Leadership Project: ETHICAL LEADERSHIP

INTRODUCTION
What are ethics? We define ethics in a twofold manner as:   The discipline of dealing with what is good and bad, and with moral duty and obligation; The principles of conduct governing an individual or a group.

At its core, ethics involves the discipline of decency. And the essence of ethics is interdependent thinking and questioning. Business ethics is deeply concerned with both moral values and moral actions. Moral values are basic ideals that are considered desirable or worthwhile for human interaction. Moral actions are the overt expressions and applications of these underlying values. Therefore, the notion that, as businesspersons, we should not deceive or mislead our customers is a moral value. Behaving honestly and fairly toward our customers is a moral action.

Business ethics is called into question when the moral values or the accompanying moral actions of organizational decision-makers conflict with the commonly accepted standards of society.4 that fall into the Good/Good or the Bad/Bad cells tend to be easy to make. After all, why wouldnt leaders support decisions that make good business sense and are highly ethical? And for all those decisions that are highly unethical and make for bad business, voting no would also be a simple matter. When leaders fail to make the right choices, such as paying employees fairly (Good/Good) or dumping garbage on a main street (Bad/Bad), the poor choice can be attributed politely to unenlightened thinking ornot so politelyto stupidity. On the other hand, those issues that fall into the Good/Bad or the Bad/Good cells present an entirely different challenge.

This gray area is where many executives wallow in ethical ambiguity. Exploring such areas is a powerful way to identify sticky issues and to probe more deeply the ethical implications for the company. Taking a deep dive into grey areas usually results in a much clearer image of how a company defines itself. Taking a hard look at issues that seem easier to ignore can help companies make the right decisions.

EMBA - AHMEDABAD UNIVERSITY

Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

ETHICS BUSINESS Good Bad

Good

Bad The Ethics Grid In terms of the Ethics Grid, it is demonstrated that: More opportunities exist in the Good/Good mode than we realize. Few companies that operate in the Good Business/Bad Ethics mode succeed over the long term. More understanding is needed for the hard choices that exist in the Good Ethics/Bad Business mode.

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

THE ETHICAL LEADER

There is more than enlightened self-interest at work among leaders who conform to rigorous ethical guidelines and pressures. What really motivates them is an interest in developing ethical attitudes toward living, learning, and working. When it appears that the market will respond favourably to apparent changes in ethical behaviours, the ethical leader is more concerned that ethical values dominate management thinking. He or she understands these two critical principles:

1. Ethical initiatives that come entirely from a business perspective may have temporary effects, but will erode when business pressures or market data demand a change in strategy. 2. If ethical initiatives originate for ethical reasons, then changes will be more lasting and will be less influenced by market manipulation. The ethical leader knows that a true change in business ethics requires a frontal assault on who we are not just token efforts to increase knowledge about what one can and cannot do according to a code of ethics. At its most basic level, the ethical leader thinks about others.

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

As for codes of ethics, in many corporations they have had little impact on employee actions. This is largely because they have sought only to protect firms from the actions of their employees and have stressed legalese; most codes have neglected the important ethical issues related to culture, environment, people, customers, and communities. There is no real power in pushing codesthat is, there is no dynamic growth in codes. Instead, ethical growth usually emerges as a result of meaningful dialogue about tough issues. Ethical leaders are willing to pursue and engage in such dialogue.

The Ethical Leadership Scale Anyone who holds a position of leadership can consider their decision on this scale of importance and ability to make choices. It is designed to help them assess the current level of ethical functioning in their organizations and to explore how they can gain competitive advantage by developing an ethical edge. Throughout the book, variations of the Ethical Leadership Scale, shown below, are provided to facilitate this approach. Here it appears in its basic form, to help leaders determine, in a general way, their current level of ethical functioning, and to prompt them to decide what their goal is in relation to ethics.

