (Practical) Guide to Managing Ethics in the Workplace.)

Developing Codes of Ethics

According to Wallace, “A credo generally describes the highest values to which the company aspires to operate. It contains the `thou shalts.’ A code of ethics specifies the ethical rules of operation. It’s the `thou shalt nots.” In the latter 1980s, The Conference Board, a leading business membership organization, found that 76% of corporations surveyed had codes of ethics.

Some business ethicists disagree that codes have any value. Usually they explain that too much focus is put on the codes themselves, and that codes themselves are not influential in managing ethics in the workplace. Many ethicists note that it’s the developing and continuing dialogue around the code’s values that is most important. (Extracted from Complete (Practical) Guide to Managing Ethics in the Workplace.)

Developing Codes of Conduct

If your organization is quite large, e.g., includes several large programs or departments, you may want to develop an overall corporate code of ethics and then a separate code to guide each of your programs or departments. Codes should not be developed out of the Human Resource or Legal departments alone, as is too often done. Codes are insufficient if intended only to ensure that policies are legal. All staff must see the ethics program being driven by top management.

Note that codes of ethics and codes of conduct may be the same in some organizations, depending on the organization’s culture and operations and on the ultimate level of specificity in the code(s). (Extracted from Complete (Practical) Guide to Managing Ethics in the Workplace.)




Resolving Ethical Dilemmas and Making Ethical Decisions

Perhaps too often, business ethics is portrayed as a matter of resolving conflicts in which one option appears to be the clear choice. For example, case studies are often presented in which an employee is faced with whether or not to lie, steal, cheat, abuse another, break terms of a contract, etc. However, ethical dilemmas faced by managers are often more real-to-life and highly complex with no clear guidelines, whether in law or often in religion.

As noted earlier in this document, Doug Wallace, Twin Cities-based consultant, explains that one knows when they have a significant ethical conflict when there is presence of a) significant value conflicts among differing interests, b) real alternatives that are equality justifiable, and c) significant consequences on “stakeholders” in the situation. An ethical dilemma exists when one is faced with having to make a choice among these alternatives.

Assessing and Cultivating Ethical Culture

Culture is comprised of the values, norms, folkways and behaviors of an organization. Ethics is about moral values, or values regarding right and wrong. Therefore, cultural assessments can be extremely valuable when assessing the moral values in an organization.

Also consider

Ethics Training

The ethics program is essentially useless unless all staff members are trained about what it is, how it works and their roles in it. The nature of the system may invite suspicion if not handled openly and honestly. In addition, no matter how fair and up-to-date is a set of policies, the legal system will often interpret employee behavior (rather than written policies) as de facto policy.

Therefore, all staff must be aware of and act in full accordance with policies and procedures (this is true, whether policies and procedures are for ethics programs or personnel management). This full accordance requires training about policies and procedures.

Some Contemporary (Arguably) Ethical Issues






General Resources Regarding Managing Ethics in the Workplace


Social Responsibility

Social responsibility and business ethics are often regarding as the same concepts. However, the social responsibility movement is but one aspect of the overall discipline of business ethics. The social responsibility movement arose particularly during the 1960s with increased public consciousness about the role of business in helping to cultivate and maintain highly ethical practices in society and particularly in the natural environment.

Boards and Corporate Social Responsibility


General Resources Regarding Social Responsibility

There are many online resources in regard to social responsibility. The following will help to get your started.


For the Category of Ethics:

To round out your knowledge of this Library topic, you may want to review some related topics, available from the link below. Each of the related topics includes free, online resources.

Also, scan the Recommended Books listed below. They have been selected for their relevance and highly practical nature.


Complete Guide to Ethics Management: An Ethics Toolkit for Managers

Ethics concept

Complete Guide to Ethics Management: An Ethics Toolkit for Managers

© Copyright Carter McNamara, MBA, PhD, Authenticity Consulting, LLC.
(This guide is located at https://staging.management.org/businessethics/ethics-guide.htm on the Web.)

The profession of business ethics has long needed a highly practical resource that is designed particularly for leaders and managers — those people charged to ensure ethical practices in their organizations. Unfortunately, far too many resources about business ethics end up being designed primarily for philosophers, academics and social critics. As a result, leaders and managers struggle to really be able to make use of the resources at all.

Also, far too many resources about business ethics contain sensationalistic stories about businesses “gone bad” or prolonged preaching to businesses to “do the right thing”. These resources often explore simplistic ethical questions, such as “Should Jane steal from the company?” The real world of leaders and managers is often much more complex than that.

This guide is a straightforward and highly practical tool designed to help leaders and managers implement comprehensive ethics management systems in their workplaces — systems to deal with the complex, ethical issues that can occur in the day-to-day realities of leading and managing an organization.

For Web readers:

This free guidebook is about 20 pages long (8 1/2″ x 11″ pages). If you are reading the document on the World Wide Web, please wait until the document is fully loaded before attempting to link to its sections listed below. The best approach to using this guidebook may be to print it out for ongoing reference. The Free Management Library provides additional information about ethics and a great range of other free information about management. For a complete list of library topics, see https://staging.management.org/topics.htm

Disclaimer:

The author, Carter McNamara, MBA, PhD, makes no warranty, express or implied, nor assumes any legal liability for accuracy, completeness, or usefulness of any information from this guide.

Another Tool to Effectively Infuse Ethical Principles:

If you are planning to infuse strong, ethical principles throughout your company or want to change the culture of your company, then you might take the advice of Bob Kniffin, Vice President of External Affairs, at Johnson and Johnson (J&J) company. The way that J&J handled an ethical issue (the “Tylenol scare” crisis) in the 1980s is probably one of the most inspiring and enlightening examples of how to successfully deal with a major ethical issue in business. Kniffin was one of the key players in helping J&J to handle the crisis so effectively. Kniffin said that it was not the J&J Credo (a form of a code of ethics) that helped J&J to handle the crisis so well. Rather, it was the ongoing “challenge sessions” that the company regularly held in order for each person to clarify their own perspective and commitment to the J&J Credo. Authenticity Consulting’s peer coaching groups are a powerful, yet straightforward, means to organize, facilitate and evaluate challenge sessions. For more information about the peer coaching groups, go to our publications site (https://www.authenticityconsulting.com/act-lrn/AC_pubs.htm) and consider the “Program Planning Kit”.

About this Free Guidebook

· This free guidebook aims to fill a large void of practical, realistic ethics information for leaders and managers, whether nonprofit or for-profit.
· This guidebook takes about two hours to read. It is concisely written and well organized as a step-by-step guidebook for handy reference.
· This guidebook is free in order to make its contents highly accessible to organizations, particularly those with limited resources. The free nature of this document does not in any way indicate that its content are of low value — high fees and impressive presentation do not necessarily imply high value.
· The author hopes the online form of this document remains a dynamic community resource that is continually modified and improved by feedback, particularly from leaders and managers — those people in the trenches who are charged with applying business ethics techniques in the workplace.

