Definition of Ethical Leadership
Integrating ethical leadership in the organization
In a world where business scandals with ethical conflicts are an almost every-day issue that is publicly displayed in the media, it’s often seen that leaders blame employees or other components but don’t take personal accountability. In the following course it will therefore be investigated whether ethical leadership is helpful or even more can help a company in a crisis caused by a scandal in particular consideration to the company Starbucks. Therefor the term ethical leadership will be defined, as well as methods to accomplish successful ethical leadership and then lastly be analyzed in regards to Starbucks action and the consequences their handling took.
Definition of Ethical Leadership
Ethical leadership is associated with character traits such as honesty, trustworthiness, and care. Ethical leaders base their decisions on their ethical values and expect their followers to do the same which is why heir handling is considered as fair. (Brown/ Treviño (2006), p. 597) Furthermore their concern for other people and their integrity is a role model for other individuals, most importantly because their motivation is altruistic. (Brown/ Treviño (2006), p. 600) Ethical leadership is similar to other leadership styles (such as authentic leadership, spiritual leadership and transformational leadership) with their core attributes of altruism, ethical-decision-making, integrity and role modeling but differentiates itself through emphasizing ethical standards as well as moral management. (Brown/ Treviño (2006), p.589) Ethical leaders approach the “transactional aspect” through communication and accountability processes. (Brown/ Treviño 2006, p. 600)
The general perception is that ethical leadership is about having a good character or certain characteristics that are considered as “right” but ethical leadership goes beyond and can have a huge impact on organizations. Ethical leaders don’t consider themselves as a one-person-party that succeeds on their own but know they need the support and qualities of their co-workers and stakeholders to have a thriving business. It follows that ethical leaders are “first and foremost members of their own organizations and stakeholder groups.” (Freeman/Stewart (2006), p. 3) Hence the core values for the organization set an example for the company, specifically the “constituents” (Freeman/Stewart (2006), p. 3) which influences the benefit of the whole organization.
Integrating ethical leadership in the organization
To achieve an ethical leadership style there are several aspects to consider. Primarily ethical leaders should not only talk about their morals but actually embody them. The leader sets the tone for the whole organization and its standards, they should apply to everyone, including the leader to actually be seen as an ethical leader and role model. (Brown/ Treviño (2006), p. 603) This becomes more important in times of the media paying close attention and looking for ways to publicly criticize business leaders. Embodiment could for instant mean to show transparency or to take ownership once unethical activities occur. The result should be “shared responsibility” because employees know they’re expected to take ownership for their actions and the consequences or otherwise be held accountable. (Freeman/Stewart (2006), p. 3f.) A reward and discipline system could be a liable tool. Employees “should be more likely to focus on the ethical implications of their decisions and make more ethical decisions as a result”. (Brown/ Treviño (2006), p. 607) Holding others and themselves accountable for their action is one of the core traits of ethical leaders. In research it’s been shown that ethical role models actually want to “turn mistakes into learning experiences and humility” (Brown/ Treviño (2006), p. 600)
Secondly it is important to engage in an open relationship with employees to combine both the vision for the company and interests of the stakeholder groups. Ethical leaders take the opinion and views of other organizational members seriously and use them to improve their leadership skills. (Freeman/Stewart (2006), p. 2f.) Those techniques are helpful because “this broader concept of ethical leadership empowers leaders to incorporate and be explicit about their own values and ethics.“ (Freeman/Stewart (2006), p. 3)
It is imperative for ethical leaders to find the right staff which in this context would mean to not only look for professional qualities and skills but moreover to take a look at the characteristics such as integrity and ethical values of potential future employees. As mentioned above, ethical leaders know the importance of their relationship with their constituents thus motivation and loyalty are equally important to a company’s success. It’s not about the ethical leader as an individual. (Freeman/Stewart (2006), p. 4)
A leader knows the success of the organization is bound to its personell and their outcome which is why ethical leaders want to maintain good relationships with their employees and have a positive interaction. (Brown/ Treviño (2006), p. 603) There should be a possibility for employees to speak up about dislikes or general doubts in beliefs or processes of the company. This will help in making sure that the company won’t stop progressing and furthermore even prevent any possibly occurring unethical activities caused by discontent of leader’s or employee’s behavior. (Freeman/Stewart (2006), p. 5) It’s been established that communication is a key part of ethical leadership because employees “who have a high quality exchange with their managers are less likely to engage in negative behaviours” (Brown/ Treviño (2006), p .607)
To keep the intrinsic motivation intact a regular exchange about establishing the purpose of the organization and whether every party is fulfilling their part is vital. Even more “to hold each other responsible and accountable about whether they are really living the values”. (Freeman/Stewart (2006), p. 4f.) This is important to make business decisions in regards to ethical standards and includes the leader itself. It should result in employees committing to the organization because they’re inspired and “associate ethical leadership with satisfaction and job dedication” (Brown/ Treviño (2006), p. 608). Executives could for example talk with employees that differ in their working level to get a full insight from different perspectives in the company. (Freeman/Stewart (2006), p. 5)
Followers as well as leader learn from role models. Their way of working is influenced by observing an ethical role model’s approach and the behavioral consequences. (Brown/ Treviño (2006), p. 600) It could be valuable for the development of their own ethical leadership skills. It’s been studied that a close working relationship is more effective and can directly influence employee’s behavior. In a big organization with many work levels executive leaders may engage less with low-level employees which is why supervisors on these levels have a bigger impact. (Brown/ Treviño (2006), p. 611) As Trevino said “Executive ethical leadership will have the main impact on organizational outcomes but direct supervisory ethical leadership will be more influential on group and individual level outcomes.” (Brown/ Treviño (2006), p. 612) Finally, it’s important to practice ethical leadership at the top of the organization but even more teach it beyond executives to ensure ethical leadership within all levels.
