Why Small Organizations Need Our Help

Ethics Resource Center 2003
Leslie Altizer

Today, there exists a large gap in the presence of formal ethics programs between large and small organizations. The gap may be attributed to a higher level of public and media attention large organizations are receiving when it comes to ethical responsibility. Because of their public profile, large companies feel a greater pressure than small organizations to implement effective ethics programs. Conversely, the small organization is probably not feeling enough pressure to begin building formal ethics infrastructures because they have largely avoided the public eye. Moreover, smaller organizations have a lesser amount of resources available to them to build an effective ethics program.

Another potential cause for the lack of formal ethics programs within small organizations is that these organizations have cultures that are more informal. Thus, formal infrastructures are not as prevalent and this results in very strong informal standards. Employees tend to be more bound by these informal standards because they represent the culture of the organization.

A final reason for this gap is that smaller organizations may feel they are not populated enough to warrant a formal ethics infrastructure. Is it really worth having an Ethics Hotline or Ethics Office when a company only employs 20 people? This is probably the greatest argument for why small organizations don't need formal programs. It is not as feasible for smaller organizations to have the same level of formal infrastructures but it is possible for this group to customize a formal structure that fits their culture. A small company can still have formal written standards for employees to follow. It can still have a means for employees to make an anonymous report of misconduct. It can designate an individual or Committee to respond to these reports in a confidential manner. It will just take more time and energy for this group to discover what will work.

The Federal Sentencing Guidelines identifies seven requirements that organizations must follow in order to establish effective ethics programs. The 2003 National Business Ethics Survey (NBES) focused on four of these elements and how prevalent they are in the American workplace. The results of the survey make visible the need for more attention to be shifted onto smaller organizations, especially in the for-profit sector. The four elements examined were: written standards of ethical conduct, training on standards of conduct, an ethics office or ethics hotline and a means to anonymously report misconduct.

A Code of Ethics is an organization's first step in building an ethics program. A good Code of Ethics is how an organization begins to build an effective ethics program. An effective Code of Ethics will center on an organization's core values and provide appropriate guidance for employee decision-making. It will also communicate these values to employees and leaders, put an organization in compliance with regulations, reduce financial risks, reduce the chance of receiving high government fines and provide a benchmark with which performance can be measured.

73% of participants from the 2003 NBES responded that their organizations had written standards of business conduct. The presence of written ethics standards was much higher in larger (88%) versus smaller (58%) organizations. When examining the work sectors (government, non-profit and for-profit) by organization size, only small, for-profit organizations reported a very low presence of written standards. These findings begin to demonstrate the large gap that exists between large and small organizations.

The next piece of evidence that shows this difference is found in the presence of ethics training related to an organization's written standards. The Code is a means to make employees aware of an organization's values and principles. Training is a way for leadership to raise awareness of ethical issues, to respond to questions and concerns from employees and to reinforce the commitment to behave in accordance with the core values.

Though 73% of respondents said their organizations had written standards, only 54% of participants said their organizations provided ethics training. This question is more optimistic when only examining the organizations with written standards. Further analysis in the NBES showed that of those 73%, 67% actually said their organization provided ethics training. So, organizations that had written standards reported a higher percentage of training than did the sample as a whole. This is a continued step in the right direction for the overall ethics field but we cannot overlook the negative trend with small organizations. The smaller, for-profit organizations had the lowest reported level of ethics training (35%).

To this point, the Code and training are means for an organization to raise employee awareness of how to behave in an ethical manner, but awareness is only half the battle. Leadership must provide a means to both enforce the ethics standards and give employees the ability to anonymously report ethics concerns. Establishing an ethics office or hotline, which provides employees with the capability of anonymous reporting, is an excellent way to address this requirement.

Only 43% of respondents from the NBES said their organizations had an ethics office or telephone advice line to which they could turn for advice about ethics issues or concerns. Once again, smaller organizations were much less likely to have an ethics office or advice line (26%) than the larger organizations (58%). When broken down by sector, the group that was least likely to have these elements was the small, for-profit organizations.

Overall, 63% of participants in the NBES claimed their organizations provided them with a means to report ethical misconduct anonymously. When analyzed based on organization size, the larger organizations were much more likely (77%) to have a mechanism for anonymous reporting than the smaller organizations (47%). To continue the earlier trend, the smaller, for-profit organizations were the least likely to possess a mechanism for anonymous reporting.

This article has examined ethical program elements as stand-alone elements. In order for an ethics program to be very effective, it should contain at least these four components. An organization must have employees who are aware and knowledgeable about ethical behavior, who are able to obtain advice and information about ethical behavior and who have the ability to report misconduct anonymously.

Unfortunately, only 27% of all respondents said their organizations had all four of the program elements, though 44% claimed they had at least two of the four. To complete the earlier pattern, 42% of larger organizations, as compared to a mere 12% of smaller organizations, had all four components in their ethics programs.

The statistics from NBES clearly show a large difference between small and large organizations. What NBES did not do is tell us why. Why is it that smaller organizations, specifically smaller, for-profits, are not as current as larger organizations when it comes to their ethics programs? As was mentioned earlier, this issue might be attributed to the greater amount of focus larger organizations receive and the lack of resources available to smaller organizations. The media is always focusing on the larger organizations such as Enron or WorldCom. Seeing Goliath fall is much more newsworthy than seeing David fall. To add to this problem, the larger organizations have more money to spend on building an ethics program. There is not a large enough market in the small business sector for consultants to work in. Finally, smaller organizations tend to be regulated by their informal standards because they do not employ enough people to warrant a formalized system.

Now is the time for the ethics community to focus on the needs of smaller businesses because they have been widely neglected in the field of ethics. NBES is only the first step in helping small organizations. The survey illustrated how much of a gap exists between large and small organizations. We must direct more of our research efforts towards this problem.