IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE1

Impact of Ethical Training on Employee Performance with the Moderating

Role of Organizational Factors

IBA, Punjab University

Table of content
Abstract................................................................................................................................4
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE2

1. Introduction..................................................................................................................5

1.1 Research Significance..........................................................................................6

1.2 Problem Statement...............................................................................................7

1.3 Research Questions..............................................................................................7

2. Literature Review........................................................................................................7

2.1 Ethical Training:..................................................................................................8

2.2 Ethical training and employee performance......................................................10

2.3 Organizational Factors.......................................................................................11

3. Theoretical Framework..............................................................................................13

3.1 Theoretical Model..............................................................................................13

3.2 Proposed Hypotheses.........................................................................................14

3.3 Indicators (Operationalization)..........................................................................14

3.3.1 Ethical training...............................................................................................14

3.3.2 Organizational Factors...................................................................................15

3.3.3 Employee Performance..................................................................................16

4. Research Methodology..............................................................................................17

4.1 Research Design................................................................................................17

4.2 Research Paradigm............................................................................................17

4.3 Sampling Plan....................................................................................................17

4.4 Sample Selection...............................................................................................17

IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE3

4.5 Sample Size.......................................................................................................17

4.6 Survey Media.....................................................................................................18

4.7 Data Collection..................................................................................................18

5. Conclusion.................................................................................................................18

In Citation References.......................................................................................................19

Questionnair.......................................................................................................................26
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE4

Abstract

This paper investigates the effect of ethical training on the employee performance. The

moderating variable used in this study is the organizational factor. The organizational factors

are considered to ensure that these factors are critical for the employees to behave/work

ethically. Literature review shows that the ethical training has an influence on the employee

performance. It is also revealed that if the organizational factors are in support of employees

their performance/behavior improves and becomes ethical as well. After a thorough literature

review a model is proposed. On the basis of this model two hypotheses are drawn. The research

methodology explains the whole process through which the data will be collected and analyzed

afterwards. It can be concluded, on the basis of literature review solely, that the ethical training

has an impact on the employee performance in the organization which conduct ethical training.
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE5

1. Introduction

The fundamental aim of this research is the exploration of the relationship between

ethical training and the moderating effect of organizational factors on the ethical training and

employee performance. The term ethical training is quite rare among the organizations especially

in context of the Pakistani organizations. Among many big companies/brands working in

Pakistan, only Nestle and Packages are known to conduct the ethical training. In the same way

the organizational factors needs to support employees so that the organization can become a

desirable place to work. These concepts need to be developed in the developing countries like

Pakistan and the present study aims to fulfill this gap.

The word "ethics" is often in the news these days. Ethics is a philosophical term derives

from the Greek word “ethos" meaning character or custom. Formally defined, ethical behavior

is that which is morally accepted as "good" and "right" as opposed to "bad" or "wrong" in a

particular setting.Error: Reference source not found. Ethics has been defined as “the standards of

conduct that indicate how one should behave based on moral duties and virtues” Error:

Reference source not found. According to these author, quoting Error: Reference source not

found, to behave ethically can be equated with the common concept of “do unto others as you

would have done unto you”. An ethical climate, specifically, can be defined by Error: Reference

source not found, Error: Reference source not found as the employees’ perception of what

constitutes ethically right or wrong behavior; thus, ethical climate becomes a psychological

mechanism through which ethical issues are managed in an organization..

In recent years, a theoretical and empirical development in the area of organizational

climate has provided the impetus for research concerning ethical climate. According to this latter

research, ethical climate is a multi-dimensional construct which is manifested in organizations.

IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE6

Studies, however, have not focused on the relationship between ethical climate and ethical

behavior.Error: Reference source not found

Ethical issues elicit an emotional response and it is never difficult to evoke an opinion

about right or wrong ways of doing things. Whether down the pub after work, in the staff canteen

or at the photocopier, you can hear debates about fairness and unfairness; phone hacking, MPs’

expenses, bankers’ bonuses – these are just some of the business ethics scandals that have ignited

the public’s interest. So if ethics can be so engaging and relevant, it should be possible for

business ethics messages to get through in the workplace.Error: Reference source not found. The

use of targeted ethical scenarios, however, offers an effective training mechanism because

scenarios link learning to real life and the experiences of the participants. Trainees can identify

with the characters, situations and relationships portrayed even if they have not directly

experienced the ethical issue being communicated. Error: Reference source not found

Good ethics is good business because it generates positive externalities like trust and

commitment to stakeholders, which in turn helps ensure long-term performance Error: Reference

source not found.The ethical training would generate a climate for a positive code of conduct,

affecting employees’ willingness to shoulder corporate social responsibility Error: Reference

source not found.In turn, employee satisfaction would be promoted because of corporate social

responsibility Error: Reference source not found.

