Oops! Ethical Slip-Up? How Going the Extra Mile Can Save Your Company's Reputation
"Discover how businesses can turn ethical lapses into opportunities to strengthen employee trust and boost overall organizational health."
In today's business landscape, ethical failures can have far-reaching consequences, impacting everything from employee morale to a company's reputation. While preventing these lapses is crucial, knowing how to respond effectively when they do occur is equally important. A recent study by Marshall Schminke, James Caldwell, Maureen Ambrose, and Sean McMahon sheds light on this critical area, offering insights into how organizations can navigate ethical breaches and rebuild employee trust.
Traditionally, organizational research has focused on preventing ethical violations due to their often-catastrophic effects. Workplace fraud, estimated to cost upwards of three-quarters of a trillion dollars annually in the U.S. alone, highlights the importance of preventative measures. However, despite these efforts, ethical lapses continue to happen, underscoring the need for strategies to manage them effectively.
Ethical lapses can jeopardize a company's reputation and even its existence. With a significant portion of the workforce reporting witnessing ethical violations, it's essential to understand how to address these incidents and regain employee trust. Schminke and his colleagues draw on service recovery literature to explore how firms can recover from ethical lapses, similar to how they handle customer service failures.
The Ethical Recovery Paradox: Turning a Crisis into an Opportunity
The service recovery literature introduces the concept of the "recovery paradox," where a customer's loyalty increases after a company effectively resolves a service failure. Schminke and his colleagues suggest that an ethical recovery paradox may also exist. If a firm goes the extra mile to address an ethical violation, it can restore and even enhance employee confidence and support.
- Control Condition: Described the basic setting, jobs, a shared tip jar, and the company's ethics code (no ethical failure).
- Observed Ethical Failure: A new manager stealing tips from the jar three times.
- Reported Violation: The violation was reported to the manager.
- Varying Levels of Action: The general manager's response ranged from negative/dismissive to somewhat positive (more engaged/proactive) to highly positive (very concerned, restored loss to victims, new procedure for future).
Turning Ethical Lapses into Opportunities for Growth
This research highlights the importance of addressing ethical failures head-on. By taking deliberate steps to deal with the problem, organizations can restore employee faith and build stronger bonds. This can lead to an "ethical recovery paradox," where the firm emerges stronger than before the lapse occurred. Future research should explore the factors that contribute to a high-quality recovery effort and how these findings extend to those who indirectly witness ethical violations.