Section 3: Ethics in Business

Describe the methods to encourage ethical behavior in contemporary organizations

As you read in the last section, ethical violations can happen on an individual or corporate level. It is imperative to implement ethical standards and behaviors throughout every level of business operations. An ethical company begins with smart hiring practices and onboarding processes. It then continues into the company’s code of ethics and company-wide training to help foster and promote an ethical environment.

Ethical behavior requires accountability from all levels of the organization and needs to be audited and enforced on a daily basis. Unethical decisions and actions can have a detrimental effect on an organization and it is up to each individual to ensure ethics is at the cornerstone of every business decision.

Learning Outcomes

  • Examine smart hiring methods
  • Discuss the importance of a company’s code of ethics
  • Examine how training can impact ethical behavior
  • Describe how upper management impacts ethical culture

Hiring Ethically

Image rendering of three resumes. The resumes have no text, only colored bars indicating where text would beCompanies place a lot of resources into their hiring process as it is a fundamental part of a successful company. The human resources department spends many hours on each new hire selecting who they believe to be the correct individuals for the job. But when the right person is not hired for the right job, chaos can ensue.

A bad hire can be toxic to a work environment—hiring the wrong person can negatively impact morale, productivity, and company standards. Consistently making bad hires effects multiple levels of an organization.

While the hiring process can prove to be lengthy, the process of terminating an employee is equally, if not more, strenuous. Unfortunately, hiring a new employee isn’t a simple or inexpensive process. Therefore, it is critical to use smart hiring practices to increase your odds of hiring and retaining the right person for the right job. When a company is unable to retain new employees, it leads to a lot of wasted time and energy.This section will examine some smart hiring practices and how they are beneficial to the hiring process.

Roadblocks to Making a Good Hire

Before we dive into the different types of smart hiring practices, let’s examine some roadblocks to making a good hire:

  • If a company is desperate to fill a position, they are more likely to rush through the hiring process and focusing more on filling the void rather than hiring the right person. Therefore, a short staffed company is oftentimes at a greater risk for making a bad hire and continuing the turnover trend.
  • Companies often make decisions heavily on resumes and how a candidate looks on paper. Although a resume is a great place to start, candidates’ GPAs, resume buzzwords, and where they went to school do not always tell the whole story. A candidate’s interview should play a much larger role.
  • Interviewers often have different ideas of who they’d like to fill a position. There should be a system in place to properly evaluate a candidate’s interview. If there are multiple people participating in the hiring process, it is important to have a streamlined way of ensuring fair and consistent hiring practices. This can include a rubric system that evaluates how well a candidate performed based on their responses.

Smart Hiring Practices

Now let’s review some smart hiring practices. First, you need to make sure you partner with the departments who have spots to fill to fully understand the type of employee they are looking for. Meeting with their team to create a list of qualifications and behavioral needs is the first step to ensuring you have a clear picture of the type of person that would work well on the team. You can then use this description and list of desired traits to start searching for the best candidate. The next step includes creating a smart recruiting process. Once a recruitment plan is in place, you are ready to start the search! While collecting resumes, now is the time to screen candidates and pull the ones with proper qualifications aside. It is also a great time to prescreen your candidates to help narrow down your applicant list. Once you have a pool of qualified candidates, it is time to start the interview process.

Photograph of two men sitting at a table. One man is talkingIt is important to remember that how you interview a candidate can make or break your success rate. A behavioral-based interview style is a great way to better understand how a person would act in certain situations. Behavior-based questions help gain insight into how people would perform in the future. If you only ask questions based on the candidate’s resume, you will miss your opportunity to get a full picture of that person. Here are some behavioral-based interview question examples:

  • Describe a stressful work situation and how you handled it.
  • Tell me about a time you used logic to solve a problem.
  • Tell me about a time you did not meet your goal. How did you handle that?

