Hiring, promotions and other personnel measures for ethical organizations

Years ago, two young lawyers at a firm sat in the office of a senior partner who was on the phone conducting a reference check for a potential hire, waiting for the call to end so they could begin the meeting they had planned with him. They listened silently as the partner went down the list of the questions that one asks in these calls – Is the candidate hard working?  Is he smart?  Does he have the potential to attract business?  – but when he  inquired whether the candidate was honest, one of the young attorneys turned to the other and cynically asked in a whisper: “What’s the right answer?”

Today, when business ethics has become part of the corporate mainstream, it is more difficult (though not impossible) to imagine a conversation like this happening.  Indeed, organizations of all kinds routinely proclaim that ethics matters in the context of hiring – and the related settings of deciding promotions and compensation.  But what does that actually mean?

In an excellent post last week in Slaw, which was responding to an article summarizing various studies that showed that “legal employers rank ‘integrity, honesty and trustworthiness’ as a crucial quality in a prospective lawyer hire,…” Professor Alice Woolley of the University of Calgary Law School wrote: “While I  can’t help but be pleased to see this apparent consensus on the importance of ethics and professionalism to legal practice, I think the conversation as framed has the potential to lead us astray… by [among  other things] assuming that it is ethical actors who create ethical behavior…” In fact, she argued:  “the kind of person I am will affect my behaviour in a far less significant way than will the circumstances in which I find myself, ” and she notes further that “there is far greater consistency of behaviour by different people within a single situation than there is from the same person across different situations.”

I completely agree with Professor Woolley’s behaviorist analysis and, as described in a series of earlier posts,  have suggested that behavioral ethics supports the need for strong corporate compliance programs. That is, such programs a) are predicated on the assumption that most individuals are in fact vulnerable to pressures/temptations to engage in wrongdoing – i.e., what Woolley calls situations; and b) can play a crucial role in minimizing the risk causing potential of such situations. Moreover, it is also the case that many of the ways in which compliance programs attempt do this – e.g., propounding standards and procedures, training on these and auditing/ monitoring to ensure they are followed  –  are not directed at hiring the ethically fit and barring others from one’s organization.

However, focusing on ethics in hiring and other personnel decisions – particularly when reinforced by other compliance program efforts –  does have a role to play in mitigating ethics risk, in that these measures can help individuals:

– make the right decisions when faced with a risky situation; or

– better yet, take steps to prevent such situations from occurring in the first instance.

Here are some thoughts (including “practice pointers”) on how to do this.

With respect to hiring, business organizations generally conduct some due diligence on candidates but – while generally necessary – these sorts of efforts serve limited purposes. By contrast, too few companies ask ethics-related questions in employment interviews – e.g., “Describe an ethical challenge you’ve faced and how you dealt with it?”  The point of asking this (or  similar) questions is less about identifying individuals of strong ethical character – something which, as noted above, behavioral ethics teaches us doesn’t matter much in determining how people respond to actual ethical challenges.  Rather, its principal benefit is in conveying that ethics matters in tangible ways (which hiring decisions clearly are) to a company – which can positively impact not only the job candidate but the interviewer as well.  A practice pointer: it can be helpful to reinforce in compliance training for managers the importance of ethics-related job interviewing – as this helps convey the larger message that managers are responsible for the conduct of those who report to them.

Note that this sort of inquiry is most important for more senior-level positions.  In particular, in hiring (or approving the hires of) candidates for senior posts, boards of directors should ask what was the “ethics component” of the process – a question which can reinforce their company’s expectations for the new hire, the other senior executives… and the board itself.  Moreover, this topic should be included in board ethics training.

Turning from hiring to promotion/compensation/recognition, the most common tool for making ethics count in these types of personnel-related matters is the performance evaluation.   In my experience, this is an area of struggle (and under-performance)  for a great many companies.   A practice pointer: the key to success here  can be tailoring ethics-related criteria in performance evaluations to different positions/functions, rather than painting with a broad brush.

Some companies do give direct financial awards for exemplary ethical behavior – amounts which are often, but not always, nominal.   Practices of this sort have been around for a long time – indeed, Bear Stearns had an internal compliance  “bounty” system as far back as the 1990’s, at least for certain types of violations – and they have been the subject of much controversy, with many people taking the position that it is flat-out wrong to pay employees to do what is right. I don’t have such a completely negative view on it, but do think that appealing  to the “pro-social” side of human nature may be more effective than giving cash for ethics.  A practice pointer:  as part of the management training mentioned earlier, managers should be shown how to identify acts of truly exemplary ethical behavior and compliment the employees involved (including when to let other employees know about this).

Finally, most companies have means to weed out genuine bad actors in the promotion process, but too few have a mechanism to identify those who are merely weak when it comes to ethics, e.g., supervisors who convey the message that required ethics training is a “necessary evil.”  A practice pointer: companies should have a requirement for promotions to ranks above a certain (typically high) level that the decision makers must receive the input of the compliance & ethics officer.  Not only can this be a helpful tool for ensuring that promotions reflect company values, but the very act of putting the C&E officer in this position of power can  – like some of the other strategies described in this post – help shape in a positive way the sorts of situations to which Woolley refers.

(Thanks to the recently launched Behavioral Legal Ethics Blog  for alerting me to Woolley’s post.)