What is the ethical issue?

Organisations seeking to create a sustainable ethical culture will encourage employees to be guided in their work by certain ethical values and to demonstrate behaviours that reflect those values. A key tool in achieving this is the performance management process.

Goal setting and performance assessment are central to embedding desired values, and ensuring these are measurable can often prove problematic to organisations. Performance management is one of the levers that can be used to support and reinforce efforts to articulate core values which change organisational culture, but it needs to be carried out effectively to avoid ethical lapses.

A key issue with performance management is ensuring that assessment systems are not working in conflict with attempts to build an ethical culture and embed values in the workplace and employee decision-making. An IBE survey from 2013 found that less than 60% of FTSE 350 companies include ethics in employee performance appraisals. Ignoring the important element of company ethics in overall performance can lead to a toxic internal culture with low employee engagement. Appraisals that contrast with ethics can result in employee behaviour which prioritises targets at the expense of company values, and increases the risk of serious ethical violations due to the desire to meet unrealistic targets.


IBE Guidance

A summary of good practice
  • Performance management is central to embedding ethical values into business practice.
  • Careful attention needs to be paid to what is accomplished and rewarded so that only goals which support an organisation’s ethical commitments are put forward. It is also important that employees are assessed and rewarded based on how they achieve those goals.
  • Examples of ethical behaviour in performance management criteria can be included in staff appraisals, development reviews and bonus evaluations.
  • Performance management systems must be designed and implemented in ways that support rather than undermine an organisation’s ethical commitments. In doing so, it is crucial to identify measurable ways of assessing how well employees have lived up to ethical standards.
  • To incorporate ethics into the performance assessment process there needs to be support from senior management. In establishing an open and fair process, which also makes it easier for employees to understand how to exhibit company values, organisations increase their chances of embedding a values-driven and ethical workplace culture.


Further resources


Building an ethical culture

In this blog Prof. David Grayson CBE, Chair of the Trustees, discusses practical steps that a company can take, “when times are good”.

04 March 2020

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2019

The 2019 results of the IBE's annual survey of the attitudes of the British public to business ethics.

17 December 2019

Publication type: Other

A Year In Review: Ethical Concerns and Lapses 2018

Read the IBE's annual analysis of business ethics news stories from the last year - which were the sectors and issues most in the news in 2018?

30 January 2019

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2018

The 2018 results of the IBE's annual survey of the attitudes of the British public to business ethics

13 December 2018

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2017

The 2017 results of the IBE's annual survey of the attitudes of the British public to business ethics

12 December 2017

Publication type: Board briefing

Fair or Unfair: getting to grips with executive pay

This Board Briefing offers both practical advice on how remuneration committees can address the challenge and some pointers to possible reform centered around the need to be clear about the value of what is being awarded and the pace at which remuneration is earned. Fairness and simplicity are the two themes which run through this publication.

10 February 2016

Publication type: Research report

Fairness in the workplace: Staffing and employment contracts

This IBE Briefing considers ethical issues related to staffing arrangements and employment contracts. Specifically, it looks at the potential ethical implications of the ‘casualisation’ of the workplace, including zero hours, agency contracts, part-time workers and transfers under TUPE.

30 April 2015

Publication type: Good practice guide

Performance Management for an Ethical Culture

Performance management has a major influence on how employees perceive the company they work for and on how they behave. This Good Practice Guide considers how organisations develop performance management processes which measure how business is done as well as what is achieved. Drawing on interviews and surveys with IBE Supporters companies and other organisations, the Guide suggests how to address the challenges that may be faced when integrating company values and ethical behaviour into performance management.

04 November 2014

Publication type: Research report

Fairness in the Workplace: Pay

This Briefing looks at how fairness can be achieved in the specific areas of executive remuneration and paying a living wage. It also briefly addresses some additional pay issues, and provides examples of ways in which some companies are addressing the issue of fairness in pay.

02 July 2014

Publication type: Business ethics briefing

Supply Chain and Payment Practices

This briefing explores the three issues involving supplier payments. It then looks at governmental attempts to curb the problems and how companies are addressing the issue.

06 November 2013

Publication type: Research report

Incentivising Ethical Behaviour in Staff

This Briefing analyses the different ways of incentivising ethical behaviour, using ‘carrots’ or ‘sticks’. It outlines 6 attributes of an effective incentives scheme.

11 September 2009