THE ETHICAL LEADERSHIP SCALE  5.0 Ethical Exemplar  4.0 Ethical Culture  3.0 Ethical Leadership  2.0 Compliance with Internal and External Laws and Regulations  1.0 Ethical MinimumStay Out of Trouble

Level-four or level-five goal is required to turn an ethical burden into a competitive edge, and exemplary leadership is required to achieve that edge. Ethical leadership is more than complying with legal regulations and accounting standards. It is setting the standard for principle-driven relationships. Exemplars provide us with a model of how leadership can create an ethical culture. These are leaders who, by their example, buttress the assertion that trust can be rebuilt in corporations.

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

5 STEPS TOWARDS ETHICAL LEADERSHIP DEVELOPMENT

Here listed below are the 5 steps to be considered in establishing Ethical Leadership in a system. Each one of these plays an important role in moulding an organisation in the right form and right mix to lay the foundation and develop ethical leadership culture.  Creating an Ethical Culture, addresses the relationship of ethics to corporate culture. It shows how vision, values, and norms are the critical ingredients in any approach to organizational change related to ethics. Envisioning what is possible and articulating core values serve as guideposts for making ethical decisions along the way.

 Winning through People, addresses company-employee relationships. The topics here include the principles of developing people, promoting health and safety, creating a sense of balance, and valuing differences. Relating constructively with employees is the starting point for building an ethical culture. It sets the tone for all relationships.  Winning with Customers, addresses the ethical considerations of customer relationships. It addresses principles related to product development, manufacturing, and marketing. The way a company relates to customers not only defines who it is as a company but also has a major impact on profitability over the long term.  Winning for the Community, discusses ways in which organizations deal with the communities in which they are located. The topics here include enhancing the environment, contributing to community resources, and participating in community organizations. Socially responsible companies build trust among their constituents and, as a result, build healthy balance sheets over time.  Action Steps provides action steps for the ethical leader. It suggests strategies for transforming principles into action. These actions are a measure of the integrity of the firm. They constitute the day-to-day behaviours that lead investors and stakeholders to trust the information provided by the firm for them to make their own buying decisions, employment decisions, regulatory decisions, and investment decisions.

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

STEP 1 CREATING AN ETHICAL CULTURE

Creating an ethical culture means empowering people to do the right thing for the company, the customer, and the community.

Principles 1. Creating an ethical culture must begin with a vision that includes employees, customers, and communities. 2. An ethical culture must be guided by values that anchor the vision. 3. An ethical culture must be supported by norms and policies that influence desired behaviours in the organizational environment.

Rating Scale for Culture This scale will help you see where you are and where you want to be. 5.0 Congruence between stated values and operating procedures 4.0 Transference of values to employees, customers, and communities 3.0 Behaviour change supported and modelled by senior management 2.0 Motivational programs to rally support for the vision, values, and norms 1.0 Awareness of stated values

5D PROCESS

This is a process devised to create and ethical culture in an organisation. Design: Every organization has strengths and weaknesses relative to its articulated values; therefore, a culture-change effort must begin with a clear statement of the desired end-state: what we want the culture to look and feel like.

Diagnosis: An accurate diagnosis assesses employee perceptions of the current values and norms within the organization. For this purpose, two methods are highly useful. Meeting formally and informally with employees at every organizational level, gathering data through surveys.

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

Development: Effective and lasting change requires a broad base of leadership skills and support within the organization. Developing skills and support usually involves a multifaceted approach to change. This includes further sub-steps like communication, environment, skill enhancement and planning.

Delivery: Many culture-change efforts fail because they treat diagnosis or development as the goal line and neglect delivery. It is a highly important stage and, for most organizations, perhaps the most difficult part of any changes effort. Delivery includes those activities specifically aimed at increasing commitment, enhancing capacity, and mobilizing support from leaders and employees.

Determination: This is the final phase of the 5D process and represents a return, or cycling, to the design and diagnostic phases. Effective change is an ongoing cycle of exploration, understanding, and action: exploration of where we are leads to an understanding of where we need to go, and acting on the understanding gets us to the goal line. The important features of determination are that it builds on what has been accomplished and continues the change process.

STEP 2 WINNING THROUGH PEOPLE

Winning through People means treating employees as whole persons with unique values, differences, and needs.

