Do you want to know how to create an ethical culture at your firm?
As social creatures, we take our behavioral cues from the people surrounding us. One good deed can have a ripple effect and inspire good behavior in those around you. Modeling a high level of integrity can support the integrity of your entire firm. On the other hand, some people will be less apt to make good ethical decisions if you don’t model your firm’s ethical principles.
To help you set high standards, we partnered with CPA Academy to bring you a webinar called “Painless December Ethics CPE.” The webinar was hosted by Caleb Newquist, Gusto’s Editor-at-Large, and Greg Kyte, founder of Comedy CPE.
As a comedian, Greg Kyte loves to make his audiences—including accounting students—laugh and think at the same time. He brings his ironic wit to both comedy clubs and CPE classes alike and is proud to give students actionable, practical ways to thrive in their careers.
In this article, you’ll learn how to encourage ethical behavior, why a code of ethics is important, and how to succeed in building an ethical organizational culture.
Create a story around ethical behavior
Sometimes, leaders can fall into the trap of thinking they only need to support ethical behavior on their team. But have you ever considered the behavior of your clients? Most, if not all, accountants have at least one client engaging in questionable actions. It can be tricky to know what to do if they’re not doing something downright illegal in front of your face. So what do you do? When it comes to the people you serve, what does it mean to be ethical?
“Identify a smarmy client. [Pick] somebody [about whom] you go, ‘I can justify doing the work that we do for you, but I’m pretty sure that on the other side of the veil, you’re doing some stuff that’s unethical.’”– Greg Kyte
Greg argued that you should root out a questionable client, stop working with them, and make that fact well known throughout the firm. By sharing the story as an example, people will begin thinking about their own behavior. They’ll want to live up to the level of integrity they see in the story.
“The biggest nudge you can have towards [encouraging your own] ethical behavior and [fostering] ethical behavior at your firm is [to share an experience] you can propagate at your firm that shows [your ethical] belief.”– Greg Kyte
Greg brought up an example of a questionable client from his experience. He talked about one from a former firm.
“His thing was, ‘Let’s be as aggressive as we can. Let’s find loopholes to exploit them. Let’s find ways that we can defer taxes for … investors in our real estate. … And even above and beyond that, [it] became very clear inside the firm [that] he was even taking an extra salary from the company above and beyond his contracted amount. … He was having that reclassified as a loan from the company to him, even though … there was no debt service on this loan. It was like a loan, it would … accrue interest, but there were never ever any payments toward it, and the firm knew about that.”– Greg Kyte
It turned out that nothing the client was doing in the open was technically illegal, so the firm still worked with him, even though it was clear to everyone that he wasn’t being forthright. The client was very profitable for the firm, but Greg was adamant about what should have been done.
“The firm that I worked with should have fired him as a client. … They were a big revenue [generator] for our firm. If we had fired them, everybody would’ve been like, ‘Why did you fire that client?’ And they should have said, ‘We just didn’t feel good about how they were doing stuff.’ We could have justified it.”– Greg Kyte
When you refuse to work with questionable clients, you may lose some money, but you’ll gain respect from your team. You’ll also be encouraging good behavior in them, which will make your firm operate much more smoothly in the long run. A positive work culture in which people want to do the right thing also sets the tone for a better work environment, which can potentially help you retain talent for longer. However, you need to set those standards clearly and publicly.
“[Every] firm culture is based on stories. … So, if you can say, ‘We fired a client that was bringing in $90,000 of revenue every year just because we didn’t feel good about them and we felt like they were being unethical,’ everybody’s going to talk about that. That’s going to be a story that stays with your firm forever, and you’re going to be able to cash in on that as a lever for higher levels of ethical behavior from your firm forever.”– Greg Kyte
What story do you want to tell your firm?
Follow through on your claims to be ethical
Anyone can talk about moral codes and ethical standards, but fewer people can actually follow through on them. When your actions don’t align with your words, those around us can default to cynicism, judgment, and, most importantly, feelings of apathy towards ethical behavior.
“Every accounting firm has core values. We can [say we] hold ourselves [to] the highest level of integrity with ourselves and with our clients … but [we have to] prove it. What has your firm done to prove [their] core value[s]?”– Greg Kyte
This applies to every aspect of your business, not just client relationships and standards for performance. If you claim to be ethical in regards to how you treat your staff, you need to show that you give them more than platitudes. If you say that you don’t overwork your staff and that you value taking care of your team, you should be able to back it up by sending people home after they’ve worked for a specified amount of hours. That shows that you really are committed to preventing burnout.
