CODE OF ETHICS AND CODE OF CONDUCT

Code of ethics and code of conduct specify the ethical standards that a group (e.g., staff or a
professional group) should follow in order to continue as a member of the group. They are generally
formally stated and members are required to accept them as part of their membership of the group
while accepting employment/membership. Values vary between individuals and across cultures.
Hofstede's four value dimensions (1980) help us understand cultural value clashes. Long-term
versus short-term values affect many aspects of organizational life. The four key ethical principles are
egalitarianism, utilitarianism, individual right, and distributive justice. Organizations following the
utilitarianism approach in ethics make decisions based on their outcomes and consequences. Ethical
behaviour is influenced by moral intensity, ethical sensitivity, and the situation. A code of ethics
serves a number of key roles.

A code of ethics is different from a code of conduct. Code of ethics for an organization or for a
profession is developed more in the form of statement of values and beliefs that defines an
organization or a group. Value statements are aspirational, while rules or principles are the beliefs,
which individual members of an organization should subscribe to in order to continue as members of
the organization. These are listed in different sections in the code, regarding specific relationships
with employees, customers, shareholders, suppliers, and competitors, as well as the society in
general. Because of the increasing importance of ethical compliance, professional organizations
emphasize on imparting training on ethics.

The code of conduct, on the other hand, translates the values (documented in the code of ethics) into
specific behavioural standards, keeping in mind the possible reflection on the stakeholders’ interest.
It outlines a fundamental set of principles, explains why members of an organization should behave
in a certain way, what actions are prohibited, and also how to determine which action is ethical or
unethical. Therefore, codes of ethics are general guides to operational values and decisions, while
codes of conduct are more specific or formal statements of the values and practices of a business.
Codes of conduct for any organization are better understood through the mission statement of the
organization.

A common philosophical definition of ethics is the science of conducts or values of management.

Moral values are respect, honesty, fairness, and responsibility, and these values are translated into a
code of ethics, according to Carter McNamara (2002), a Minneapolis consultant, specializing in
leadership development and strategic planning ethics ‘includes the fundamental ground rules by
which we live our lives’. As it pertains to business, ethics is generally considered the act of learning
what is right and what is wrong in the workplace and then making the decision to do the right thing.

Benefits of Code of Ethics

It is now clear that merely having by default a code of ethics or conduct will not solve the ethical
problems. However, having a developed code of ethics will certainly be beneficial to the organization
and to the society as a whole. For the organization, a clear code of ethics or standards provides
concrete guidelines necessary to deal with situations both within the company as well as in external
relations. Internal ethical dilemmas always need not be straight and simple; it may be complex,
requiring well-defined policies to facilitate fairness and moral management. In external relations
with suppliers, customers, and shareholders, a solid code is the best way to avoid decisions that can
lead, in extreme cases, to governmental intervention and prosecution.
A clear statement of ethics policy of an organization also helps employees to align their personal
values with those of the organization, creating a stronger workplace bond with both fellow workers
and company leaders. Also, a code of ethics provides individual workers with security that protects
them from possible violation of ethical practices by unscrupulous organizations. Society also benefits
when the organizations comply with the ethical codes. Some such areas may be organizations’
decision to comply with environmental hazards, and improving the quality of work life (apart from
the benefit to the people who work with the organization, it also benefits the society through
improved infrastructural facilities). Also, a code of ethics benefits future corporate leaders, as these
prospects can improve their moral standards right from the beginning, to rise to the future
expectations of ethical standards in their higher role positions.

Hence, a developed code of ethics benefits all types of organizations and businesses, irrespective of
their size and nature of activities. Such a code not only transcends business practices, but also
encourages employees to be upfront about problems, which they may encounter in the workplace.