Principles Winning through People requires a multifaceted approach that includes: 1. Developing employees in ways that increase their productivity and value. 2. Promoting health and safety. 3. Supporting a sense of balance in employees lives. 4. Valuing differences.

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

Rating Scale for Winning through People The following scale will help you to assess where you are and to set goals for the people-oriented dimension of your business. 5.0 Movement to an exemplar for winning through people 4.0 Creation of a culture that nurtures personal and professional growth through innovative performance management, developmental opportunities, succession planning, and the like 3.0 Provision of proactive people programs such as day care, employee assistance, and health promotion 2.0 Compliance with the law by observing Equal Employment Opportunity (EEO) requirements 1.0 Avoidance of trouble with people, such as avoidance of labour-relations problems.

Other issues to be addressed for attainment of this step are: I. II. III. Employee Development. Health and Safety of employees. Giving Supporting balance to the employees.

STEP 3 WINNING WITH CUSTOMERS

Winning with Customers means conducting all interactions with the highest levels of integrity and interdependence.

Principles Winning with customers is a multidimensional approach that must incorporate these practices: 1. Thinking about customer benefits before product development; 2. Ensuring customer safety when producing/manufacturing products; 3. Relating constructively and honestly with customers while marketing the product; 4. Insisting on fairness toward customers when distributing and servicing the product.

Rating Scale for Winning with Customers This scale will help you determine where you are and where you want to be. 5.0 Interdependent, grow-grow relationships with customers 4.0 Immersion in the customers business as a partner
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Leadership Project: ETHICAL LEADERSHIP

3.0 An obsession with customer benefits and win-win relationships 2.0 A passion for customer satisfaction 1.0 An orientation toward customer manipulation

Other issues to be addressed in attainment of this step are: 1. Product Development 2. Product Safety 3. Public Interest 4. Quality Assurance to the customers 5. Environment Concern 6. Waste Management 7. Product Performance and Warranties 8. Ethical Selling Practices of Vendors

STEP 4 WINNING FOR THE COMMUNITY

Winning for the Community means taking the initiative to create productive communities that are able to sustain growth and development.

Principles A company that wants to do right by its community will . . . 1. Enhance the environment. 2. Contribute generously to community resources. 3. Encourage participation in the community.

Rating Scale for Winning for the Community This scale will help you determine where you are and where you want to be: 5.0 Creating a productive community 4.0 Promoting community growth 3.0 Participating in community organizations 2.0 Protecting community resources 1.0 Meeting minimal regulations
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Leadership Project: ETHICAL LEADERSHIP

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Other issues that play an important part in attainment of this step are: 1. Environment Concern 2. Diverting extra resources towards the betterment of the society 3. Creating productive communities (NGOs, voluntary organisations etc.)

STEP 5 ACTION STEPS

THE 10 INGREDIENTS OF AN ETHICAL CULTURE 1. A tradition of strong values and ethics 2. A belief at the top in the strategic importance of integrity 3. Leadership modelling and commitment 4. Explicit statements of values and beliefs, such as codes of ethics and standards of business conduct 5. Active solicitation of support from managers and employees 6. A common view that ethics is a cultural issue 7. Procedures and systems that ensure that ethics is a central part of selection and performance management 8. Tailored education and training programs 9. Multiple upward and downward communication channels 10. Broad monitoring of ethics goals

PRINCIPALS AND ACTION STEPS 1. A tradition of strong values and ethics: When ethics and values are grounded in tradition, policies emerge naturally as an outgrowth of the culture. 2. A belief at the top in the strategic importance of integrity: When leaders view integrity as having strategic importance, all employees begin to see the business possibilities in creating an ethical edge. 3. Leadership modelling and commitment. When leadership demonstrates its commitment to ethics through its own behaviour, employees will get the message that taking the high road will enhance their careers.
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Leadership Project: ETHICAL LEADERSHIP

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4. Explicit statements of values and beliefs, such as codes of ethics and standards of business conduct. When there are explicit statements of values and beliefs, employees are clear about expectations. 5. Active solicitation of support from managers and employees. When executives actively solicit the involvement and support of managers and employees, there is joint ownership of the mission. 6. A common view that ethics is a cultural issue. When ethics is seen as a cultural issue, people focus on the environment as a potential source of competitive advantage. 7. Tailored education and training programs. When education and training programs are tailored to the needs of the target population, people are able to apply their skills in creative and productive ways. 8. Multiple upward and downward communication channels: With such channels, employees feel informed about whats going on and free to initiate their ideas for improvement.