This document contains the following sections:

Also consider
Related Library Topics

Acknowledgment
Particular “Thanks!” goes to Twin Cities-based consultants, Doug Wallace and Jon Pekel, of the Fulcrum Group (651-714-9033; e-mail at jonpekel@comcast.net), for contributing key information to this document. I have referenced their copyright where I included their key materials in this guidebook.


Document Fills a Void of Practical Business Ethics Information for Leaders and Managers

Current Literature is Focused on Needs of Philosophers, Academics and Social Critics — Leaders and Managers Require More Practical Information About Managing Ethics
Managing ethics in the workplace holds tremendous benefit for leaders and managers, benefits both moral and practical. This is particularly true today when it is critical to understand and manage highly diverse values in the workplace.

However, the field of business ethics has traditionally been the domain of philosophers, academics and social critics. Consequently, much of today’s literature about business ethics is not geared toward the practical needs of leaders and managers — the people primarily responsible for managing ethics in the workplace. The most frequent forms of business ethics literature today typically include: a) philosophical, which requires extensive orientation and analysis; b) anthologies, which require much time, review and integration; c) case studies, which require numerous cases, and much time and analyses to synthesize; and d) focus on social responsibility, which includes many examples of good and bad actions taken by companies. (This lack of practical information is not the fault of philosophers, academic or social critics. The problem is the outcome of insufficient involvement of leaders and managers in discussion and literature about business ethics. More leaders and managers must become involved. This guidebook aims to increase that involvement.)

What’s Conspicuously Missing is the “How to” of Managing Ethics in the Workplace
But it isn’t from lack of examples that managers aren’t better at managing ethics in the workplace — they require more practical information about managing ethics. This problem was explained very well by Stark in his article, “What’s the Matter with Business Ethics?” published in the Harvard Business Review (1993, May/June, pp. 38-48). Brenner (Journal of Business Ethics, V11, pp. 391:399) notes “while much has been written about individual components of ethics programs, especially about codes of ethics, the literature is much more limited on ethics programs.” Wong and Beckman (Journal of Business Ethics, V11, pp. 173- 178) note that “researchers are claiming that current literature is filled with strong arguments for more ethical corporate leadership and incorporation of ethics in business curriculum, but what is conspicuously missing is the “how to” in actually putting ethical goals and theories into practical action.”

Myths Abound About Business Ethics, e.g., “Ethics is Simply to Do What’s Right”
Lack of involvement from leaders and managers in the field of business ethics (again, this is the fault of no one or of everyone) has spawned a great deal of confusion and misunderstanding among leaders and managers about business ethics. McDonald and Zepp, in their article “What Should Be Done? A Practical Approach to Business Ethics” (Management Decision, 28, 1, 1990, pp. 9-13), note that when someone brings up the topic of business ethics “… it tends to bring up cynicism, righteousness, paranoia, and laughter.” Many leaders and managers believe business ethics is religion because it seems to contain a great deal of preaching. Or, they believe it to be superfluous because it seems to merely assert the obvious: “do good!”

Business Ethics Literature is Often Far Too Simplistic — So Many Leaders and Managers Think Business Ethics is Irrelevant

Stark notes that “often ethicists advance a kind of moral absolutism that avoids many of the difficult and most interesting questions.” Case studies to explore ethical dilemmas are often far too simplistic, presented as if every real-life situation has a right and wrong e.g., “should I lie, cheat or steal?” Consequently, many managers believe business ethics is irrelevant because too much business ethics training avoids the real-to-life complexities in leading organizations. (This document contains samples of real-to-life, complex ethical dilemmas, in a subsection, “Examples of Real-to-Life Complex Ethical Dilemmas” in the upcoming section “Ethics Tools: Resolving Ethical Dilemmas.”) Bob Dunn, President and CEO of San Francisco-based Business for Social Responsibility, explains, “Ethical decisions aren’t as easy as they used to be. Now, they’re the difference between right — and right.” Preston Townley, in his speech “Business Ethics: Commitment to Tough Decisions” (Vital Speeches, January 1992, pp. 208-211), states that “… it ought to be fairly easy to choose between right and wrong by relying on principles, but business activity often demands that we select from alternatives that are neither wholly right or wholly wrong.”

What is Business Ethics?

Let’s Start With “What is ethics?”

Simply put, ethics involves learning what is right or wrong, and then doing the right thing — but “the right thing” is not nearly as straightforward as conveyed in a great deal of business ethics literature. Most ethical dilemmas in the workplace are not simply a matter of “Should Bob steal from Jack?” or “Should Jack lie to his boss?”

(Many ethicists assert there’s always a right thing to do based on moral principle, and others believe the right thing to do depends on the situation — ultimately it’s up to the individual.) Many philosophers consider ethics to be the “science of conduct.” Twin Cities consultants Doug Wallace and John Pekel (of the Twin Cities-based Fulcrum Group; 651-714-9033; e-mail at jonpekel@atti.com) explain that ethics includes the fundamental ground rules by which we live our lives. Philosophers have been discussing ethics for at least 2500 years, since the time of Socrates and Plato. Many ethicists consider emerging ethical beliefs to be “state of the art” legal matters, i.e., what becomes an ethical guideline today is often translated to a law, regulation or rule tomorrow. Values which guide how we ought to behave are considered moral values, e.g., values such as respect, honesty, fairness, responsibility, etc. Statements around how these values are applied are sometimes called moral or ethical principles.

So What is “Business Ethics”?

The concept has come to mean various things to various people, but generally it’s coming to know what it right or wrong in the workplace and doing what’s right — this is in regard to effects of products/services and in relationships with stakeholders. Wallace and Pekel explain that attention to business ethics is critical during times of fundamental change — times much like those faced now by businesses, both nonprofit or for-profit. In times of fundamental change, values that were previously taken for granted are now strongly questioned. Many of these values are no longer followed. Consequently, there is no clear moral compass to guide leaders through complex dilemmas about what is right or wrong. Attention to ethics in the workplace sensitizes leaders and staff to how they should act. Perhaps most important, attention to ethics in the workplaces helps ensure that when leaders and managers are struggling in times of crises and confusion, they retain a strong moral compass. However, attention to business ethics provides numerous other benefits, as well (these benefits are listed later in this document).

Note that many people react that business ethics, with its continuing attention to “doing the right thing,” only asserts the obvious (“be good,” “don’t lie,” etc.), and so these people don’t take business ethics seriously. For many of us, these principles of the obvious can go right out the door during times of stress. Consequently, business ethics can be strong preventative medicine. Anyway, there are many other benefits of managing ethics in the workplace. These benefits are explained later in this document.

Two Broad Areas of Business Ethics

1. Managerial mischief.Madsen and Shafritz, in their book “Essentials of Business Ethics” (Penguin Books, 1990) further explain that “managerial mischief” includes “illegal, unethical, or questionable practices of individual managers or organizations, as well as the causes of such behaviors and remedies to eradicate them.” There has been a great deal written about managerial mischief, leading many to believe that business ethics is merely a matter of preaching the basics of what is right and wrong. More often, though, business ethics is a matter of dealing with dilemmas that have no clear indication of what is right or wrong.
2. Moral mazes. The other broad area of business ethics is “moral mazes of management” and includes the numerous ethical problems that managers must deal with on a daily basis, such as potential conflicts of interest, wrongful use of resources, mismanagement of contracts and agreements, etc.

