Is It Really Worth Paying Attention To Ethics?

As part of our series of articles by exceptional HR professionals, today we present article by a new guest author, Chris Bauer.

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Hopefully you pay attention to your ethics and those of your company simply because it is the right thing to do. Plus of course, as a terrific bonus, better ethics ultimately make for better business and only the most cynical amongst us would argue otherwise these days.

Sometimes, though, you may be in a position where you need some specific metrics to support your arguments in favor of an organizational focus on ethics. Perhaps it’s to make your case for the ROI for ethics training or perhaps it is simply to satisfy the occasional, understandable need for supporting conventional wisdom with some specific facts and figures.

How about this, then? 

In the American Association of Certified Fraud Examiners most recent “Report To The Nation On Occupational Fraud and Abuse”, they estimate that a full 7% of gross is lost each year to fraud and abuse in major U.S. companies. 7%!!! Other studies suggest that this figure is more or less accurate in smaller companies as well. Further, although data is less clear from other countries, anecdotal information suggests that this figure is reasonably representative internationally if, in fact, rather conservation for some locations where corruption is more institutionalized.

Now, add to that information that fraud and abuse only accounts for one part of the losses related to ethics violations. Among many other things, this already astronomical estimate does not include such considerable costs as:

1. The legal fees and settlement costs for hostile work environment actions.
   
2. The legal fees and settlement costs for discrimination actions.
   
3. The costs associated with unfulfilled contracts due to inadequate, inappropriate, or otherwise ethically compromised oversight.
   
4. The recruiting and training costs associated with replacing employees terminated due to unethical practices.
   
5. The business your company doesn't even get in the first place because a prospective customer, partner, or affiliate heard, saw, or felt something not entirely 'on the up and up' about your organization and they won't even do business with you in the first place. (And remember, all it takes is the appearance of loose ethics by one of your employees for this to happen, it need not be the reality.)
   

So, potentially, losing 7% of your gross may be the proverbial tip of the iceberg when it comes to routine losses due to ethics problems. More frightening still, many of these problems will not even be visible to you until either you learn to look for them or the damage is already done. Possibly both.

Now, here’s another fact to add into the equation, a variety of studies have shown that companies with effective ethics training programs lose as much as 50% less per year to ethics problems. What a difference for an investment in training that will be truly nominal compared to what it will be able to save you.

7% (plus) of gross minus 50% saved would equal a whopping 3.50% increase in your bottom line each year. But suppose your gains weren’t actually that high. In fact, let’s cut it in half for the sake of argument. Do you think that you would be investing 1.75% of your gross into ethics training. In most organizations that would be a pretty wildly extravagant amount to require; chances are that it would require only a fraction of that. 

What could your company do with an additional 1.74% annual gross?  3.50 % increase? Perhaps more? Even a portion of that would make your ROI for ethics training a huge value!

Ultimately, we should all be doing what is right simply because it is right! One of the many underpinnings of that is assuring that employees all receive credible and effective ethics training. If the bottom-line value of doing so ever becomes a question, though, these are just a few of the available numbers to support your argument.

Dr. Bauer is the author of “Better Ethics NOW: How To 

Avoid The Ethics Disaster You Never Saw Coming”, now in its second edition, and his Weekly Ethics Thought is seen by thousands of readers worldwide. Information on his programs as well as free subscriptions to his Weekly Ethics Thought can be found at here.