1.1 Research Significance

As very few organizations conduct ethical training in Pakistan (Nestle and Packages are

two big names in the list) so previously no research is conducted which investigates the impact

of ethical training on employee performance. This study is significant as it studies this concept
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE7

for the first time especially in the context of Pakistani organizations. Thus, this study aims to

fulfill the gap in this area of research.

1.2 Problem Statement

The purpose of this research is to investigate the impact of ethical training on the

employee performance. Additionally, the purpose is to analyze the role of organizational factors

on the relationship between ethical training and employee performance. So, the data will be

collected from the organizations in Pakistan which conduct ethical training like Nestle and

Packages.

1.3 Research Questions

This study aims to answer/explain following questions:

2. Is there any relationship ethical training and employee performance?

3. How organizational factors affect the relationship between ethical training and employee

performance?

4. Literature Review

The purpose of the study is to evaluate the understanding of employees’ perceptions of

ethics in their workplace, enquire if and how employees feel supported in maintaining ethical

standards at work and explore if and how an ethical culture and the existence of formal ethics

programs influence standards of ethical behavior in workplaces. The importance of the ethical

training can be realized by this finding; Ninety-four percent of the 1082 respondents to a 1988

Touché Ross survey of business executives, directors, and business school deans, said that the

business community as a whole is troubled by ethical problems. Error: Reference source not

found
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE8

It is suggested that organizational ethics is strengthened by managing the psychological

contracts between its employees and the organizations, reinforcing the employee’s organizational

commitment and encouraging (creating and nurturing) an ethically-oriented organizational

culture. Error: Reference source not found,

4.1 Ethical Training:

Firms conduct ethical training for various reasons, from encouraging ethical employee

behavior to assuring stakeholders the firm is moral and ethical. Error: Reference source not

found. Employees need to have an experiential awareness of the types of ethical dilemmas they

may face, and they need to know what actions to take in these dilemmas. Providing ethics

training for employees is one key to increasing this awareness. Error: Reference source not found

Organizational culture influences thoughts and feelings and guides behavior and

manifests itself in norms, rituals, ceremonies, legends, and the organizational choice of heroes

and heroines Error: Reference source not found. While an ethical culture provides a roadmap for

individual conduct at work, programs and policies must be developed to facilitate the permeation

of such normative guidance throughout the organization Error: Reference source not found.

Merely having standards is not enough; a company must make the standards understood, and

ensure their proper dissemination within the organizational structure Error: Reference source not

found.

Ethics training does have a positive effect, but that relatively few firms provide such

programs (about one-third). Error: Reference source not found However, the use of ethics codes

and training as principal strategies for enhancing employee ethicality has received some criticism

Error: Reference source not found. Some have argued that the existence of an ethics code is a
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE9

necessary, but not sufficient condition for creating an ethical organizational climateError:

Reference source not found.

It therefore appears that ethical programs must be supported by other organizational

characteristics in order to be effective. For instance, Error: Reference source not found stated that

various ethics initiatives are successful when fortified by a strong ethical culture, and that the

firm’s organizational environment is expected to play the most important role in affecting the

ethical sensitivities and behaviors or workers. Indeed claimed that the top leadership in a

company signals their commitment to ethical principles through their influence on corporate

cultureError: Reference source not found

Ethics training is an effective tool to ‘make the (ethical) standards understood, and ensure

their proper dissemination within the organizational structure. Error: Reference source not found.