EMBA - AHMEDABAD UNIVERSITY

Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

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BEST PRACTICES
Based on an extensive review of the literature since 1987, it appears that the best practices for ethical leadership are the following:  Challenge processes.  Encourage the heart.  Strive for consistency and congruence.  Think long-term.  Look at the whole.  Tap employees commitment and capacity to learn.  Share power.  Ensure diversity of voices.  Create a humane and nurturing workplace.  Build interdependent relationships.  Foster community.  Accept ownership and accountability.  Resist policies of self-interest.  Put people and creativity at the center.  Be authentic.  Engage in constructive collaboration.  Develop stories of integrity.  Create a culture of trust. (Source: Ethical Leadership, Richard Bellingham)

Why are these practices so difficult to institutionalize? The simple answer is that we are fighting history and habits. We live in a culture that values independence and supports an economic system built on self-interest. These best practices, however, require interdependent thinking and a focus on community. In many ways, they are countercultural. It is thus no surprise that they are not the accepted, expected, and rein- forced behaviours in organizational cultures. Interdependence and community bring us once again to the vital importance of relationship. Indeed, we may say that building interdependent relationships forms the core of ethical leadership.

EMBA - AHMEDABAD UNIVERSITY

Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

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SUMMARY
Ethics is not just another bandwagon: Ethical leadership has one outcome: sustainable development. We cannot sustain progress if our corporate culture does not support our policies. We cannot sustain growth if we do not invest in our people, environment and customers.

Ethical leadership does not mean mass confession: It does not involve finding a guiding light or forming a new business religion. Quite the contrary. Ethical leadership is not interested in lies, it seeks the truth.

Winning the right way does not cost more than its worth: It can be expensive: For example, investing in conservation and recycling might require substantial cash outlays in the early stages because educating people about these things costs money.

Resources are available but require redistribution: Committing funds to clean up past abuses and to prevent future disasters will require a redistribution of resources.

EMBA - AHMEDABAD UNIVERSITY

Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

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RESEARCH METHODOLOGY
Primary data has been collected in form of questionnaires. Emotional Quotient Test was created for the same and circulated among the respondents to mark their responses for the fields. In each of the organisations one candidate from the higher management has been chosen, whose details are attached in the annexure. A sample of 20 was chosen for the same, data from three different organisations has been collected, which are: 1. Larsen & Toubro, Knowledge City, Baroda. 2. IOT Anwesha Engineering and Construction Ltd., 3. Jyoti Ltd., Baroda.

COMPANY PROFILES 1. L&T Knowledge City, Baroda. Located at Waghodia, Baroda, 'L&T Knowledge City' extends across a 112-acre campus. The state-of-the-art engineering campus at Baroda meets the high-end design and engineering needs of the hydrocarbon and power sectors. In the hydrocarbon space, it caters to the needs of the upstream, midstream and downstream sectors, and in power, design support for complete projects. It is a fully owned subsidiary of Larsen & Toubro Ltd. Manager Surveyed: Ms. Vandana Nambiar, Manager (HR), heads the employee services wing of the human resources department, she holds a masters degree in Human Resource Management. She has been associated with L&T Ltd., for several years in different capacities in the HR department. 2. IOT Anwesha Engineering and Construction Ltd., Baroda. IOT Anwesha Engineering & Construction Ltd. (IOTAEC) is an ISO9001:2008 approved company in the field of engineering, construction and manufacturing. It is a subsidiary of IOT Infrastructure & Energy Services Limited, a joint venture of Indian Oil Corporation Limited and Oil Tanking GMBH. It has been a leader in mechanical construction with a niche in fabrication and erection of large storage tanks, pressure vessels, silos etc and has the
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requisite engineering, managerial as well as financial capabilities to take on projects of large size. In order to meet the growing requirement of its Clients, it has also established a fully equipped Civil engineering department and has grabbed some major jobs since past two years. IOTAEC also has a state of art manufacturing unit at Savli, Baroda to serve the fabrication needs of its clients in the petroleum, petrochemical, fertilizer, chemical and other various industries.