Personality tests are another great way to gain a deeper understanding of the candidate. Personality tests can help hiring teams determine how candidates would contribute, or take away from, a team. Learning about someone’s negative personality traits may be helpful in avoiding making a hiring choice that could turn out to be toxic to a team environment. On the other hand, learning about a candidate’s positive personality traits may help guide the team to find the perfect placement for the candidate. We will discuss personality traits further in the next module.

After the interview, it is time to run a background check and follow-up on their references. This step should either solidify your hiring decision or force you to find another candidate. These additional checks can help ensure you are hiring an ethical candidate who will bring value, not conflict, to your company.

Practice Question

It is important to remember that there is no such thing as a perfect hiring system. There is a chance you will go through all the “right” steps and still end up with a candidate who is not the best fit. However, having a smart hiring process in place will help increase your chances of finding the right candidate for the job.

Code of Ethics

Before we can understand why a code of ethics is important, we need to first understand what a code of ethics is. In school, you probably had to sign a student code of conduct. In these documents, rules and regulations for your behavior were outlined. The school created this document to make sure their students knew exactly how they were expected to behave. Similar to a student code of conduct, businesses have a code of ethics they use to help guide the behavior of their employees. While not every company is required by law to have one, a code of ethics has become an expectation by today’s standards. Since a code of ethics is such an extremely helpful tool for an organization, it makes sense for all companies to create one, regardless of legal obligations.

A code of ethics should include a company’s mission, values, and principles. A code of ethics allows a company to connect these important components to clear professional expectations and standards. It is a framework from which the entire company should operate and should reference on a daily basis. A code of ethics also gives actionable ways to measure performance. The clear guidelines and values included in a company’s code of ethics can be used to help promote and educate employees. While a code of ethics is a great internal guide for a company, it is also an important external declaration. Externally, a code of ethics informs the public of the company’s values and goals. It is a way for outsiders to learn about a company and hold it accountable to its promises.

So how do you implement a code of ethics within an organization? There are many answers to this question. The exact way in which to apply a code of ethics may differ greatly from company to company; however, there are a few key trends. First, the code of ethics needs to be delivered to all employees in some way. It can be an electronic copy or a hard copy, depending on preference. A company should give time for all employees to review the code of ethics and ask any questions they may have. Training is the next step to ensuring proper implementation of a code of ethics. We will discuss the training portion in more depth in the next section. After training is held, every employee that received the training and a copy of the code of ethics should sign the document to verify their understanding and commitment.

The last step in implementing a code of ethics is the reinforcement of the code. After employees have been trained and signed the code of ethics, they are now under obligation to abide by the code. It is the responsibility of everyone in the company to enforce the code of ethics. If you observe unethical conduct, it is your responsibility to report it immediately. It then becomes the responsibility of the management and human resources teams to handle ethics violations according to company policies.

Practice Question

Let’s move onto the next section where we will further explore the importance of training to ensure ethical behavior.

Training for Ethical Behavior

Could you imagine starting a new job and receiving zero guidance on how to perform your job functions? There would be a lot of confusion and frustration. In addition, there would not be any consistency in day-to-day operations. Job training is imperative to creating an effective workforce that is able to meet goals and required output. Without training to align all employees with company policies and procedures, a company would suffer tremendously.

Group of individuals sitting around a conference table. At the front of the room, a man stands in front of a screen giving a presentation.Training is also a fundamental part of implementing a code of ethics. Without training, parts of the code of conduct may be left up to interpretation. Training will help to ensure that every employee is on the same page about their obligation to the code. It is also a great way see a variety of ethics-violation scenarios. Seeing examples of ethics violations and being able to ask questions can be a wonderful learning opportunity. So why is it so important to train employees on every aspect? A code of ethics is the foundation on which a company operates. If employees of the company are not fully aware of the code of ethics and its expectations, it creates a weak foundation. Although it takes time to train everyone, training is a critical part of implementing a successful ethical culture.