Such prescriptive guidance also enables companies to better satisfy the due diligence standard

specified by the 1991 Federal Sentencing GuidelinesError: Reference source not found. The

goals of ethics training should be linked to organizational needs and desired outcomes. These

goals may be to:

5. provide the tools to help employees understand the ethical decision process (i.e.,

vocabulary and philosophies),

6. help people assess ethical priorities,

7. provide ways to deal with those who violate ethical standards,

8. enable employees to identify ethical problems with respect to company policy,

9. increase sensitivity to ethical issues,

10. enhance individual effectiveness, and

IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE10

11. improve the ethical climate of a business through the creation of ethics support systems

and codes (Error: Reference source not found

A number of managerial approaches establish an ethical context, and one of the primary

methods involves using corporate programs such as ethics training Error: Reference source not

found. Ethics training provides employees an overview of ethical policies and rules, outlines key

ethical challenges, and teaches appropriate behaviors for completing job assignmentsError:

Reference source not found. Ethics training can also introduce many of a company’s important

ethical values and standards Error: Reference source not foundand enhances how employees

perceive ethical problems Error: Reference source not found.

Thus providing important normative guidance about how ethical decisions should be

made. Many of these discussions can be supported with active role-playing and participative

exercises to reinforce comprehension of ethical principlesError: Reference source not found.

Further, ethics training can provide a forum for exchanges of ethical issues and problemsError:

Reference source not found, serving as a feedback mechanism so that managers can better

respond to work challengesError: Reference source not found.

11.1 Ethical training and employee performance

There is strong evidence for an enduring impact of college on the use of principled moral

reasoning to judge moral issues Error: Reference source not found. On balance, the literature

favors the conclusion that ethics instruction does sensitize business students to ethical

issuesError: Reference source not found. Other studies suggest that students’ ethical attitudes are

influenced more by exposure to the large socio-cultural norms than by education in specific

disciplines Error: Reference source not found. If employees can be trained to more appropriately

evaluate common ethical dilemmas by referencing ethical principles, then these same principles
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE11

should ultimately enhance their work conduct. When employees believe that the organizations

for which they work have strong ethical values, they appear to be more likely to engage in ethical

behaviorError: Reference source not found.

Research in social learning theory strongly supports the idea that we learn appropriate

behavior by modeling the behavior of persons we perceive as important - parents, siblings, peers,

teachers, public officials, etc.Error: Reference source not found. Managers no doubt represent

significant others to employees, and thus the ethical behavior of managers will certainly

influence the ethical behavior of employees. Strengthening an ethical context would serve to

enhance how employees feel about their employment situations, encouraging them to work more

diligently to complete their job requirements, as well as provide the organization advantages in

the recruitment and retention of quality employees Error: Reference source not found

The declining organizations have a greater propensity for unethical behavior, and suggest

that those firms performing most poorly will be the least ethically inclined. Error: Reference

source not found. Ethical culture fully mediates the process by which ethics program reduce

misconduct. The aim of an ethics program to decrease unethical behavior is thus accomplished

through the mediating role of ethical culture rather than directly, and this has important

implications for policy makers and managers. Error: Reference source not found

According to Error: Reference source not founditems cover a broad array of job

performance indicators including quantity, quality, efficiency, overall ability, judgment, accuracy,

job knowledge, and creativity in performing employees’ assigned roles. The literature on

identification is vast Error: Reference source not found. Generally speaking, this body of

research suggests that individuals with high organizational identification tend to be greater

contributors to their workgroup or firmError: Reference source not found.

IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE12

11.2 Organizational Factors

Because the organizational support for ethical conduct is valued highly in personal selling

and management, ethics training, functioning through a company’s ethical values and culture,

should prompt greater satisfaction with supervisors and coworkers because these individuals play

a part in the ethical practices that impact job satisfaction in others.Error: Reference source not

found. Organizational leaders in the sales and marketing professions should consider using ethics

training to institutionalize an ethical environment in sales organizations, as well as involving

sales managers and other professionals in this institutionalization process. Such efforts could

yield greater employee satisfaction for supervisors and coworkers. Error: Reference source not

found.

Employees probably talk more frequently with supervisor because they can approach a

supervisor more readily than the manager. So perhaps accessibility explains the more frequent

ethical discussions. However, the supervisors need to be voluble on the subject of ethics and

engage all employees in talks about organizational values. Leaders, especially if they are liked

and trusted, can change the ethical tenor of an organization in dramatic ways through their

communications and actions. Managers need to take the lead in this critical area. Employees also

reported their ethical decisions were influenced by their supervisors.Error: Reference source not

found

Another organizational factor is managerial behavior. Managers behaving unethically

contrary to their ethical philosophies represent a serious limit to ethical reasoning in the firm.

