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Study Shows Ethical Environment Boosts Employee Reporting

Employee reporting of unethical conduct internally can be a key factor in preventing the kind of high-profile corporate scandals that effect company performance and reputation. So what might make employees more likely to report unethical conduct to their superiors? Distinguished professor Linda Treviño in the Penn State Smeal College of Business set out to investigate.
October 4, 2013

This story originally appeared in the Centre Daily Times on September 29, 2013.

Linda Treviño
Linda Treviño

Employee reporting of unethical conduct internally can be a key factor in preventing the kind of high-profile corporate scandals that effect company performance and reputation. But research has shown that employees are often reluctant to make such reports, either for fear of retaliation or the perception that their reports will fall on deaf ears.

So what might make employees more likely to report unethical conduct to their superiors? Distinguished professor Linda Treviño in the Penn State Smeal College of Business, along with colleagues from the University of Michigan, the University of Maryland, and the University of Central Florida, set out to investigate.

In their paper “Encouraging employees to report unethical conduct internally: It takes a village,” the authors assert that a culture of ethical behavior must be fostered at multiple organizational levels; employees must perceive both an ethical leadership and ethical co-workers. It is not enough, they say, to have just one or the other.

"If employees perceive that either their supervisor or peers are less ethical they will be less likely to report unethical conduct internally."

For the large majority of employees, the default mode is to remain silent. Key reasons employees give for remaining silent include the fear of retaliation or the perception that no action would be taken in response to the report.

“(B)ecause formal or informal sanctions can come from supervisors or coworkers, if employees perceive that either their supervisor or peers are less ethical they will be less likely to report unethical conduct internally,” the authors write.

According to research presented in the article, employees decide whether to speak up about perceived unethical behavior by looking to their social environment — which includes both managers and colleagues — for cues.

Managers, then, should focus on consistency in the ethical messages coming from multiple social actors in the organization — not just those messages that come from leaders.

“Employees observe the behaviors of their supervisors and emulate them,” the authors found. But, they also note, “employees are likely to look to coworkers for ethical guidance and support.”

Just having supportive ethical leadership or just having ethical colleagues may send an inconsistent message. This inconsistent message likely discourages reporting because employees will perceive greater risk of reporting improper behavior or think it likely that no action will be taken.

“Leaders need to learn what it means to be an ‘ethical leader,’ and employees need to understand that they play an important role in supporting each other’s ethical behavior."

The authors suggest surveying employees about ethics-related issues to examine responses regarding ethical leadership and ethical support from coworkers with an eye toward discovering consistencies and inconsistencies in the social cues employees perceive.

The authors also suggest providing ethics training programs tailored to specific audiences: “Leaders need to learn what it means to be an ‘ethical leader,’ and employees need to understand that they play an important role in supporting each other’s ethical behavior,” they write.

If managers are concerned about the level of internal reporting in their own organizations, they should look to ensure that all members of the organization — not just the leadership — are sending the same message of dedication to ethical behavior.

“Ongoing corporate scandals continue to bring attention to unethical behavior in organizations,” write the authors. “(O)rganizations that wish to avoid such scandals should focus on developing ethical leadership and developing employee support for ethics.”

“Encouraging employees to report unethical conduct internally: It takes a village” appeared in the May 2013 issue of Organizational Behavior and Human Decision Processes. Authors include Treviño, distinguished professor of organizational behavior and ethics at Smeal, David M. Mayer and Samir Nurmohamed of the University of Michigan’s Ross School of Business, Debra L. Shapiro of the University of Maryland’s Robert H. Smith School of Business, and Marshall Schminke of the University of Central Florida’s College of Business Administration.

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