What is ethical leadership? Importance, principles, and impact on an organization

Ethical leadership is becoming the need of the hour in today’s ever-evolving business landscape, helping build trust in employees and team members. It is a style of leadership that revolves around honesty, fairness, integrity, and respect for others. Ethical leadership empowers leaders to focus on doing what is just and right, even if they are pressured to act otherwise. These leaders have a strong commitment to ethics and values, and they always demonstrate appropriate conduct that is in accordance with their recognized principles.

Brand image

Moral brand practices are essential because, in the digital world, any negative news can impact the brand. One of the top qualities of ethical leadership is behaving and acting responsibly, significantly improving brand image.

Employee morale

Ethical leadership leads, inspires, motivates, and encourages accountability. This helps ensure that employees are happy at the workplace, improving the chances of organizational success.

Workplace culture

Ethical leaders influence results as well as the company culture. They practice what they preach, which is how they can develop an organizational culture that inspires, motivates, and encourages people to follow ethical practices.

Customer relations

With the shifting consumer needs and expectations, customers are no longer looking for just good products. They want their brands to be ethical as well. Organizations that demonstrate good, ethical decisions and choices are preferred.

Employee loyalty

Ethical leadership helps build trust with employees, as they feel less objectionable to organizational decisions and less threatened. This improves employee loyalty and retention.

Recruitment

As people continue to switch to remote and hybrid working models, it is critical to hire employees who are ethical and moral to effectively reflect organizational culture and values, even when working remotely.

Fairness

This is one of the core qualities of ethical leadership, revolving around how people interact with each other and how they like being treated. Everyone wants to be treated fairly, and in return, they also treat others fairly.

Trust

Any strong team is built on a foundation of trust. People cannot work well together if they cannot trust each other. That is why trust is a crucial quality in leaders when developing a high-performance team.

Accountability

Taking accountability for mistakes or bad decisions is imperative. Some people make mistakes and ignore them, while others like to push the blame on others. Accountability for mistakes showcases how one is a strong and well-rounded leader, inspiring people to follow by example.

Honesty

Honesty is a highly appreciated trait in people. That is why honest leaders help create a workplace environment that encourages others to be open and honest about important challenges. This aspect further strengthens trust within the organization and the employees.

Equality

Ethical leaders ensure equality for every employee, which fosters an attitude of looking at challenges with respect. This encourages and promotes diversity within the team.

Respect

Respect is showing regard to the wishes, rights, feelings, and perspectives of other people, even when one doesn’t agree with them. While there are differences in the thoughts and points of view of different people, a real understanding of humanity helps show an ability to consider the thoughts and ideas of different people.

Reducing bias

Every individual will have their own conscious or subconscious beliefs, which may not always be correct. While leaders may not want to admit flaws, a lack of self-awareness can have a severe negative impact. As the workforce becomes more diverse, it becomes important for ethical leadership to recognize and expunge biases.

Corporate social responsibility (CSR)

This is an approach to business self-regulation with the aim of practicing social accountability and making a commitment to having a positive impact on society. Being eco-conscious, promoting diversity, giving back to the community, etc., are some ways in which organizations can embrace CSR.

Self-care

Ethical leaders understand that only if they care for themselves can they care for others. Taking time for self-care allows ethical leaders to recharge, helping them better manage and care for employees. Being focused on meeting their own needs allows ethical leadership to maintain a calm and capable demeanor.

Ethical leadership is rooted in integrity. However, there are clear differences between ethics and integrity. Ethics are a set of moral principles that govern the behavior of a person or how they act, while integrity is the quality an individual has of being honest and having strong, morally correct principles. Ethics involves evaluating actions and decisions against moral principles. Integrity is a characteristic or personal trait which involves consistency in beliefs, words, and actions.

Lead by example

Ethical leadership cannot be based on suggestions and ideas. Leaders need to lead by example. It is important for ethical leaders to not only talk the talk but also to walk the walk. Ethical leadership does not expect employees to follow what they say but to follow what they do.