“If you’re a partner of a firm or you run a firm and you say that your core values include ethical behavior, maybe you shouldn’t be running people … 14 hours a day at your firm.”– Greg Kyte
Staying committed also means that you’re willing to make sacrifices when staying true to your values demands it. For example, limiting the amount of work you give people so that they’re not working 14-hour days might require some financial sacrifices.
Create a great place to work to support ethical behavior
People who feel positive, confident, supported, and well-rested are more likely to choose to do the right thing. Conversely, people who feel depleted, exhausted, cynical, and angry are more likely to do the wrong thing. It’s simplistic but true.
Consider that no one is perfect and that everyone is generally honest or dishonest, rather than being perfectly honest or dishonest. We all have the capacity to lie, cheat, and steal, even if it’s just a little white lie. We can also cheat by doing simple things, like taking an inordinately long lunch break. Creating an ethical work culture is about encouraging good behavior and taking away opportunities and conditions that lead to bad behavior.
Studies like the Ultimatum Game have shown that people look to others for models of how to behave. We all want and even need others to respect us and see us as honest. We also want to see ourselves as honest. At the same time, we face natural urges to be self-absorbed and self-centered and to do underhanded things to get our way.
We’re more likely to act in dishonest ways when we’re exhausted from having to do the right thing over and over again repeatedly. Going for too long without any indulgences, breaks, or rest can set us up to swing in the opposite direction. For example, if you restrain yourself from getting enough sleep for weeks, at one point, you might just cave in and sleep through an important family event. It would have been better to pace yourself.
It follows that to create the optimal conditions for ethical behavior at your firm, you should strive to create a workplace where people are generally positive, relaxed, and enthusiastic about work. This means supporting a good work-life balance and, if possible, offering benefits for healthcare and savings.
How Gusto can help you build an ethical culture at your firm
Gusto can help you achieve all of this because our mission is always to create a world where work empowers a better life. So what does that mean? It means we’re committed to a workplace culture that benefits everyone on multiple levels. We can help through our focus on three primary pillars to support your firm.
- Peace of mind
- Great place to work
- Personal prosperity
To help our partners and their staff attain peace of mind, we make payroll, benefits, management, reporting, and many other facets of business streamlined and simple. To help build great places to work, we offer HR support for small businesses that can’t afford a dedicated HR team, amazing tools to make onboarding and training easy, and ways to gain valuable employee feedback. Finally, we support prosperity by helping clients take care of their team’s long-term financial growth with a range of benefits for every budget.
People who feel their managers actually care about them, their families, and their futures are less prone to ego depletion. CPEs who have health benefits, flexible hours, and time off can take care of themselves and replenish themselves when needed. When you know you’re saving for the future and can get access to funds in an emergency, you’re less likely to steal, cheat, lie, or stretch the truth.
On the other hand, people whose bosses couldn’t care less (or who appear not to care), live paycheck to paycheck, have no way to take time off even if they need it, and work in a culture of distrust and competition are more apt to choose unethical behavior.
“Think about what the opposite of [our pillars are]. So the opposite of peace of mind might be … uncertainty. … The opposite of a great place to work might be a toxic environment where people don’t feel connected, and they’re largely disengaged. … The opposite of personal prosperity is where people … don’t feel like they do have the opportunity to plan for a prosperous future. [This creates] an environment that’s really high risk for unethical behavior.”– Caleb Newquist
As you take care of your team, they’ll put more trust in you, and you’ll be able to trust them more.
Learn more about how to incorporate ethics in the workplace
To build a strong ethical culture at your firm, walk your talk and show that you value being ethical. One way to do this is to let go of any clients who, despite being profitable, aren’t ethical. Then, make this into a story you tell your team. You should also make sure you’re supporting your employees and making their work experience positive. Gusto can help you create a great place to work where people feel more positive, motivated, and well-supported, all of which drive ethically sound behavior.
If you liked this article, check out the full webinar to learn more. Also, take a peek at our other articles based on the same episode: Navigating the Space Between Honesty and Dishonesty in CPA Ethics, CPA Ethics & The Ultimatum Game, The Science of Moral Codes and AICPA Ethics, The Sunglass Experiment and How It Applies to CPE Fraud, and What Is Ego Depletion and How to Replenish It as a CPA.
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