Business Ethics is Now a Management Discipline

Business ethics has come to be considered a management discipline, especially since the birth of the social responsibility movement in the 1960s. In that decade, social awareness movements raised expectations of businesses to use their massive financial and social influence to address social problems such as poverty, crime, environmental protection, equal rights, public health and improving education. An increasing number of people asserted that because businesses were making a profit from using our country’s resources, these businesses owed it to our country to work to improve society. Many researchers, business schools and managers have recognized this broader constituency, and in their planning and operations have replaced the word “stockholder” with “stakeholder,” meaning to include employees, customers, suppliers and the wider community.

The emergence of business ethics is similar to other management disciplines. For example, organizations realized that they needed to manage a more positive image to the public and so the recent discipline of public relations was born. Organizations realized they needed to better manage their human resources and so the recent discipline of human resources was born. As commerce became more complicated and dynamic, organizations realized they needed more guidance to ensure their dealings supported the common good and did not harm others — and so business ethics was born.

Note that 90% of business schools now provide some form of training in business ethics. Today, ethics in the workplace can be managed through use of codes of ethics, codes of conduct, roles of ethicists and ethics committees, policies and procedures, procedures to resolve ethical dilemmas, ethics training, etc.

10 Myths About Business Ethics

Business ethics in the workplace is about prioritizing moral values for the workplace and ensuring behaviors are aligned with those values — it’s values management. Yet, myths abound about business ethics. Some of these myths arise from general confusion about the notion of ethics. Other myths arise from narrow or simplistic views of ethical dilemmas.
1. Myth: Business ethics is more a matter of religion than management.
Diane Kirrane, in “Managing Values: A Systematic Approach to Business Ethics,” (Training and Development Journal, November 1990), asserts that “altering people’s values or souls isn’t the aim of an organizational ethics program — managing values and conflict among them is …”
2. Myth: Our employees are ethical so we don’t need attention to business ethics.
Most of the ethical dilemmas faced by managers in the workplace are highly complex. Wallace explains that one knows when they have a significant ethical conflict when there is presence of
a) significant value conflicts among differing interests, b) real alternatives that are equality justifiable, and c) significant consequences on “stakeholders” in the situation. Kirrane mentions that when the topic of business ethics comes up, people are quick to speak of the Golden Rule, honesty and courtesy. But when presented with complex ethical dilemmas, most people realize there’s a wide “gray area” when trying to apply ethical principles.
3. Myth: Business ethics is a discipline best led by philosophers, academics and theologians.
Lack of involvement of leaders and managers in business ethics literature and discussions has led many to believe that business ethics is a fad or movement, having little to do with the day-to-day realities of running an organization. They believe business ethics is primarily a complex philosophical debate or a religion. However, business ethics is a management discipline with a programmatic approach that includes several practical tools. Ethics management programs have practical applications in other areas of management areas, as well. (These applications are listed later on in this document.)
4. Myth: Business ethics is superfluous — it only asserts the obvious: “do good!”
Many people react that codes of ethics, or lists of ethical values to which the organization aspires, are rather superfluous because they represent values to which everyone should naturally aspire. However, the value of a codes of ethics to an organization is its priority and focus regarding certain ethical values in that workplace. For example, it’s obvious that all people should be honest. However, if an organization is struggling around continuing occasions of deceit in the workplace, a priority on honesty is very timely — and honesty should be listed in that organization’s code of ethics. Note that a code of ethics is an organic instrument that changes with the needs of society and the organization.
5. Myth: Business ethics is a matter of the good guys preaching to the bad guys.
Some writers do seem to claim a moral high ground while lamenting the poor condition of business and its leaders. However, those people well versed in managing organizations realize that good people can take bad actions, particularly when stressed or confused. (Stress or confusion are not excuses for unethical actions — they are reasons.) Managing ethics in the workplace includes all of us working together to help each other remain ethical and to work through confusing and stressful ethical dilemmas.
6. Myth: Business ethics in the new policeperson on the block.
Many believe business ethics is a recent phenomenon because of increased attention to the topic in popular and management literature. However, business ethics was written about even 2,000 years ago — at least since Cicero wrote about the topic in his On Duties. Business ethics has gotten more attention recently because of the social responsibility movement that started in the 1960s.
7. Myth: Ethics can’t be managed.
Actually, ethics is always “managed” — but, too often, indirectly. For example, the behavior of the organization’s founder or current leader is a strong moral influence, or directive if you will, on behavior or employees in the workplace. Strategic priorities (profit maximization, expanding marketshare, cutting costs, etc.) can be very strong influences on morality. Laws, regulations and rules directly influence behaviors to be more ethical, usually in a manner that improves the general good and/or minimizes harm to the community. Some are still skeptical about business ethics, believing you can’t manage values in an organization. Donaldson and Davis (Management Decision, V28, N6) note that management, after all, is a value system. Skeptics might consider the tremendous influence of several “codes of ethics,” such as the “10 Commandments” in Christian religions or the U.S. Constitution. Codes can be very powerful in smaller “organizations” as well.
8. Myth: Business ethics and social responsibility are the same thing.
The social responsibility movement is one aspect of the overall discipline of business ethics. Madsen and Shafritz refine the definition of business ethics to be: 1) an application of ethics to the corporate community, 2) a way to determine responsibility in business dealings, 3) the identification of important business and social issues, and 4) a critique of business. Items 3 and 4 are often matters of social responsibility. (There has been a great deal of public discussion and writing about items 3 and 4. However, there needs to be more written about items 1 and 2, about how business ethics can be managed.) Writings about social responsibility often do not address practical matters of managing ethics in the workplace, e.g., developing codes, updating polices and procedures, approaches to resolving ethical dilemmas, etc.

9. Myth: Our organization is not in trouble with the law, so we’re ethical.
One can often be unethical, yet operate within the limits of the law, e.g., withhold information from superiors, fudge on budgets, constantly complain about others, etc. However, breaking the law often starts with unethical behavior that has gone unnoticed. The “boil the frog” phenomena is a useful parable here: If you put a frog in hot water, it immediately jumps out. If you put a frog in cool water and slowly heat up the water, you can eventually boil the frog. The frog doesn’t seem to notice the adverse change in its environment.
10. Myth: Managing ethics in the workplace has little practical relevance.
Managing ethics in the workplace involves identifying and prioritizing values to guide behaviors in the organization, and establishing associated policies and procedures to ensure those behaviors are conducted. One might call this “values management.” Values management is also highly important in other management practices, e.g., managing diversity, Total Quality Management and strategic planning.

10 Benefits of Managing Ethics in the Workplace

Many people are used to reading or hearing of the moral benefits of attention to business ethics. However, there are other types of benefits, as well. The following list describes various types of benefits from managing ethics in the workplace.