Open dialogue

Leaders should listen to what others have to say. If they find the suggestion or idea to be unethical, leaders need to communicate the same and encourage employees to find alternate solutions. This way, employees can raise concerns and share thoughts without fear.

Practice fairness

A great diversity statement is not enough, as organizations require ethical leadership to ensure equal treatment and opportunities for every employee regardless of where they come from. Ethical leadership helps get rid of bias in hiring and promotion practices.

Learn from mistakes

Mistakes are almost unavoidable, and ethical leadership does not ignore mistakes or push the blame onto others. Responsibility should be taken for any mistakes, and they should be treated as opportunities to learn, grow, and improve.

· Understand

First, clarify the issue and gather facts from all sides before making any decision. It is important to understand the details of what happened and consider all perspectives and backgrounds equally. Also, consider if there are any cultural or language-based differences that may have factored in the situation being investigated.

· Provide resources

Sometimes, an ethical issue may be caused by a lack of training or education, where involved parties may require more information on the ethics that surround the issue. Conducting ethics training can help businesses set standards of conduct across the organization and get employees to talk about such issues openly.

· Escalate

Once the situation has been clarified and understood enough, the next actions can be decided. However, there may be certain situations where clarification may not be enough, and resolution doesn’t work, where the issue may need to be escalated. Ensure that issues that cannot be resolved are quickly escalated so the right action is taken quickly.

· Be consistent

Maintain consistency while handling challenges of the same nature. This can also be clarified through a policy that details the ethical decisions that must be taken. All employees should be signed on to ensure understanding of the policy.

Pressure to achieve results: One of the biggest challenges of ethical leadership is the pressure to prioritize short-term results over ethics.

Solution: Encourage long-term perspective, emphasize the importance of ethical conduct and sustainable success, set realistic goals, and provide adequate resources to support achieving goals.

Ethical dilemmas: When ethical principles conflict with stakeholder interest or organizational objectives.

Solution: Develop a strong ethical framework, set clear values, establish guidelines for ethical behavior, encourage open dialogue, and provide training on ethics.

Workplace culture: Another common challenge of ethical leadership is struggling to maintain one’s ethical standards and fostering a culture of integrity in an organization that tolerates or overlooks unethical behavior.

Solution: Lead by example, promote ethical behavior, establish mechanisms for reporting unethical behavior, protect anyone who reports unethical conduct, and reinforce a culture of respect, trust, and accountability.

Lack of awareness: Some leaders may lack awareness of ethical issues and standards, or they may lack the skills required to address them.

Solution: Offer training, mentorship, and coaching.

Change resistance: The change brought about by implementing ethical practices may be resisted by certain individuals who may be accustomed to their own way of doing things.

Solution: Communicate the rationale behind the initiatives, highlight their benefits, involve stakeholders in the decision-making, address concerns openly, and ensure transparency.

Cultural differences: Multinational organizations require leaders to navigate a range of cultural norms, which can make consistency across ethical standards in different regions challenging.

Solution: Foster cross-cultural understanding and sensitivity, provide competence training, establish intercultural communication initiatives, and adapt ethical guidelines that respect local customs.

The difference between just any leader and ethical leaders is within the emotional intelligence of the professional. Mercer | Mettl offers a range of assessments that help organizations evaluate the capabilities and competencies of ethical leaders. From emotional intelligence, personality assessments, and leadership skills tests to skills gap analysis, the library of scientifically validated tests by Mercer | Mettl can make the leadership hiring and development processes seamless for an organization.

Today’s digitally driven world tends to test senior executives and leadership on their morals and ethics time and again. From business practices, the focus has shifted to leadership practices, putting any organization’s leaders under the microscope. How leadership acts and behaves now has a direct impact on an organization’s employer brand and success, which has made ethical leadership more important for organizations than ever before.