Do you remember The Wolf of Wall Street? How about Gordon Gecko from the movie Wall Street? Things didn’t go as planned for both of these unscrupulous characters. While movies paint an exaggerated picture of reality, they do show why business acumen and shark-like abilities to pursue opportunities aren’t enough for long-term stability and profitability.
How are managerial decisions in the financial sector made? A sole focus on results and bottom line may seem to make sense but it doesn’t benefit the organization strategically in the long run. Such decisions fail to take into account workplace culture, employee needs, and most importantly – transparency.
Ethical leadership adds new dimensions to decision-making. Profits are obviously important. But so are inclusion, building a strong corporate culture, and encouraging employees to partake in strategic processes. Through ethical leadership, financial service providers can attract and retain top talent while also building the kind of brand that resonates with clients and maximizes loyalty.
The Importance of Ethical Leadership in Business
Moral leadership is more important now than it’s ever been in the past. Studies suggest that ethical leaders have stronger connections with their coworkers and they’re more capable of improving business performance.
Generational specifics also play a role here. By 2025, Gen Z members will make up approximately 25 percent of the workforce. These employees have established themselves as more demanding of leadership ethics than any generation before them.
Generational profiles suggest that Gen Z workers have very strong values and ethics. These individuals don’t negotiate and they’re less likely to change their position due to managerial pressure. As a result, executives have to adopt a new approach towards effective management and relationship establishment within the workplace environment.
Ethical leadership fosters relationships and makes the decision-making process more holistic. An ethical leader is authentic and caring. They’re an active listener. These qualities help strengthen the workplace culture while motivating employees through honesty, accountability, fairness, and respect. It’s easy to see how these qualities can have a positive impact on performance and the long-term stability of the enterprise.
At its very core, ethical leadership is all about being a role model for others within the organization. It gets managers leading by example and adhering to values like honesty, integrity, respect, and community building. When top-level executives are committed to such values, the dynamics within the organization are impacted profoundly. Ethical leaders inspire their employees to follow suit, creating a unified culture within the enterprise and stimulating everyone to pursue goals in the same moral manner.
The Current State of Financial Services: Why Ethics Matter More Than Ever Before
According to Deloitte’s 2024 Financial Services Industry Outlooks, the sector will experience some unique challenges during the year.
High interest rates, regulatory pressures, and inflation are all problems that executives have had to deal with before. Younger employees, however, will be experiencing those challenges for the very first time. The report concludes that leaders will need to focus on helping teams navigate these issues to discover new growth opportunities.
Technological turbulence is another factor that will impact the sector in 2024. The integration of generative AI and cloud-based solutions will cause certain disruption. While such technologies can present new growth possibilities in the future, innovation is something that employees will need some help getting familiar and comfortable with .
The report concludes that 2024 may be the year during which the future will start to unfold for financial service providers and all other industries. Those who invest in strong teams and new product development right now will get a chance to reap the long-term benefits.
The Role of Empathy in Financial Services Leadership
Turbulence and rapid changes are factors that many employees simply can’t handle on their own. That’s where empathy as a part of ethical leadership will play an important role.
According to the American College of Financial Services, empathy fosters trust. Needless to say, trust is the one element that enables financial service providers to grow strong and build lasting relationships with clients.
It also helps for talent retention in a field that sees employee turnover rates of 18.6 percent on an annual basis. Research suggests that a salary increase alone isn’t enough to ensure the loyalty of top employees because of competition for talent in the sector. Managers will have to offer something more – a company culture that resonates with employees and an empathetic approach toward problem resolution.
Empathy is also connected to service provision and the way that clients perceive the service provider. Hence, it’s one of the most important ethical leadership components that can effortlessly strengthen financial performance by building client trust and making employees loyal to the team.
Empathy and Ethical Leadership: A Winning Combination
Turbulent times create challenges but they also present opportunities. Leaders who are open enough and ready to embrace novelty will reap those benefits.
Empathy and ethical leadership can benefit organizations in multiple wholesome ways. Some of the key positive impacts include:
- More engaged, productive employees who are willing to contribute ideas and collaborate for better outcomes
- A resilient brand reputation that can withstand tests and challenges stemming from societal or economic factors
- Loyal clients who see the added value of ethical service provision and who are committed to the brand
- The creation of a transparent and honest environment that’s likely to appeal to investors as much as it does to clients
- An enhanced ability to mitigate risks by recognizing the ethical risks that may arise from certain actions lacking in morality and addressing potential problems as quickly as possible
Having a regulatory framework is one thing. Having an ethical code grounded in empathy and transparency is completely different. It adds a “human” element to the corporate operation. Through empathy and ethical leadership, managers can improve employee job satisfaction and get everyone involved in problem-solving and opportunity creation.
Leaders who are committed to doing the right thing are beneficial for the organization, for its employees, and for its customers. That’s why the demand for ethical leaders is stronger than at any given point in the past. Integrity matters, especially when financial service provision is involved. CEOs who place top value on corporate ethics are getting recognized and they’re also driving their companies towards sustainable success.
Author Bio:
Giovanni Gallo is the Co-CEO of Ethico, where his team strives to make the world a better workplace with compliance training services, sanction and license monitoring, and workforce eLearning software and services.
Growing up as the son of a Cuban refugee in an entrepreneurial family taught Gio how servanthood and deep care for employees can make a thriving business a platform for positive change in the world. He built on that through experience with startups and multinational organizations so Ethico’s solutions can empower caring leaders to build strong cultures for the betterment of every employee and their community.
When he’s not working, Gio’s wrangling his four young kids, riding his motorcycle, and supporting education, families, and the homeless in the Charlotte community.