1. Attention to business ethics has substantially improved society.
A matter of decades ago, children in our country worked 16-hour days. Workers’ limbs were torn off and disabled workers were condemned to poverty and often to starvation. Trusts controlled some markets to the extent that prices were fixed and small businesses choked out. Price fixing crippled normal market forces. Employees were terminated based on personalities. Influence was applied through intimidation and harassment. Then society reacted and demanded that businesses place high value on fairness and equal rights. Anti-trust laws were instituted. Government agencies were established. Unions were organized. Laws and regulations were established.

2. Ethics programs help maintain a moral course in turbulent times.
As noted earlier in this document, Wallace and Pekel explain that attention to business ethics is critical during times of fundamental change — times much like those faced now by businesses, both nonprofit or for-profit. During times of change, there is often no clear moral compass to guide leaders through complex conflicts about what is right or wrong. Continuing attention to ethics in the workplace sensitizes leaders and staff to how they want to act — consistently.

3. Ethics programs cultivate strong teamwork and productivity.
Ethics programs align employee behaviors with those top priority ethical values preferred by leaders of the organization. Usually, an organization finds surprising disparity between its preferred values and the values actually reflected by behaviors in the workplace. Ongoing attention and dialogue regarding values in the workplace builds openness, integrity and community — critical ingredients of strong teams in the workplace. Employees feel strong alignment between their values and those of the organization. They react with strong motivation and performance.

4. Ethics programs support employee growth and meaning.
Attention to ethics in the workplace helps employees face reality, both good and bad — in the organization and themselves. Employees feel full confidence they can admit and deal with whatever comes their way. Bennett, in his article “Unethical Behavior, Stress Appear Linked” (Wall Street Journal, April 11, 1991, p. B1), explained that a consulting company tested a range of executives and managers. Their most striking finding: the more emotionally healthy executives, as measured on a battery of tests, the more likely they were to score high on ethics tests.

5. Ethics programs are an insurance policy — they help ensure that policies are legal.
There is an increasing number of lawsuits in regard to personnel matters and to effects of an organization’s services or products on stakeholders. As mentioned earlier in this document, ethical principles are often state-of-the-art legal matters. These principles are often applied to current, major ethical issues to become legislation. Attention to ethics ensures highly ethical policies and procedures in the workplace. It’s far better to incur the cost of mechanisms to ensure ethical practices now than to incur costs of litigation later. A major intent of well-designed personnel policies is to ensure ethical treatment of employees, e.g., in matters of hiring, evaluating, disciplining, firing, etc. Drake and Drake (California Management Review, V16, pp. 107-123) note that “an employer can be subject to suit for breach of contract for failure to comply with any promise it made, so the gap between stated corporate culture and actual practice has significant legal, as well as ethical implications.”

6. Ethics programs help avoid criminal acts “of omission” and can lower fines.
Ethics programs tend to detect ethical issues and violations early on so they can be reported or addressed. In some cases, when an organization is aware of an actual or potential violation and does not report it to the appropriate authorities, this can be considered a criminal act, e.g., in business dealings with certain government agencies, such as the Defense Department. The recent Federal Sentencing Guidelines specify major penalties for various types of major ethics violations. However, the guidelines potentially lowers fines if an organization has clearly made an effort to operate ethically.

7. Ethics programs help manage values associated with quality management, strategic planning and diversity management — this benefit needs far more attention.
Ethics programs identify preferred values and ensuring organizational behaviors are aligned with those values. This effort includes recording the values, developing policies and procedures to align behaviors with preferred values, and then training all personnel about the policies and procedures. This overall effort is very useful for several other programs in the workplace that require behaviors to be aligned with values, including quality management, strategic planning and diversity management. Total Quality Management includes high priority on certain operating values, e.g., trust among stakeholders, performance, reliability, measurement, and feedback. Eastman and Polaroid use ethics tools in their quality programs to ensure integrity in their relationships with stakeholders. Ethics management techniques are highly useful for managing strategic values, e.g., expand marketshare, reduce costs, etc. McDonnell Douglas integrates their ethics programs into their strategic planning process. Ethics management programs are also useful in managing diversity. Diversity is much more than the color of people’s skin — it’s acknowledging different values and perspectives. Diversity programs require recognizing and applying diverse values and perspectives — these activities are the basis of a sound ethics management program.

8. Ethics programs promote a strong public image.
Attention to ethics is also strong public relations — admittedly, managing ethics should not be done primarily for reasons of public relations. But, frankly, the fact that an organization regularly gives attention to its ethics can portray a strong positive to the public. People see those organizations as valuing people more than profit, as striving to operate with the utmost of integrity and honor. Aligning behavior with values is critical to effective marketing and public relations programs. Consider how Johnson and Johnson handled the Tylenol crisis versus how Exxon handled the oil spill in Alaska. Bob Dunn, President and CEO of San Francisco-based Business for Social Responsibility, puts it best: “Ethical values, consistently applied, are the cornerstones in building a commercially successful and socially responsible business.”

9. Overall benefits of ethics programs:
Donaldson and Davis, in “Business Ethics? Yes, But What Can it Do for the Bottom Line?” (Management Decision, V28, N6, 1990) explain that managing ethical values in the workplace legitimizes managerial actions, strengthens the coherence and balance of the organization’s culture, improves trust in relationships between individuals and groups, supports greater consistency in standards and qualities of products, and cultivates greater sensitivity to the impact of the enterprise’s values and messages.

10. Last – and most — formal attention to ethics in the workplace is the right thing to do.

One Description of a Highly Ethical Organization

Mark Pastin, in The Hard Problems of Management: Gaining the Ethics Edge (Jossey-Bass, 1986), provides the following four principles for highly ethical organizations:
1. They are at ease interacting with diverse internal and external stakeholder groups. The groundrules of these firms make the good of these stakeholder groups part of the organizations’ own good.

2. They are obsessed with fairness. Their groundrules emphasize that the other persons’ interests count as much as their own.

3. Responsibility is individual rather than collective, with individuals assuming personal responsibility for actions of the organization. These organizations’ groundrules mandate that individuals are responsible to themselves.
4. They see their activities in terms of purpose. This purpose is a way of operating that members of the organization highly value. And purpose ties the organization to its environment.

Doug Wallace asserts the following characteristics of a high integrity organization:
1. There exists a clear vision and picture of integrity throughout the organization.
2. The vision is owned and embodied by top management, over time.
3. The reward system is aligned with the vision of integrity.
4. Policies and practices of the organization are aligned with the vision; no mixed messages.
5. It is understood that every significant management decision has ethical value dimensions.
6. Everyone is expected to work through conflicting-stakeholder value perspectives.

Ethics Management Programs: An Overview

About Ethics Management Programs Organizations can manage ethics in their workplaces by establishing an ethics management program. Brian Schrag, Executive Secretary of the Association for Practical and Professional Ethics, clarifies. “Typically, ethics programs convey corporate values, often using codes and policies to guide decisions and behavior, and can include extensive training and evaluating, depending on the organization. They provide guidance in ethical dilemmas.” Rarely are two programs alike.

“All organizations have ethics programs, but most do not know that they do,” wrote business ethics professor Stephen Brenner in the Journal of Business Ethics (1992, V11, pp. 391-399). “A corporate ethics program is made up of values, policies and activities which impact the propriety of organization behaviors.”