Much of the research cited in the above paragraph implicitly or explicitly states that ethical

philosophies will have little impact on employees' ethical behavior unless they are supported by
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE13

managerial behaviors which are consistent with these philosophies. If normative structures help

explain behavior patterns as social psychologists contend Error: Reference source not found.

Thus, managers do not have to rely on the integrity of the employee alone. They have the

power to structure the organizational context to promote ethical behavior. If managers are willing

to take the actions necessary to support ethical behavior, then employees, when faced with

ethical dilemmas such as improper gifts, kickbacks, improper pricing, nepotism, favoritism, etc.,

may be encouraged to make the right choices. Error: Reference source not foundOne of the most

basic of management principles states that if you desire a certain behavior, reinforce it. Research

in ethical behavior strongly supports the conclusion that if ethical behavior is desired, the

performance measurement, appraisal and reward systems must be modified to account for ethical

behavior Error: Reference source not found.

Several dimensions of the job itself may also influence the ethical behavior of employees.

Researchers believe that the more centrally located a job is in the communication network of the

firm, the more ethical decisions will likely have to be made by the occupant of that job (Trevino,

1986). Also jobs involving external contacts are believed to have more potential for ethical

dilemmas than jobs with purely internal contacts Error: Reference source not foundFurther,

management often responds less severely to breaches of ethics by employees on whom they rely

for technical expertise, because these employees represent a scarce resource for the firm Error:

Reference source not found

12. Theoretical Framework

IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE14

12.1 Theoretical Model

ETHICAL EMPLOYEE

TRAINING PERFORMANCE

ORGANIZATIONAL

FACTORS

Explanation of Model

On the basis of above literature, this model was proposed. Ethical training is the

independent variable whereas the dependent variable is the employee performance. This model is

proposed to explain the importance of ethical training on the employee performance with the

moderation role of organizational factors in which the most important is the supervisors role and

characteristics of the job. This model tells that if ethical training is followed in the organization

along with the support of each and every employee it directly effects the organizational

performance. This relationship is regulated by supervisors role either he is strongly the mirror

image of good ethics follower or not and whether he promote ethical behaviors or not as well.

12.2 Proposed Hypotheses

On the basis of literature review and the theoretical model presented above, following

hypotheses can be proposed:

H1: There is a direct relationship between ethical training and employee performance
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE15

H2: Organizational factors strengthen the relationship between ethical training and employee

performance.

12.3 Indicators (Operationalization)

12.3.1 Ethical training

Perceptions of behavior includes employees perception of the degree of honesty practiced

in their workplace or not, their experience of pressure to compromise ethical standards in their

Organization. Whether they had been aware of misconduct in the workplace in the past year, and

if so, whether they had taken any action. Taking an action means the misconduct is reported in

the organization by the ethical trained persons.Error: Reference source not found

Ethical climate is the other indicator to measure the ethical training in the organization by

interpreting the perceptions of management behavior, perceptions of communication of ethical

standards to all the employees in the company enforcement of ethical standards by following the

procedures available at that time for responsible business conduct. Error: Reference source not

found

Assistance on ethical matters covers whether employees feel their organization

encourages and supports them to behave ethically at work. This assistance is often provided

through a formal ethics program, typically comprising at least four aspects: a code of ethics (or

equivalent document) to provide guidance on values expected in business decision-making and

behavior; an anonymous speak up mechanism for employees to raise concerns about misconduct;

an advice ‘helpline’ on ethical issues; and business ethics training. Error: Reference source not

found
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE16

12.3.2 Organizational Factors

Organizational factors can be measured by the Supervisors role and characteristics of the

job. Supervisor’s behavior means either ethical behavior of the Supervisor promotes its

subordinates to follow the same or not which means that whether supervisor personality

influences the employees or not. Employees are receiving any reward on behaving ethically, it

increases their self being and promotes them to better their performance in this area. As we all

know that job analysis is the important and imperative part of the job which includes all the

characteristics of the job. If the job duties are clear, the employees are vibrant to perform their

duties ethically.

It is the responsibility of the line manager to explain the staff and colleagues about the

importance of honesty and ethics in the workplace and all the procedures regarding this.

Organizational factors disciplines employees who violate organizational ethical standards by

giving them formal ethical training or by awarding them with the incentives. Ethical issues of

‘right and wrong’ should be discussed in staff meetings and on technological gadgets (computers,

android phones applications, notice board, emails, etc.).

