Putting principle before profit

The Volkswagen scandal may be one of the most systemic and damaging examples yet of a business focusing on financial return whilst compromising or deceiving all its other stakeholders. Once more it is bringing business ethics and behaviours to the fore, highlighting that people and their behaviours are the biggest drivers of both risk and value in organisations.

Rebuilding trust, understanding what drives the decisions that businesses make, and the need for change in many corporate cultures and behaviours has never been more important or visible. HR has a hugely important role to play in this. But it’s not easy, and we’ve seen too often that  writing more rules or regulations isn’t the answer.. Indeed, too many rules can work against individual understanding of accountability and ethics. This has been demonstrated over many years through behavioural science, beginning with the infamous Milgram studies of obedience conducted in the 1960s. However, command and control -manifested by endless rules, policies and processes - remains a dominant mindset.

Many now  agree that we need to go back to an understanding of purpose, and of values and principles for good business. A clear purpose that recognises higher goals and aspirations, engages employees and guides their day to day behaviours. Values should clearly describe behaviours and expectations, how they are lived from top to bottom, and how they are reinforced through people management practices from recruitment to reward and recognition.

But we also need greater clarity on what the principles of good business and decision making should be, for example, should we be democratic or market driven, or based on a sense of fairness or rights, and how do we understand ethics? Ideas such as managing for the triple bottom line (people, profit, planet) have been espoused by some, although practiced by very few. Businesses need to move beyond just accounting, to accountability, and understand that responsibility for all their stakeholders. 

 We are researching these ideas as part of our Profession for the Future strategy. Some of our findings show we still have a long way to go. For example in our survey of nearly 3,500 business leaders, less than half of them believed that core values cannot be compromised whatever the context, and 21% said keeping true to some of their principles may affect their ability to succeed in their organisation. Through this work, we also want to help HR professionals to engage on these bigger questions so we can play our full part in building for a better future. Equally important is to help provide frameworks against which we can better resolve conflicts that we often face in balancing shorter term priorities or demands from the business with the longer term investment in our people and the organisation as a whole.

The good news is that regulators, policy makers, the finance, accounting and risk professions, and even the investor community, are all waking up to these realities and increasingly want to engage with our profession. The work we’ve been doing on improving people metrics and reporting is part of this, but we also need to build deeper understanding and debate about how to influence better behaviour and decision making. There remain many tensions between short term thinking and the pressures of markets, to the long term focus needed on culture change, leadership development, engagement and the many other key agendas for HR and L&D. Whilst we as a profession need to continue to work on being more business savvy, we also have a responsibility to help the rest of business to be much more people savvy.

We’ll share our Profession for the Future strategy with those of you attending our annual conference in Manchester this November. We’ll then continue working with you all to further develop our thinking, and you can join the debate at cipd.co.uk/pff.

Thank you for your comments. There may be a short delay in this going live on the blog page as we moderate the comments added to our blogs.

  • Anonymous

    This is an updated reminder for all leaders and HR professionals.

    We should never stop learning. Good to know.

    A real shake up for HR to find their 'True North'

  • I am doing some research on the subject of Corporate Social Responsibility, focusing particularly on the overseas operations of large corporations (often in ‘export processing zones’) and the associated conditions of employment.  Companies are very good at producing comprehensive Codes of Conduct and statements of human rights for employees and suppliers, but such materials tend to be used either in response to incidents or to legitimise poor wages and conditions, rather than to regulate or improve matters. It would be interesting to learn of alternative experiences

  • Anonymous

    In the financial crisis and now VW, the issue is that acting with integrity would have led to long term profit. Acting as they did has led to companies collapsing.

  • Anonymous

    This blog gets to the heart of how the economic environment and the quest for company survival has impacted on culture.  I feel like the regulators are finally getting to the root of some of the issues and there is a renewed focus on living by a company's values.  Somewhere along the line the desire to remain competitive on revenue for many companies has distracted from accountability for truly living by our values.

  • My old boss taught me a lot about the need for HR to practice sound ethics and professional integrity, and the importance of applying these in difficult situations - long term its always the right thing to do.