Benefits of Ethical Practices in Organizations

By behaving ethically, organizations can derive huge advantages. Even though the primary
constructs of ethical practices are humanity and compassion for the stakeholders, it can provide the
following advantages to organizations:

 Competitive advantage—Customers favour those organizations which are known for their ethical
practices. Hence, ethical violation reduces the market share, reduces their sales and revenues, and
ultimately adversely affects the bottom line of the organization.
 Better staff attraction and retention—Ethics compliant organizations also develop their brand
image and such employer branding helps them to attract and retain the best people, which eventually
contribute to their sustainable competitive advantage. On the contrary, ethical violation means high
attrition rate of employees, recruitment of average performers, and overall cost inefficiency.
 Investment—Ethics compliant organizations can also attract investors as people repose their confidence
only on those who show integrity, a sense of responsibility, and who are trustworthy.
 Morale and culture—Ethics-compliant organizations also create a workplace, where employees feel
compelled to work. Ethical organizations develop high integrity, become socially responsible, and globally
considerate. All these, make such organizations less prone to stress, attrition, and dissatisfaction.
Therefore, complying with the ethics, organizations develop a work culture, free from stress, which makes
employees feel happier and become more productive.
 Reputation—Building organizational reputation takes years of efforts and ruining it hardly requires one
violation. Ethically responsible organizations are less prone to scandals and disasters. They become more
sensitive to any such practices, which may adversely affect the reputation of the organization.
 Legal and regulatory reasons—Even though compliance with ethics still now voluntary and
organizations comply with these for their long-term business interests, globally ethical issues are likely to
come under legal and regulatory norms, making it compulsory for organizations to comply with the same.
Hence, early preparedness of the organization will benefit them in the long run, when ethical issues
become legally enforceable.
  Legacy—It is human nature to be good. Ethical consideration changing our percept of legacy, which is
not to pile up money at the cost of others’ sufferings, but decisions and business practices which are
beneficial to mankind. Hence, organizations believe the test of real legacy is ethical decision-making.

Effective Performance Management (PM) is among the top priorities

for management teams, and is an important tool to operationalize and support
the organization’s strategies and objectives. Our new management-level study
at 20 Norwegian companies provides insights and input to companies in their
work towards improving PM practices.

Capgemini’s definition: “PM is a structured approach to enhance the ability

of companies and its employees to deliver on strategic objectives”

The study is based on Capgemini’s global framework, which ties together 5

key components of successful PM (as outlined in the Figure below).

Leadership and Governance:

One of the top drivers for PM is implementing strategy, while respondents

indicate that the management team can improve in inspiring the organization
and provide a clear vision. Companies that invest in communication and have
engagement from the management team, achieve greater success in
engaging the organization in implementing strategy.

Priorities and Measures:

There is an increased focus on risk management and its effects on

performance. Many companies are struggling with the integration, but
companies that have succeeded reports increased margins compared to their
competitors.

Companies struggle with cascading KPIs further down from the corporate
level. A lack of cascading can result in unclear and faulty priorities and a PM
framework that fails to set directions throughout the organization.

Information and Insight

The study reveals that respondents experience limited access to critical

information. The information presented lacks focus and does not reflect key
business drivers. Respondents express that they can improve their decision-
making process from ambition to action.
 Processes and Systems

Capgemini experience that companies have invested in one or several BI/PM

systems, but often the problem is not the system itself but how it is used. To
achieve the expected business benefits, BI/PM investments need to be
aligned with the overall strategy, and top management needs to be in the front
seat related to implementation and establishing a performance culture.

Capabilities and Culture

Information and knowledge sharing is something all strive for and find difficult
to succeed at. The study shows that companies invest in governance models
and IT systems for knowledge sharing, but still struggle. As people are strong
drivers of information and knowledge sharing, hence important to create and
foster a culture of collaboration and teamwork.

Success?

The Capgemini framework represents a long term commitment to

improvements in PM, and will ensure that development remains on track and
is driven forward. Investing time and resources establishing a well-anchored
PM framework ensure operationalization and implementation of the
organization’s strategy and objectives. Potential benefits are:

 Increased strategic goal achievement

 Create a performance culture
 Improvements in risk management
 Increased sales and customer satisfaction
 Effective profitability analysis, predictive analysis and management
reporting
 Increased focus on efficiency and reducing cost
 Robust foundation for decision making and planning

To achieve the benefits that PM can provide, a holistic approach and

systematic improvements in all 5 components of the PM framework is key
success criteria.