Bob Dunn, President and CEO of San Francisco-based Business for Social Responsibility, adds: “Balancing competing values and reconciling them is a basic purpose of an ethics management program. Business people need more practical tools and information to understand their values and how to manage them.”

Benefits of Managing Ethics as a Program

There are numerous benefits in formally managing ethics as a program, rather than as a one-shot effort when it appears to be needed. Ethics programs:
· Establish organizational roles to manage ethics
· Schedule ongoing assessment of ethics requirements
· Establish required operating values and behaviors
· Align organizational behaviors with operating values

· Develop awareness and sensitivity to ethical issues
· Integrate ethical guidelines to decision making
· Structure mechanisms to resolving ethical dilemmas
· Facilitate ongoing evaluation and updates to the program

· Help convince employees that attention to ethics is not just a knee-jerk reaction done to get out of trouble or improve public image

8 Guidelines for Managing Ethics in the Workplace

The following guidelines ensure the ethics management program is operated in a meaningful fashion:
1. Recognize that managing ethics is a process.
Ethics is a matter of values and associated behaviors. Values are discerned through the process of ongoing reflection. Therefore, ethics programs may seem more process-oriented than most management practices. Managers tend to be skeptical of process-oriented activities, and instead prefer processes focused on deliverables with measurements. However, experienced managers realize that the deliverables of standard management practices (planning, organizing, motivating, controlling) are only tangible representations of very process-oriented practices. For example, the process of strategic planning is much more important than the plan produced by the process. The same is true for ethics management. Ethics programs do produce deliverables, e.g., codes, policies and procedures, budget items, meeting minutes, authorization forms, newsletters, etc. However, the most important aspect from an ethics management program is the process of reflection and dialogue that produces these deliverables.

2. The bottom line of an ethics program is accomplishing preferred behaviors in the workplace.
As with any management practice, the most important outcome is behaviors preferred by the organization. The best of ethical values and intentions are relatively meaningless unless they generate fair and just behaviors in the workplace. That’s why practices that generate lists of ethical values, or codes of ethics, must also generate policies, procedures and training that translate those values to appropriate behaviors.

3. The best way to handle ethical dilemmas is to avoid their occurrence in the first place.
That’s why practices such as developing codes of ethics and codes of conduct are so important. Their development sensitizes employees to ethical considerations and minimize the chances of unethical behavior occurring in the first place.

4. Make ethics decisions in groups, and make decisions public, as appropriate.
This usually produces better quality decisions by including diverse interests and perspectives, and increases the credibility of the decision process and outcome by reducing suspicion of unfair bias.

5. Integrate ethics management with other management practices.
When developing the values statement during strategic planning, include ethical values preferred in the workplace. When developing personnel policies, reflect on what ethical values you’d like to be most prominent in the organization’s culture and then design policies to produce these behaviors.

6. Use cross-functional teams when developing and implementing the ethics management program.
It’s vital that the organization’s employees feel a sense of participation and ownership in the program if they are to adhere to its ethical values. Therefore, include employees in developing and operating the program.

7. Value forgiveness.
This may sound rather religious or preachy to some, but it’s probably the most important component of any management practice. An ethics management program may at first actually increase the number of ethical issues to be dealt with because people are more sensitive to their occurrence. Consequently, there may be more occasions to address people’s unethical behavior. The most important ingredient for remaining ethical is trying to be ethical. Therefore, help people recognize and address their mistakes and then support them to continue to try operate ethically.

8. Note that trying to operate ethically and making a few mistakes is better than not trying at all.
Some organizations have become widely known as operating in a highly ethical manner, e.g., Ben and Jerrys, Johnson and Johnson, Aveda, Hewlett Packard, etc. Unfortunately, it seems that when an organization achieves this strong public image, it’s placed on a pedestal by some business ethics writers. All organizations are comprised of people and people are not perfect. However, when a mistake is made by any of these organizations, the organization has a long way to fall. In our increasingly critical society, these organizations are accused of being hypocritical and they are soon pilloried by social critics. Consequently, some leaders may fear sticking their necks out publicly to announce an ethics management program. This is extremely unfortunate. It’s the trying that counts and brings peace of mind — not achieving an heroic status in society.

6 Key Roles and Responsibilities in Ethics Management

Depending on the size of the organization, certain roles may prove useful in managing ethics in the workplace. These can be full-time roles or part-time functions assumed by someone already in the organization. Small organizations certainly will not have the resources to implement each the following roles using different people in the organization. However, the following functions points out responsibilities that should be included somewhere in the organization.
1. The organization’s chief executive must fully support the program.
If the chief executive isn’t fully behind the program, employees will certainly notice — and this apparent hypocrisy may cause such cynicism that the organization may be worse off than having no formal ethics program at all. Therefore, the chief executive should announce the program, and champion its development and implementation. Most important, the chief executive should consistently aspire to lead in an ethical manner. If a mistake is made, admit it.

2. Consider establishing an ethics committee at the board level.
The committee would be charged to oversee development and operation of the ethics management program.

3. Consider establishing an ethics management committee.
It would be charged with implementing and administrating an ethics management program, including administrating and training about policies and procedures, and resolving ethical dilemmas. The committee should be comprised of senior officers.

4. Consider assigning/developing an ethics officer.
This role is becoming more common, particularly in larger and more progressive organizations. The ethics officer is usually trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas.

5. Consider establishing an ombudsperson.
The ombudsperson is responsible to help coordinate development of the policies and procedures to institutionalize moral values in the workplace. This position usually is directly responsible for resolving ethical dilemmas by interpreting policies and procedures.

6. Note that one person must ultimately be responsible for managing the ethics management program.

Ethics Tools: Codes of Ethics

About Codes of Ethics

According to Wallace, “A credo generally describes the highest values to which the company aspires to operate. It contains the `thou shalts.’ A code of ethics specifies the ethical rules of operation. It’s the `thou shalt nots.” In the latter 1980s, The Conference Board, a leading business membership organization, found that 76% of corporations surveyed had codes of ethics.

Some business ethicists disagree that codes have any value. Usually they explain that too much focus is put on the codes themselves, and that codes themselves are not influential in managing ethics in the workplace. Many ethicists note that it’s the developing and continuing dialogue around the code’s values that is most important.

Occasionally, employees react to codes with suspicion, believing the values are “motherhood and apple pie” and codes are for window dressing. But, when managing a complex issue, especially in a crisis, having a code is critical. More important, it’s having developed a code. In the mid-70s, Johnson and Johnson updated their credo in a series of challenge meetings. Bob Kniffin, Vice President of External Affairs, explains, “We pored over each phrase and word. We asked ourselves, `Do we still believe this?’ Our meetings resulted in some fine tuning, but basically we didn’t change the values. The meetings infused the values in the minds of all of us managers.” Many believe this process guided them in their well-known decision to pull Tylenol bottles off the shelves and repackage them at a $100 million expense. Kniffin offers some sound, practical advice. “In a crisis, there’s no time for moral conclusions. Get those done beforehand. But also realize there’s no substitute for sound crisis management. For example, have a list of people with fundamental knowledge, such as who transports your products where and when.”

