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Blog/April 18, 2011

Establishing an ethics culture is a “value-add” to your core business

A couple of months ago, I asked a large room full of construction industry owners if they considered their companies (and themselves) to be ethical. All of the hands quickly went up. I then asked if they ever worked with (or for) a company that they considered unethical. Their response was very interesting. There was a pause, a short, awkward silence with many people looking around the room. Then, a few hands at a time started to pop up and, in the end, all of these same owners indicated that they had worked with unethical companies. I soon discovered that my second question created discomfort because this particular group of companies (contractors, suppliers and vendors) often overlapped each other in a common industry sector. To my surprise, the unethical companies that these leaders were forced to consider were in the room with them! All of the people who considered themselves ethical, just two minutes earlier, were now considered unethical by their peers.

Clearly, the industry has an image problem. In 2004, FMI conducted a survey of 270 owners, architects, construction managers, contractors – 61% of survey respondents thought that the industry was “tainted” by unethical acts. Further, there is systemic failure within the industry to prevent unethical behavior: 84% reported that they had experienced, encountered or observed construction industry-related acts or transactions that they would consider unethical in the past year. Apparently, this perception has not changed that much in seven years. The challenge for my group of owners is to find ways to establish a clearer ethical standard and use it to reduce the negative perceptions that might exist about their company’s reputation. In other words, they need to DO some things to PROVE that they are ethical.

Making ethics tangible

FMI spoke with 20 CEOs and compliance managers at leading design and construction firms to establish a picture of the ethics and compliance initiatives currently in practice. In some cases, interviewees had been with the same firm for decades and were associated with long-established ethics programs; in others, they were shaping a relatively new ethics program. It is worth noting that all participants reported ongoing refinement of their corporate policies and practices regarding ethics, and that all had fashioned the associated collateral – code of conduct, code of ethics, employee handbook, training modules, scenarios etc. – through a largely internal process.

Following is a list of best practices FMI has extracted from the interviews.

  • Ethics starts at the top – the leader must champion ethics policies, practices and attitude.
  • Keep your ethics policy simple, and tie it back to key values.
  • Get buy-in from everyone in the company.
  • An ethical culture starts with hiring the right people.
  • Ethics can be taught.
  • Review, monitor and report ethics behavior.
  • Take action on ethical violations.

Ethics policies rarely are mentioned when contractors speak of their success, though ethics has become a defining issue for the design and construction industry. Driven in part by regulatory pressure, ethics programs are gaining prominence within firms whose leaders have made it a priority. Throughout the industry, these programs are supported by associations like the Construction Industry Ethics and Compliance Initiative (CIECI) and the AGC. The establishment of “effective” ethics policies also provides strong evidence that the company is striving to be ethical and that, in turn, provides a defense against undetected incidents of unethical behavior, and reduces company liability when an ethical breach occurs.

Specifically, ethics and compliance programs must:

  • Establish standards and procedures to prevent and discover wrongdoing.
  • Provide for periodic risk assessments.
  • Ensure corrective measures are implemented.
  • Promote periodic communication and awareness of the ethics code.
  • Provide an effective training program for ethics education.
  • Provide and advertise an anonymous hotline for reporting breaches of conduct.

Most firms use a combination of a code of conduct, ethics and compliance policy and annual training to communicate the basics of their ethics program to employees. It is FMI’s experience that the greatest return on investment is realized when the program is embedded in the corporate strategy. A program that calls attention to company goals, clarifies the company’s direction and issues clear directives for staff can be galvanizing, especially during times of thin backlog and low morale.

Breathing life into these programs so that ethics permeates the culture of a company is the true challenge and test of superb leadership. The firms that make the commitment to build a vibrant ethical culture will take the first steps toward countering the negative perceptions that others might have about their company and the industry as a whole. They will also pave the way for other companies to create formal ethics programs, thus raising the bar for the entire industry.

Want to know more?