What is ethical fading? What are the main factors that cause employees to behave unethically?
Ethical fading is when people engage in increasingly unethical behavior while convincing themselves that they are acting fairly and properly. According to Simon Sinek, ethical fading happens for three reasons: 1) poorly designed incentives, 2) rationalization and 3) reliance on rigid and impersonal structures in place of enlightened leadership.
We explore each of these below.
What Is Ethical Fading?
The trust that strong relationships are based on develops when a group of people consistently behaves ethically. Unfortunately, if a trust-based environment is not properly established in an organization, the people within that organization can start to suffer a gradual decline in their ethics, which can build on itself and eventually create a toxic work environment. This is called ethical fading.
According to Simon Sinek, ethical fading starts with minor transgressions—a few corners cut here and there, or someone taking credit for someone else’s idea. If employees committing those minor transgressions are rewarded with things like bonuses or promotions, other employees start committing small transgressions, which can increase and accumulate into larger transgressions.
A company that suffers from ethical fading often runs into legal trouble or is not prepared for competitive challenges in the marketplace because their employees have been trained to look inward, at their own minor goals, rather than outward, at the company’s larger place in the world.
There are several common factors that encourage unethical behavior, including:
- Poorly designed incentives
- Reliance on rigid and impersonal structures in place of enlightened leadership.
1. Poorly-Designed Incentives Can Cause Ethical Fading
Finite-minded companies are particularly susceptible to the effects of ethical fading. In finite-minded organizations, short-term accomplishments are often emphasized so strongly that people are incentivized to hit their performance goals by any means possible.
In an organization run with a finite mindset where employees are judged exclusively on their performance with no consideration given to how they achieved that performance, employees can feel pressure to hit their targets by cutting corners, bending rules, and making unethical decisions. When employees who do this are then rewarded with bonuses and promotions, other employees get the message that the organization prioritizes winning at all costs. When this mentality becomes pervasive, employees fear for their job security and feel compelled to keep up with colleagues who are acting unethically. This can result in organizations filled with unethical actors and can lead to big problems.
Case Study: Wells Fargo
Wells Fargo provides an example of the kind of trouble a company can get into when its culture places excessive focus on the ability of its employees to meet certain performance metrics. From 2011 to 2016, thousands of Wells Fargo employees opened over three and a half million fake bank accounts under customers’ names. The company’s CEO tried to pass it off as a few bad actors within a larger environment of well-behaved employees, but it became clear as more information came out about the scandal that the company had fostered a toxic environment that put high pressure on its employees to meet unreasonable standards, and encouraged and rewarded widespread ultra-competitive and unethical behavior. For example, employees were asked to sell an unreasonable number of products every day and were warned that if they didn’t meet these targets, they’d be fired. When one employee called the bank’s ethics hotline to report the pressure she felt to act unethically, the bank fired her. Audits revealed that senior leadership, including the CEO, had known about these problems for decades before they were publicly revealed but did nothing to address them.
2. Rationalization Can Justify Unethical Behavior
Unethical behavior is not merely caused by flawed incentive structures that reward unethical employees and punish ethical ones. It is also caused by self-deception, created when people rationalize their unethical choices. Our ability to rationalize has brought many benefits to our species, but this ability can also bring us harm when we use it to convince ourselves that unethical behavior is actually fair and justified.
In order to remove ourselves mentally from the reality of our own unethical behavior, we engage in a few mental tricks to convince ourselves that our behavior is acceptable, including:
#1: Using euphemisms to disguise the true nature of our actions: Euphemisms put cognitive distance between our actions and their consequences by renaming key elements of those actions in less-emotionally-charged ways. This removes the emotional response that these elements would normally invoke and removes us from a sense of responsibility, thus enabling us to live with our decisions more easily. For example, “torture” becomes “enhanced interrogation.” A “surcharge” becomes a “convenience fee.” “Addiction to our products” becomes “gamification to enhance the user’s experience.” We don’t “fire” people, we “reduce headcounts.”
#2: Blaming the system when we’re confronted with the consequences of our actions: A leader who’s confronted with the consequences of her decisions often blames the “system,” arguing that the system is designed to encourage, and even necessitate, these sorts of unethical decisions. For example, when the pharmaceutical company Mylan received public outrage when it increased the price of its life-saving emergency allergy drug EpiPen from 50 dollars each to 300 dollars each, and later when it was charged for defrauding the U.S. government for EpiPens it sold them, its CEO refused to express remorse, saying she “wasn’t going to be apologetic for operating in the system that existed.”
#3: Blaming the customer for enabling our behavior: Sometimes a person can mentally remove themselves so completely from her actions that she ends up blaming the customer for the negative consequences they (the customer) endured. This legal defense of “caveat emptor” (“buyer beware”) is frequently used by companies to disassociate themselves from their unethical decisions; the argument is that the customer should have known what they were getting into, and if they didn’t want the consequences, they have only themselves to blame for purchasing the product. For example, cigarette companies often refer to this defense when pressed on their role in propagating the negative health effects of their products. While buyer choice certainly plays a role in any exchange of goods, it does not insulate the company providing those goods from any responsibility regarding their effects.
3. Reliance on Rigid and Impersonal Structures in Place of Enlightened Leadership
Sometimes, when faced with a behavioral problem from one or more employees, a leader will try to fix the problem not by addressing the reason behind the issue but by implementing new rules and regulations aimed at preventing similar transgressions. This is a finite-minded way of trying to address the symptoms of a problem rather than the cause. For example, say an employee fraudulently bills a client for too many hours and gets caught when the client protests. Instead of investigating why this happened, and maybe discovering, for example, that the employee feels undue pressure to make a quota, a leader might introduce a timesheet policy whereby every employee needs to track her time according to when she arrives and leaves every day and by how she allocates her hours per client.
Unfortunately, such fixes focus on the symptoms of a problem rather than the cause, and more often than not, create new incentives for ethical slipping. In the example above, implementing a timesheet program imposes new responsibilities on employees who may not see the benefit or need for such a program; when employees feel they’re being asked to do unnecessary things that divert their time away from more important tasks, they are likely to find ways to cut corners. In this case, they might fill out their time cards hastily at the end of the week in a general “arrived at 9:00, left at 5:30” manner before submitting them to their managers for a signature. (Their managers, if they sign such a timesheet even while acknowledging the unlikelihood of such schedule consistency, are furthering the culture of small, accumulating ethical transgressions.)
This is how ethical fading begins. Employees cutting corners like this don’t feel they’re doing anything wrong. They justify their behavior as “white lies”: small, unimportant dishonesties that don’t hurt anyone and simply help them get through the bureaucratic process—a process they see as overly restrictive and not something that their leaders truly care about anyway.
To truly counter ethical fading—which is a people problem—a leader needs to use infinite solutions. This means reminding her employees of their Just Cause, encouraging a Trusting Team, and giving people the opportunity to use their own inner morality to meet the goals of the organization.
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