Developing Codes of Ethics

Note that if your organization is quite large, e.g., includes several large programs or departments, you may want to develop an overall corporate code of ethics and then a separate code to guide each of your programs or departments.

Also note that codes should not be developed out of the Human Resource or Legal departments alone, as is too often done. Codes are insufficient if intended only to ensure that policies are legal. All staff must see the ethics program being driven by top management.

Note that codes of ethics and codes of conduct may be the same in some organizations, depending on the organization’s culture and operations and on the ultimate level of specificity in the code(s).

Optional: Also see in the Free Management Library at https://staging.management.org:

1. Organizational Culture – review to get a basic understanding of “personalities” of organizations
2. Strategic Planning – specific to developing a Values Statement
3. Diversity and Inclusion– to consider that there are other values and perspectives

Consider the following guidelines when developing codes of ethics:

1. Review any values need to adhere to relevant laws and regulations;
this ensures your organization is not (or is not near) breaking any of them. (If you are breaking any of them, you may be far better off to report this violation than to try hide the problem. Often, a reported violation generates more leniency than outside detection of an unreported violation, particularly per the new Federal Sentencing Guidelines.) Increase priority on values that will help your organization operate to avoid breaking these laws and to follow necessary regulations.

2. Review which values produce the top three or four traits of a highly ethical and successful product or service in your area,
e.g., for accountants: objectivity, confidentiality, accuracy, etc. Identify which values produce behaviors that exhibit these traits.

3. Identify values needed to address current issues in your workplace.
Appoint one or two key people to interview key staff to collect descriptions of major issues in the workplace. Collect descriptions of behaviors that produce the issues. Consider which of these issues is ethical in nature, e.g.., issues in regard to respect, fairness and honesty. Identify the behaviors needed to resolve these issues. Identify which values would generate those preferred behaviors. There may be values included here that some people would not deem as moral or ethical values, e.g., team-building and promptness, but for managers, these practical values may add more relevance and utility to a code of ethics.

4. Identify any values needed, based on findings during strategic planning.
Review information from your SWOT analysis (identifying the organization’s strengths, weaknesses, opportunities and threats). What behaviors are needed to build on strengths, shore up weaknesses, take advantage of opportunities and guard against threats?

5. Consider any top ethical values that might be prized by stakeholders.
For example, consider expectations of employees, clients/customers, suppliers, funders, members of the local community, etc.

6. Collect from the above steps, the top five to ten ethical values which are high priorities in your organization (see item #7 below for examples).

7. Examples of ethical values might include
(the following list is the “Six Pillars of Character” developed by The Josephson Institute of Ethics, 310-306-1868):
a) Trustworthiness: honesty, integrity, promise-keeping, loyalty
b) Respect: autonomy, privacy, dignity, courtesy, tolerance, acceptance
c) Responsibility: accountability, pursuit of excellence
d) Caring: compassion, consideration, giving, sharing, kindness, loving
e) Justice and fairness: procedural fairness, impartiality, consistency, equity, equality, due process
f) Civic virtue and citizenship: law abiding, community service, protection of environment

8. Compose your code of ethics; attempt to associate with each value, two example behaviors which reflect each value.
Critics of codes of ethics assert that they seem vacuous because many only list ethical values and don’t clarify these values by associating examples of behaviors.

9. Include wording that indicates all employees are expected to conform to the values stated in the code of ethics.
Add wording that indicates where employees can go if they have any questions.

10. Obtain review from key members of the organization.
Get input from as many members as possible.

11. Announce and distribute the new code of ethics (unless you are waiting to announce it along with any new codes of conduct and associated policies and procedures).
Ensure each employee has a copy and post codes throughout the facility.

12. Update the code at least once a year.
As stated several times in this document, the most important aspect of codes is developing them, not the code itself. Continued dialogue and reflection around ethical values produces ethical sensitivity and consensus. Therefore, revisit your codes at least once a year — preferably two or three times a year.

13. (Note that you cannot include values and preferred behaviors for every possible ethical dilemma that might arise.
Your goal is to focus on the top ethical values needed in your organization and to avoid potential ethical dilemmas that seem mostly likely to occur.)

Ethics Tools: Codes of Conduct

About Codes of Conduct

“Codes of conduct specify actions in the workplace and codes of ethics are general guides to decisions about those actions,” explains Craig Nordlund, Associate General Counsel and Secretary at Hewlett Packard. He suggests that codes of conduct contain examples of appropriate behavior to be meaningful.
The Conference Board found that codes of conduct are increasingly sophisticated and focused at lower levels in companies. Departments frequently have their own codes. Be careful, though. An organization
could be sued for breach of contract if its practices are not in accord with its policies. That’s why legal departments should review codes of conduct and other ethics policies. Also, that’s why it’s critical for organizations to review their policies at least once a year to ensure they are in accordance with laws and regulations.

Optional: also see in the Free Management Library at https://staging.management.org:

1. Employee Law – review major issues and topics to discern what behaviors to avoid in the workplace
2. Policies (Personnel) – review more specifics about what behaviors to avoid

Developing a Code of Conduct

Note that if your organization is quite large, e.g., includes several large programs or departments, you may want to develop an overall corporate code of conduct, and then a separate code to guide each of your programs or departments. Consider the following guidelines when developing codes of conduct:
1. Identify key behaviors needed to adhere to the ethical values proclaimed in your code of ethics, including ethical values derived from review of key laws and regulations, ethical behaviors needed in your product or service area, behaviors to address current issues in your workplace, and behaviors needed to reach strategic goals.
2. Include wording that indicates all employees are expected to conform to the behaviors specified in the code of conduct.
Add wording that indicates where employees can go if they have any questions.
3. Obtain review from key members of the organization.
Be sure your legal department reviews the drafted code of conduct.
4. Announce and distribute the new code of conduct
(unless you are waiting to announce it along with any associated policies and procedures). Ensure each employee has a copy and post codes in each employee’s bay or office.
5. (Note that you cannot include preferred behaviors for every possible ethical dilemma that might arise.)
6. Examples of topics typically addressed by codes of conduct include:
preferred style of dress, avoiding illegal drugs, following instructions of superiors, being reliable and prompt, maintaining confidentiality, not accepting personal gifts from stakeholders as a result of company role, avoiding racial or sexual discrimination, avoiding conflict of interest, complying with laws and regulations, not using organization’s property for personal use, not discriminating against race or age or sexual orientation, and reporting illegal or questionable activity. Go beyond these traditional legalistic expectations in your codes — adhere to what’s ethically sensitive in your organization, as well. (Note that, as with codes of ethics, you may be better off to generate your own code of conduct from scratch rather than reviewing examples from other organizations.)

Ethics Tools: Policies and Procedures

Optional: also see in the Free Management Library at https://staging.management.org:
Policies (Personnel) – review to understand how to develop and apply personnel policies

1. Update policies and procedures to produce behaviors preferred from the code of conduct,
including, e.g., personnel, job descriptions, performance appraisal forms, management-by-objectives expectations, standard forms, checklists, budget report formats, and other relevant control instruments to ensure conformance to the code of conduct. In doing so, try to avoid creating ethical dilemmas such as conflicts-of-interest or infringing on employee’s individual rights.