Manager Surveyed: Mr. Mohanraj K. is General Manager (Materials), for the Baroda office of IOT AEC, he has over 25 years of experience in various capacities and disciplines. 3. Jyoti Ltd. Established in 1943, Jyoti Ltd is a leading ISO 9001: 2008 engineering company offering reliable quality products and services to clients in Water and Power segments in India and in the international market

Jyoti Ltd. today is serving the vital sectors of national and international economy such as  Power (Thermal, Hydel and Nuclear) generation, Transmission and Distribution.  Agriculture, providing irrigation through pumping systems.  Water supply and sewerage schemes.  Defense-particularly Naval and marine establishments.

EMBA - AHMEDABAD UNIVERSITY

Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

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 Core industries like steel, cement, paper, sugar, fertilizers, chemicals and Petrochemicals. Railways.

Manager Surveyed: Lt. Col. A.M. Chinoy, is the Deputy General Manager (Administration), he holds vast experience in the field of administration in various disciplines and capacities.

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

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ETHICAL TEST SURVEY OUTCOMES

A test was conducted for a survey on the sample size of 20. The responses were tapped, which showed either agreement or disagreement towards a statement and weighed the statement from a scale of 1 to 10. 10 was rated for the statement if the respondent felt the statement means to him the most and 1 if its the vice versa. The outcomes were interesting for the 10 statements which demonstrated a trait towards being ethical in ones outlook, they are: Sr. No. 1 2 3 4 5 6 7 8 9 10 Ethical Traits Courage to speak the truth Courage to lead an ethical life Courage to be involved Courage to reject cynicism Courage to assume responsibility Courage to lead at home Courage to persist Courage to serve Courage to lead Courage to follow Mean Score 8.0 6.2 7.4 6.4 8.2 9.4 6.6 7.4 7.9 8.6

10 9 8 7 6 5 4 3 2 1 0

Mean Score

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

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From the above data it is seen that, courage to lead at home seems to be the most weighed statement of trait in ethical leadership. This means most respondents feel that their family is the most important legacy and they want to honour the relationships that come with it. Courage to follow is the second highest weighed trait which means the respondents feel that there is nothing wrong in following someone who is their subordinate at the right time, doing so does not hurt their ego or their self esteem. Courage to assume responsibility is the third highest weighed trait which means the respondents feel that to be an ethical leader one has to assume full responsibility of his own actions, whether it leads to success or failure. Courage to speak the truth seems to be the fourth highest weighed trait, this essentially means that majority of the sample believes that they are willing to listen to unpleasant truths and truthfulness according to them will drive them more towards being ethical. Courage to serve, to lead, to be involved have generated average scores, which says the respondents feel that they matter moderately in being an ethical leader. Lowest scores have been marked for courage to persist, to resist cynicism, to lead an ethical life, the respondents feel that these traits matter the least in being an ethical leader.

MANAGERS TEST OUTCOMES

Sr. No. 1 2 3 4 5 6 7 8 9 Ethical Traits Courage to speak the truth Courage to lead an ethical life Courage to be involved Courage to reject cynicism Courage to assume responsibility Courage to lead at home Courage to persist Courage to serve Courage to lead Ms. Vandana Mr. Mohanraj LT. Col. Chinoy 9 2 10 9 10 10 9 9 10 8 7 9 7 9 9 8 9 9 7 9 2 3 6 10 1 4 5
Malav J. Varu

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Leadership Project: ETHICAL LEADERSHIP

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10

Courage to follow

Courage to follow Courage to lead Courage to serve Courage to persist Courage to lead at home Courage to assume responsibility Courage to reject cynicism Courage to be involved Courage to lead an ethical life Courage to speak the truth 0 2 4 6 8 10 12 Lt. Col. Chinoy Mr. Mohanraj Ms. Vandana

Similar outcomes are seen from the managers responses too. Thus when it comes to being ethical in ones outlook, the priorities tend to be the same in all groups, whether they are middle managers or top level managers.

