Ethical Fading is a phenomenon that occurs in an organization's culture, allowing individuals to commit unethical acts while falsely believing they have not compromised any principles. This usually happens when small, dubious actions are taken to achieve targets, and these actions are not checked or corrected. Over time, these actions send a message to employees that achieving goals is more important than maintaining ethical standards. As this behavior continues, Ethical Fading grows, potentially leading to significant long-term costs for the organization and its customers, far outweighing any short-term benefits.

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The Infinite Game

What’s the difference between leaders who only achieve short-term success and visionaries who create resilient and truly competitive organizations? Re...

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Ethical Fading happens when an organization's culture allows people to commit unethical acts while falsely believing that they have not compromised any principles. Small, dubious actions to achieve targets, when unchecked, send a message to employees that goals matter more than ethics. Ethical fading grows with every such act. Over the long run, ethical fading will create a far higher cost to the organization and its customers than the seeming short-term benefit it offers.

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Ethical fading is a common issue in many organizations. One example is the Wells Fargo scandal in 2016, where employees created millions of unauthorized bank accounts to meet sales targets. This was a result of a high-pressure sales culture that prioritized goals over ethics. The implications were severe, including a damaged reputation, loss of customer trust, and hefty fines. Another example is the Volkswagen emissions scandal, where the company installed software in vehicles to cheat emissions tests. This unethical behavior led to significant financial and reputational damage. These examples highlight the long-term costs of ethical fading, which can far outweigh any short-term benefits.

Ethical fading challenges traditional business practices by highlighting the potential long-term costs of prioritizing short-term goals over ethical considerations. In traditional business practices, the focus is often on achieving targets, sometimes at the expense of ethical standards. Ethical fading occurs when this becomes normalized within an organization, leading employees to commit unethical acts under the false belief that they are not compromising any principles. This can lead to significant long-term damage to the organization and its customers, challenging the short-term focus of traditional business practices.

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