It can therefore be helpful to have workshops about ethical leaderships. Ethical leaders should understand the importance of their role and how their handling influences the employees but most importantly how they can enter the role model position. The influence can both be positive and negative which is why in terms of public “scrutinizing” the ethical aspect of business decision-making ethical leaders need to be aware of their influence on “employee ethical conduct.” (Brown/ Treviño (2006), p. 609) Employee misconduct has been found to occur more frequently when abusive supervision takes place while on the contrary ethical leadership has been found to reduce counterproductive behavior. (Brown/ Treviño (2006), p. 607) Regarding that aspect, practicing soft skills to improve communication for a better personal interaction and the goal to act fairly when tough decisions have to be made might be of benefit. (Brown/ Treviño (2006), p. 610)
In spite of the importance for ethical leaders to be caring and having an open communication, it’s inevitable to make hard decisions like dismissals or restructuring the company. (Freeman/Stewart (2006), p. 7) Hence ethical leadership has to combine the ethical as well as the business side, like Freeman says an “ethical leader consistently unites ‘doing the right thing’ and ‘doing the right thing for the business’”. (Freeman/Stewart (2006), p. 6) It’s suggested to not separate between business and ethics but rather to have a balance and simultaneous consideration between those two components. (Freeman/Stewart (2006), p. 7)
Accordingly, there’s a limit to every value and principle within the business environment that ethical leaders should acknowledge. For instance if one were to mainly focusing on shareholders and wanting to put them first they’d maybe focus too much on sales and keeping the stock prices high while forgetting to develop a product that meets the needs to satisfy customers. (Freeman/Stewart (2006), p. 7) Ethical standards are vital but they have to be put in relation to their possibilities of application. Furthermore ethics is a “continual discovery and reaffirmation of our own principles and values, and a realization that we can improve through encountering new ideas.” (Freeman/Stewart (2006), p. 7)
Freeman works out that ethical leaders are very aware of the fact they can be wrong as well and that their way of leading influences their employees in different dimensions depending on character and cultural background. The belief that ethics is a solid construct that can generally be applied wouldn’t be accurate but in contrary needs to be evolved from values to principles and their integration into the business environment. There needs to be a balance between sticking to the own principles but also to be open to other perspectives and views. (Freeman/Stewart (2006), p. 7)
Summarized, ethical leadership is not a tool to prevent people from making wrong decisions but rather something that enables employees to make the right ones. It can be established with a cooperative guidance, have an ongoing communication at all working levels. It’s important to evaluate the own principles and the ways they’re integrated into business environment.
Starbucks is a coffeehouse chain that was grounded 1971 in Seattle. Howard Schultz former CEO and executive chairman bought the company in 1987 while it was having 4 stores and expanded it to an international company that now has more than 28.000 stores worldwide. One of their visions is to be a “neighborhood gathering place”. (Starbucks, 2019)
In April in 2018 two black men entered the Starbucks cafe in Philadelphia. They asked to use the restrooms but the employee denied their request because the they had not yet purchased anything. Furthermore the store manager asked them to leave. The two men refused and explained they were waiting for their business partner. The employee then called the police and the African Americans were arrested on grounds of suspicion of trespassing. During the arrest the business partner showed up and was questioning whether this was actually necessary or an act of discrimination. A few hours later the two men were released since Starbucks didn’t press any charges and due to the lack of evidence. (Stevens, 2018) However another woman in the store filmed the whole scenario with a stament that she didn’t purchase anything either and had been sitting there for a while but oppositely she was not asked to leave. The video soon went viral on social media, resulting in protests especially caused by the general public perception and witnesses of this being an act of racism and discrimination. (Tangdall, 2018)
Days after the incident Starbucks itself released a personal statement by CEO Kevin Johnson taking full responsibility, including a public apology saying that they’re taking the incident very seriously and need to improve their handling when these kinds of situations arise. They also promised to review their policies and ensured a close cooperation with the community as well as with police to prevent such incidents from happening again. (Johnson, 2018) Additionally Johnson personally apologized to the two affected men.
Johnson called it a “disheartening situation […] that led to a reprehensible outcome” and reassures that Starbucks will investigate the situation and do whatever change is needed to prevent this from happening again. He took a stand with saying that Starbucks “stands firmly against discrimination or racial profiling”. (Johnson, 2018)
Their investigation led to the company focusing more on internal work. Executive Chairman Schultz stated “The reflection has led to a long-term commitment to reform systemwide policies, while elevating inclusion and equity in all we do.“ (Schultz, 2018) One of them being racial biasing which is why they closed more than 8.000 stores and corporate offices for a racial-bias training their employees had to absolve.
(CBS News, 2018) The Apex Marketing Group suggested Starbucks lost about $16 million due to the incident and the negative press. The closed stores and lost sales for the sensitivity training cost Starbucks around the same amount of money, not including the costs for the training itself. (Pontefract, 2018)