12.3.3 Employee Performance

Quality of work refers to the favorableness of the work an employee has done e.g the

results of the work were useful and strictly based on the facts and figures or not or extent to how

much they were useful. The timely completion of projects to the desired standard is a key

indicator in measuring the quality of employee performance i.e.; either the work being carried

out average or outstanding, whether the employees are committing maximum effort to projects or

not. These are some ways which depicts that the work employee are doing is up to the mark or

not.
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE17

Employee performance can also be measured by the fact that how much change is

occurred in the personal habits of the employees. Perpetual bad habits can detract from employee

performance. This may include indulging in office gossip, taking unauthorized breaks, disruptive

behavior and the use of computers for personal reasons (such as social media, online shopping).

Depending on the nature of your business consider implementing random checks against

quality standards as it also measures the performance of employees. This may include reviewing

telephone calls and checking records. While your employees may be aware of this policy, the

random nature of the checks can motivate staff to put in a consistent performance and to be

ethical in their actions as well.

13. Research Methodology

13.1 Research Design

This section presents an overview of the methods to use in the study. Areas covered

include the research paradigm, sampling plan, sample and sampling techniques, data collection

and analysis.

13.2 Sample Selection

The participants will be selected at random but belong to the required requirements for

survey. The population will be narrowed down as much as possible. For this study it is proposed
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE18

that employees of organizations which conduct ethical training will be narrowed down to keep

the study at level where approximate effect is achieved.

13.3 Sample Size

The sample for this study will be 100 employees of the organization which conduct

ethical training in Pakistan. As currently only two big names are known to conduct ethical

training i.e.; Nestle and Packages, so the samples size will be the employees these organizations.

13.4 Survey Media

The resources allowed using the choice of questionnaire for survey as it required

minimum resources in terms of cost, time and manpower required. So, survey based on close

ended questions will be adopted to get more pace and prompt response of participants.

13.5 Data Collection

Our research will be conducted through survey strategy cross-sectional and be

accomplished by employing questionnaire for data collection with the help of probability random

sampling technique. The data will collect from employees selected as sample population from

two organizations of Pakistan which conduct ethical training i.e.; Nestle and Packages.

14. Conclusion

Making an ethical climate by establishing and upholding codes of ethics, arrangements,

and orders that determine, debilitate, screen, and right unethical conduct has often been

recommended as a methods for controlling unethical conduct within the organization. Great

ethics is great business since it creates positive externalities like trust and duty to partners, which

thus guarantees long drag implementation. The ethical training would create an atmosphere for a
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE19

positive set of principles, influencing workers' ability to bear corporate social obligation. That is

why is can be concluded (just on the basis of the literature review) that the ethical training have a

positive impact on the employee performance. If fortunately the organizational factors

(supervisor’s behavior and characteristics of the job) are also in the favor of employee than

his/her performance can be improved more rapidly.

In Citation References

Error: Reference source not found

IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE20

Instrument used for research

Questionnaire

We are conducted research on the topic: “Impact of ethical training on employee

performance by the moderating role of organizational factors”. For this study scale is designed as

Strongly Agree = SA

Agree = A

Neutral = N

Strongly Disagree = SD

Disagree = SD

Sr
Questions SA A N SD D
No;
In your organization’s daily operations, honesty is practiced.
1
During the past year at work, you have been aware of any conduct by your
employer or colleagues that you thought either violated the law or your
2
organization’s ethical standards

[If yes] you raise any of your concerns with management, another
3 appropriate person or through any other mechanism.
IMPACT OF ETHICAL TRAINING ON EMPLOYEE PERFORMANCE21

You feel pressured to compromise your organization’s standards of ethical

4 conduct

You feel treated fairly in the organization

5
Your colleagues are openly talk about ethics and values in the organization
6
Employee solve their problems well independently
7
Employees are proactive in their actions
8
Employees know how to handle the criticism of their work
9

10 Employees complete their work on time and facts.

Supervisor visit frequently during working hours.
11
Routine discussions and checks are observed.
12

13 Supervisor’s ethical behavior promotes you to be more ethical.

14 Dedication of supervisor helps employee in performing better.

My line manager explains to staff and colleagues the importance of honesty
15 and ethics in the work we do

Job duties must be clear to the employee to help him perform better.
16
My organization disciplines employees who violate my organization’s
17 ethical standards