Most organizations care about having an ethical work climate. That's because an ethical climate usually attracts and retains good people as employees, it promotes high morale and organizations perceived to be ethical are more likely to attract and sustain good relationships with consumers, clients and other organizations. Nevertheless, ethical problems continuously arise in the workplace. What causes this and and what are the implications?

According to Doug Wallace, director of the Center for Ethics, Responsibilities and Values at the College of St. Catherine in St. Paul, Minn., ethical issues come into conflict when upper management perceives reality in a completely different way than do their subordinates, customers, and communities. When that happens, "organizations are asking for trouble.

"When CEOs don't perceive ethical issues as acutely as their employees, that means standards are not being set and workers are left to fend for themselves," explains Wallace. "The result can be serious ethical, if not legal, difficulties because if employees aren't clear about the standards, they'll always opt for the bottom line - what they're being rewarded for."

Unfortunately, research into organizational ethics has found that many persons in upper management are out of touch with their subordinates' perception of reality. A recent survey of Minneapolis-St. Paul executives and managers which measured attitudes toward business ethics illustrates this.

Choosing sides

In the survey, respondents were asked, "In an average business, how often do you think employees might have to choose between doing what their boss tells them... and doing what they feel is right?"

Twelve (4.5 percent) of the 266 personnel executives and middle managers said such ethical dilemmas arise daily and 48 (18 percent) said weekly. But of the 25 CEOs who responded, just one thought these questions arise weekly and 20 (78 percent) thought it happened only once a year.

When queried about how often the business people heard about situations where people had to choose between what the organization expected and what they felt was right, a similar perception gap was found. Among the managers, 60 percent said they had heard of such situations "often." Yet only one of the CEOs agreed.

Such findings are almost hard to believe, yet they leave one wondering about the ethical climate of one's own organization. Furthermore, should an ethical imbalance exist, is it even possible to turn it around?

Wallace says yes. He and Julie Belle White, director of St. Catherine's Masters of Arts in Organizational Leadership program, have done extensive research that has gone into developing a formal audit which organizations can use to measure its ethical condition and to identify problem areas as well.

What the Organizational Integrity Perception Audit does is ask respondents to consider 40 ethical factors concerning their organization's ethical climate, such as a respect for the views of others or, individuals assuming responsibility for ethical decision-making. They are then asked to rate these factors on a scale from 1-4 (1 being very important and 4 very unimportant) in terms of their importance in two areas: First, how important they actually perceive it to be in their organization, and second, how important they wish it would be.

The difference between the desired and the perceived reality, as Wallace describes it, gives the respondent a "gap score'' that shows whether there is a problem in a particular area of their organization. These gap scores are then translated into an aggregate score which is compared with the score of a control group used in the research. The result is a fairly accurate assessment of the organization's ethical condition.

Research steps

There were many research steps that went into developing the audit. First, the research team collected stories of organizational integrity. From them, focus groups collected clusters of significant factors contributing to an ethical climate. Next, respondents rated these factors as to their actual and ideal importance.

Collecting "good news" stories about the ethical decisions was the first step. The criteria Wallace and White used in collecting and selecting these stories were as follows: Each was about an actual event; each was told by one or more individuals involved in the organization in which the events occurred; each formed a story with clear descriptions of plot, characters and context about an ethical issue, and all were resolved by at least several individuals within the organizational context. All of these stories represented a variety of organizations and ethical situations from the Minneapolis-St. Paul area.

Identifying factors

Once the stories of organizational integrity were collected, the next step involved identifying the factors which helped the organizations arrive at ethical resolutions. To help with the task, 15 individuals who demonstrate understanding of ethics and leadership from the Minneapolis-St. Paul area were asked to discuss the stories in focus groups. The objective of conducting the two groups was to generate a list of factors which contributed to an ethical climate.

The list of 40 factors generated form the questions that make up the audit. These questions are categorized into five clusters: Cluster 1 questions center around the ethical principles and values that characterize the organization's environment; Cluster 2 questions revolve around the mission and structure of the organization in terms of its readiness to respond to an ethical challenge; Cluster 3 questions ask participants to respond to the extent to which leaders and other members of the organization model integrity and responsibility; Cluster 4 questions focus on the patterns of communication, and Cluster 5 questions deal with problem-solving processes.

The next phase of the research involved sending the audit to 850 people who were in management positions and had been participating in Twin City-area leadership programs. The 250 people who responded became the control group.

While Wallace says that this does not represent a random sample of the Twin Cities' population, the group is an excellent sampling of those with demonstrated interest in and the study of issues involved in the survey.

What the researchers found in analyzing the audits was that for all 40 factors, there was a significant gap between what the group felt was needed for their organization to have an ethical climate and what they perceived as actually present.

Some findings

Some of the findings are worth noting. When asked what the respondents desired for their organization's ethical climate in terms of its respect for others' views, the median score attained on this question on the 4-point scale was 3.83. When asked what the group perceived as actually being the case in terms of this factor, the median score was 2.86. With this statement, "Honesty and openness characterizes relationships among affected parties and key players," there was a median score of 3.80 generated in terms of the control group's desire for this to be present in the organization. However, when respondents rated this factor as to their perceptions of it present in their organizations, the median score produced was 2.51.

Wallace says that when factors such as these are wanted by employees in their organizations yet they're perceived as not being there, organizations put themselves at risk.

"Organizations are asking for bad news," warns Wallace, and if something bad does happen because an organization is unbalanced in its ethical positions among employee levels, "most of the time company CEOs are taken by surprise."

Wallace, who has conducted ethics courses for many major Twin City corporations, says plans are currently being negotiated to market the audit to profit as well as non-profit organizations. Media coverage about the audit has already generated many inquiries from companies across the country who want to use it.

In the meantime, Wallace and White want to build a database so that organizations taking the audit can compare themselves with other companies in their same industry, size, years in existence, and by employee gender.

The process of finding out how your organization ranks ethically doesn't stop with the audit, however. Companies that need to improve their ethical climate need to go through many steps themselves to achieve it.

"It's a skill that needs to be developed and involves all employee and management levels," says Wallace. "Having good ethical skills and good management skills go hand-in-hand."