Training can occur in many different ways. Some companies hold large group training sessions, others prefer one-on-one training or online training modules. Regardless of how a company decides to train their employees on the code of ethics, a refresher course should also be made available. Some companies retrain their employees on their code of ethics every six months or every year. This is done to ensure everyone understands the code of ethics’ expectations and has the opportunity to refresh their knowledge on the subject. A lot can happen in a year, and it is a good idea to reexamine expectations to help realign and guide employees moving forward. A code of ethics should be used as a daily guide for members of an organization. Although it may not be referenced every day, it should still be at the forefront of employees’ minds when making daily decisions. Therefore, it should not be a document discussed one time during training, but rather a living, breathing document that is used at all levels of an organization on a regular basis.

Practice Question

Training employees on the code of ethics and how to report violations is key to implementing the code of ethics on the ground level. It is equally important to train the management team on how to handle enforcing ethical conduct on their team. Management ethics training should include how to handle an ethics violation report from an employee. If management does not know how to process a complaint or violation, the code of ethics is compromised. If they do not properly handle violations, they will continue to occur without repercussions. Managers play a big role in ethical culture. We will discuss their role further in the next section.

Creating an Ethical Culture

Each organization is responsible for creating and fostering ethical culture. The organizational level of a company creates a code of ethics to support the company mission statement and business principles. It is then passed down to every level of the organization to align everyone to the same goals. Individuals are then responsible for using the code of ethics to guide their daily decisions. So does it end there, where individuals are responsible for acting independently under the guidance of the code of ethics? In some ways, yes. Individuals are responsible for their own actions and decisions. However, management also plays a big role in helping to foster an ethical environment.

Management at the highest level creates the company code of ethics. They are the first level of management to influence company culture. It is up to them to ensure the code of ethics aligns with all of the company’s values and principles. As we discussed in the last section, the human resources management team is next in line to help implement the code of conduct by developing training programs for all employees to attend. They are also responsible for enforcing the code of conduct through managing ethics violation concerns. While the top dogs in the company and human resources each have a large role to play, the lower-level managers are equally important.

Photograph of two women sitting at a desk. One woman is talking, while the other takes notes.Managers interact with their team on a regular basis. Therefore, they tend to have a better idea of what ethical culture looks like in their department. It is up to managers to reinforce ethical standards on their team. The best way for a leader to create an ethical environment is to act ethically themselves, to lead by example. That is the number one responsibility of leaders. When a leader is acting ethically, they become a role model for other employees. In addition, it gives them credibility and makes them more approachable. If someone witnesses an ethics violation by a coworker, they are more likely to report it to their manager if the manager follows ethical guidelines. It is then up to the manager to continue up the chain of command to report ethical concerns. If a report of an ethics violation is swept under the rug, more than likely, the unethical behavior will continue and possibly worsen. It is up to the management team to follow all policies and procedures in place to handle ethical concerns. There need to be repercussions in place for unethical behavior. On the other hand, it is wise for management teams to reward ethical behavior. This can help to create a positive incentive for acting ethically.

Practice Question

It is also important to note that even one manager or employee has the ability to damage a company’s reputation. Earlier in this module, we examined recent lawsuits and investigations; these cases are the perfect example of how even a few employees can destroy ethical culture and company reputation. Consistency in how ethics violations are handled is key to developing a strong ethical culture. If some ethical concerns are addressed while others are not, it creates inconsistencies that may suggest that unethical behavior is sometimes tolerated. Unethical behavior should never be tolerated. It is up to the management team, on every level, to enforce each component of the code of ethics and lead their team to do the same. Without a strong ethical management team, companies face an uphill battle to establishing an ethical culture.


Employment, Small Business and Training. “Implementing a Code of Conduct.” Business Queensland. January 02, 2019. Accessed April 12, 2019.

Heathfield, Susan M. “10 Best Ways to Ensure You Find the Right Person for Your Available Job.” The Balance Careers. October 16, 2018. Accessed April 12, 2019.

“Smarter Hiring Practices.” The Predictive Index. Accessed April 12, 2019.

“Why Have a Code of Conduct.” Ethics & Compliance Initiative. Accessed April 12, 2019.

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