EMBA - AHMEDABAD UNIVERSITY

Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

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CONCLUSION AND SUGGESTIONS

From the above literature research and primary data collected we can find that different traits mean differently to people in the organisation, they essentially mean: WHAT EACH TRAIT MEANS 1. The courage to seek the truth. I am willing to seek out unpleasant truths, even when they may conflict with things I have a great investment in, or when the truth may threaten my physical, intellectual, or emotional security. I recognize that my personal freedom depends on my ability to seek and find truth. 2. The courage to lead an ethical life. In a cynical, sometimes dissolute world, I realize that it takes courage to be ethical. I resist the temptation to be less than ethical, even when "everyone is doing it." I regard honest people as heroes, not fools. 3. The courage to be involved. Apathy and indifference can be more devastating than any natural or man-made disasters. Despite occasional compassion fatigue, I remain committed to making a difference and getting others involved. I refuse to look the other way. 4. The courage to reject cynicism. Cynicism is a comforting and protective refuge, but one I resist vigilantly. I know that trust and optimism, essential to a productive life, are impossible if I give in to the cowardice of cynicism. 5. The courage to assume responsibility. I alone am responsible for my actions, whether they lead to success or failure. I refuse to waste time on making excuses, harboring unrealistic hopes, or placing blame. I am willing to share responsibility and accountability with others, and back them up 100 % if things go wrong. 6. The courage to lead at home. I know that my home and family are my most powerful legacy for the future. I mentor my children, giving them equal love and discipline. I'm there 100 % for my partner. I honor my parents and older relatives, even if advanced age, ill health, or different values make communication seem difficult and unrewarding. I live each day with my family and won't think; tomorrow I'll have more time.

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

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7. The courage to persist. I have the courage to delay gratification, to endure the long haul, and to make sacrifices when necessary. I frequently visualize the next few years and anticipate the results of my actions. I summon the inner resources to stay on track by keeping my eye on this big picture. 8. The courage to serve. In an ego-driven, success-driven society, I have the courage to put myself second. I realize that the loftiest leader is the one who serves others best. My job, no matter what the description or title, is to provide satisfaction, solve problems, fill needs, and find answers in a way that enhances and empowers those around me. 9. The courage to lead. Few people are willing to stand for something, or even to clarify what they would stand for if they could. Others criticize without offering solutions, but I concentrate on what I stand for, on solutions and goals, and on how I can motivate others to action. I'm not content to wait for someone else to take charge and point a direction. 10. The courage to follow. Unlike leaders of image, a leader of substance knows when and how to follow willingly. I have learned the benefits of being a good follower, of welcoming the ideas and contributions of others without feeling that my position or integrity has been challenged. By sharing power, I increase my own personal and professional power, and make myself aware of the challenges that others face every day.

In todays world a lot of other stuff that goes into making a person successful, but only being successful in ones career is not enough. Being successful in life is also equally important, and to do his one has to be ethical in outlook, hence teaching the importance of ethics in personal life and in business is inevitable. Regular workshops on work and life ethics will help a lot in terms of moulding the employees of an organisation into more responsible individuals and fair professionals who will improve the overall culture of the organisation which will in turn create better opportunities for the orgnisation.

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Malav J. Varu

Leadership Project: ETHICAL LEADERSHIP

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BIBLIOGRAPHY

 Ethical Leadership: Rebuilding Trust in Organisations by Richard Bellingham  Ethical Leader by Larry Lashway  Beck, Lynn G., and Joseph Murphy. Ethics in Educational Leadership Programs: An Expanding Role.  Sergiovanni, Thomas J. Moral Leadership: Getting to the Heart of School Leadership.  Starratt, Robert J. "Building an Ethical School: A Theory for Practice in Educational Leadership."

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Malav J. Varu