2. There are numerous examples of how organizations manage values through use of policies and procedures.
For example, we’re most familiar with the value of social responsibility. To produce behavior aligned with this value, organizations often institute policies such as recycling waste, donating to local charities, or paying employees to participate in community events. In another example, a high value on responsiveness to customers might be implemented by instituting policies to return phone calls or to repair defective equipment within a certain period of time. Consider the role of job descriptions and performance appraisals. For example, an advanced technology business will highly value technical knowledge, creativity and systems thinking. They use job descriptions and performance appraisals to encourage behaviors aligned with these values, such as rewarding advanced degrees, patents, and analysis and design skills.

3. Include policies and procedures to address ethical dilemmas.
See the next section, “Ethics Tools: Resolving Ethical Dilemmas,” to select a method which is most appropriate to your organization’s culture and operations.

4. Include policies and procedures to ensure training of employees about the ethics management program.
See a following section, “Ethics Tools: Training.”

5. Include policies and procedures to reward ethical behavior and impose consequences for unethical behavior.

6. Include a grievance policy for employees to use to resolve disagreements with supervisors and staff.

7. Consider establishing an ethics “hotline.”
This function might best be provided by an outside consultant, e.g., lawyer, clergyperson, etc. Or, provide an anonymous “tip” box in which personnel can report suspected unethical activities, and do so safely on an anonymous basis.

8. Once a year, review all personnel policies and procedures.
If yours is a small organization, consider including all staff during this review. Take a full day for all staff to review policies and procedures, and suggest changes.

9. For guidance in establishing personnel policies, see the

Guide to Personnel Management and Policies (https://staging.management.org/management/guidebook.htm).

Ethics Tools: Resolving Ethical Dilemmas (with Real-to-Life
Examples)

Definition of an Ethical Dilemma

Perhaps too often, business ethics is portrayed as a matter of resolving conflicts in which one option appears to be the clear choice. For example, case studies are often presented in which an employee is faced with whether or not to lie, steal, cheat, abuse another, break terms of a contract, etc. However, ethical dilemmas faced by managers are often more real-to-life and highly complex with no clear guidelines, whether in law or often in religion.

As noted earlier in this document, Doug Wallace, Twin Cities-based consultant, explains that one knows when they have a significant ethical conflict when there is presence of a) significant value conflicts among differing interests, b) real alternatives that are equality justifiable, and c) significant consequences on “stakeholders” in the situation.

An ethical dilemma exists when one is faced with having to make a choice among these alternatives.

Real-to-Life Examples of Complex Ethical Dilemmas

· “A customer (or client) asked for a product (or service) from us today. After telling him our price, he said he couldn’t afford it. I know he could get it cheaper from a competitor. Should I tell him about the competitor — or let him go without getting what he needs? What should I do?”
· “Our company prides itself on its merit-based pay system. One of my employees has done a tremendous job all year, so he deserves strong recognition. However, he’s already paid at the top of the salary range for his job grade and our company has too many people in the grade above him, so we can’t promote him. What should I do?”
· “Our company prides itself on hiring minorities. One Asian candidate fully fits the job requirements for our open position. However, we’re concerned that our customers won’t understand his limited command of the English language. What should I do?”
· “My top software designer suddenly refused to use our e-mail system. He explained to me that, as a Christian, he could not use a product built by a company that provided benefits to the partners of homosexual employees. He’d basically cut himself off from our team, creating a major obstacle to our product development. What should I do?”
· “My boss told me that one of my employees is among several others to be laid off soon, and that I’m not to tell my employee yet or he might tell the whole organization which would soon be in an uproar. Meanwhile, I heard from my employee that he plans to buy braces for his daughter and a new carpet for his house. What should I do?”
· “My computer operator told me he’d noticed several personal letters printed from a computer that I was responsible to manage. While we had no specific policies then against personal use of company facilities, I was concerned. I approached the letter writer to discuss the situation. She told me she’d written the letters on her own time to practice using our word processor. What should I do?”
· “A fellow employee told me that he plans to quit the company in two months and start a new job which has been guaranteed to him. Meanwhile, my boss told me that he wasn’t going to give me a new opportunity in our company because he was going to give it to my fellow employee now. What should I do?”

Optional: also see in the Free Management Library at https://staging.management.org:

1. Feedback
2. Listening
3. Questioning
4. Conflict (interpersonal)
5. Negotiating
6. Diversity and Inclusion Diversity and Inclusion

3 Methods to Resolve Ethical Dilemmas

Organizations should develop and document a procedure for dealing with ethical dilemmas as they arise. Ideally, ethical dilemmas should be resolved by a group within the organization, e.g., an ethics committee comprised of top leaders/managers and/or members of the board. Consider having staff members on the committee, as well. The following three methods can be used to address ethical dilemmas. Methods include an ethical checklist, a ten-step method and a list of key questions. (Note that The Golden Rule is probably the most common method to resolve ethical dilemmas. The rule exists in various forms in many of the world religions.)

Method One – Ethical Checklist

Twin Cities-based consultants, Doug Wallace and Jon Pekel, suggest the following ethical checklist to address ethical dilemmas. If necessary, revise your decision and action plan based on results of the this test.

NOTE: To get the longer version of this document, see
Ten-Step Method for Ethical Decision-Making

Ethical Checklist Circle the appropriate answer on the scale; “1” = not at all; “5” = totally yes
1. Relevant Information Test. Have I/we obtained as much information as possible to make an informed decision and action plan for this situation? 1 2 3 4 5
2. Involvement Test. Have I/we involved all who have a right to have input and/or to be involved in making this decision and action plan? 1 2 3 4 5
3. Consequential Test. Have I/we anticipated and attempted to accommodate for the consequences of this decision and action plan on any who are significantly effected by it? 1 2 3 4 5
4. Fairness Test. If I/we were assigned to take the place of any one of the stakeholders in this situation, would I/we perceive this decision and action plan to be essentially fair, given all of the circumstances? 1 2 3 4 5
5. Enduring Values Test. Do this decision and action plan uphold my/our priority enduring values that are relevant to this situation? 1 2 3 4 5
6. Universality Test. Would I/we want this decision and action plan to become a universal law applicable to all similar situation, even to myself/ourselves? 1 2 3 4 5
7. Light-of-Day Test. How would I/we feel and be regarded by others (working associates, family, etc.) if the details of this decision and action plan were disclosed for all to know? 1 2 3 4 5
8. Total Ethical Analysis Confidence Score . Place the total of all circled numbers here.
How confident can you be that you have done a good job of ethical analysis?
7-14
15-21
22-28
29-35
Not very confident
Somewhat confident
Quite confident
Very confident

Used with permission from Copyright holders: Doug Wallace and Jon Pekel, Twin Cities-based consultants in the Fulcrum Group (651-714-9033; e-mail at jonpekel@atti.com). Do not copy without reference to copyright owners. Not to be used for commercial purposes.

Method Two – Ten-Step Method of Decision Making

Wallace and Pekel also provide the following ten-step method.
10 Step Method (Short Version)

Used with permission from Copyright holders: Doug Wallace and Jon Pekel, Twin Cities-based consultants in the Fulcrum Group (651-714-9033; e-mail at jonpekel@comcast.net). Do not copy without reference to copyright owners. Not to be used for commercial purposes.

Method Three – Twelve Questions to Address Ethical Dilemmas

Laura L. Nash poses 12 questions to help managers address ethical dilemmas.
1. Have you defined the problem accurately?
2. How would you define the problem if you stood on the other side of the fence?
3. How did this situation occur in the first place?
4. To whom and to what do you give your loyalty as a person and as a member of the corporation?
5. What is your intention in making this decision?
6. How does this intention compare with the probable results?
7. Whom could your decision or action injure?
8. Can you discuss the problem with the affected parties before you make your decision?
9. Are you confident that your position will be as valid over
a long period of time as it seem now?
10. Could you disclose without qualm your decision or action to your boss, your CEO, the board of directors, your family, society as a whole?
11. What is the symbolic potential of your action if understood? misunderstood?
12. Under what conditions would you allow exceptions to your stand?

(adapted from: Nash, L. (1981). Ethics Without the Sermon. Harvard Business Review, (59))

Ethics Tools: Training

The ethics program is essentially useless unless all staff members are trained about what it is, how it works and their roles in it. The nature of the system may invite suspicion if not handled openly and honestly. In addition, no matter how fair and up-to-date is a set of policies, the legal system will often interpret employee behavior (rather than written policies) as de facto policy. Therefore, all staff must be aware of and act in full accordance with policies and procedures (this is true, whether policies and procedures are for ethics programs or personnel management). This full accordance requires training about policies and procedures.

Optional: Also see in the Free Management Library at https://staging.management.org
Training Basics for Supervisors and Learners

1. Orient new employees to the organization’s ethics program during new-employee orientation.
2. Review the ethics management program in management training experiences.
3. Involving staff in review of codes is strong ethics training.
4. Involving staff in review of policies (ethics and personnel policies) is strong ethics training.
5. One of the strongest forms of ethics training is practice in resolving complex ethical dilemmas. Have staff use any of the three ethical-dilemma-resolution methods in this guidebook and apply them to any of the real-to-life ethical dilemmas also listed in this guidebook.
6. Include ethical performance as a dimension in performance appraisals.
7. The best ethics trainer: Bill Goodman, Chief Human Resource Officer at Aveda, describes, “We start our training even in our job ads,” then adds, “but the best trainer is the behavior of our leaders.”
8. Give all staff a copy of this free “Complete Guide to Ethics Management.”

About the Author

Carter McNamara, MBA, PhD, is a Twin Cities-based consultant in the areas of leadership development, board development and strategic planning. He has managed in a wide variety of organizations including startup, public-private, small and large nonprofit, and large corporation. He received comprehensive ethics training as an employee in a large defense contractor, various ethics classes and continuing research in business ethics. In addition, as a manager, he has struggled through several major ethical dilemmas (one was quite public) so he knows and understands the experience. He has led development of several codes of ethics and conduct, as well. Carter holds a BA in Social and Behavioral Sciences, BS in Computer Science, an MBA, and a PhD in Human and Organization Development.

Bibliography of Practical Resources

Hardcopy documents:

The following references are to hardcopy documents that provide information about managing ethics in the workplace:

Berenbeim, R. E. (1992, Spring). “The Corporate Ethics Test”. Business and Society Review, 31(1), 77-80.

Brenner, S. N. (1992). “Ethics Programs and Their Dimensions”. Journal of Business Ethics, 11,391-399.

Buchholz, R. A. (1989). “Fundamental Concepts and Problems in Business Ethics”. In Madsen, P., & Shafritz, J. M. (Eds.) (1990). “Essentials of Business Ethics”. New York: Penguin Books.

Carroll, A. B. (1990). “Principles of Business Ethics: Their Role in Decision Making and in Initial Consensus”.
Management Decision, 28(8), 21-23.

Dean, P. J. (1992). “Making Codes of Ethics ‘Real’.” Journal of Business Ethics, 11, 285-290.

Deborah, B. (1991, January/February). “Asking for Help: A Guide to Using Socially Responsible Consultants”. Business Ethics Magazine, pp. 24-29.

Francis, David R. (1991, June). “Prevent Trouble by Improving Ethics”. Christian Science Monitor, p. 9.

Fulcrum Consulting Group, 1093 Snelling Ave. South, Saint Paul, MN 55116. Phone 1-800-55-ETHIC.

Gandz, J. & Bird, F. G. (1989, Autumn). “Designing Ethical Organizations”. Business Quarterly, 54(2), 108-112.

Genfan, H. (1987, November). “Formalizing Business Ethics”. Training and Development Journal, pp. 35-37.

Josephson Institute of Ethics, 310 Washington Boulevard, Suite 104, Marina del Rey, California. Phone 310-306-1868.

Kirrane, D.E. (1990, November). “Managing Values: A Systematic Approach to Business Ethics”. Training and Development Journal, pp. 53-60.

Madsen, P., Ph. D., & Shafritz, J. M., Ph. D. (Eds.). (1990). “Essentials of Business Ethics”. New York: Penguin Books.

McDonald, G., & Zepp, R. (1990). “What Should Be Done? A Practical Approach to Business Ethics”. Management Decision, 28(1), 9-13.

Nash, L. (1981). “Ethics Without the Sermon”. Harvard Business Review, (59).

Navran Associates Management Consultants, 3037 Wembley Ridge, Atlanta, GA. Phone 404-493-8886.

Reynolds, L. (1992, July/August). “The Ethics Audit. Business Ethics Magazine”, pp. 20-22.

Sims, R. R. (1991). “Institutionalization of Organizational Ethics”. Journal of Business Ethics, 10, 493-506.

Strong, K. C., & Meyer, G. (1992). “An Integrative Descriptive Model of Ethics Decision Making”. Journal of Business Ethics, 11, 89-94.

Thompson, T. (1991, Spring). “Managing Business Ethics”. Canadian Public Administration, 34(1), 153-157.

Toffler, B. (1991, Winter). “Doing Ethics: An Approach to Business Ethics Consulting”. Moral Education Forum, 16(4), 14-20.

World Wide Web Links:

The following are links to Websites about business ethics.

General business ethics resources at the Center for Applied Ethics (http://www.ethics.ubc.ca/resources/business/)

Center for Applied Ethics at http://www.ethics.ubc.ca/

Being All That We Can See


For the Category of Ethics:

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The following books are recommended because of their highly practical nature and often
because they include a wide range of information about this Library topic. Also, a convenient search window is included below the rows of books. As an Amazon Associate, Authenticity Consulting, LLC may earn commissions from qualifying purchases on Amazon.



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The following books are recommended because of their highly practical nature and often
because they include a wide range of information about this Library topic. Also, a convenient search window is included below the rows of books. As an Amazon Associate, Authenticity Consulting, LLC may earn commissions from qualifying purchases on Amazon.



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