Why You Need Good Business Ethics

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Digital Library > Building and Inspiring an Organization > Ethics"Why You Need Good Business Ethics"

What makes for good business ethics? We give you a few examples and their payoffs, plus proven ways to ensure that ethical conduct holds sway at your company.

OVERVIEW [top]

Good ethics make good business sense. Your company stands to profit from a reputation for acting with honesty and integrity.

Environics International recently surveyed 25,000 people in 23 countries; 50% said they "pay attention" to the social behavior of companies. One in five said they'd protested poor social performance by speaking out against the companies or refusing to buy their products.

Bottom line: Your policies and actions are under constant scrutiny and assessment by those who can make or break your business. Can you afford not to do the right thing?

In this Quick-Read you will find:

  • How to choose an ethical course of action.
  • Ways to do right by your employees.
  • Tips for treating customers ethically.

SOLUTION [top]

Having a code of ethics helps your company define and maintain standards of acceptable behavior. A good ethical framework can help guide your company through times of increased stress, such as rapid growth or organizational change, and decreases your firm's susceptibility to misconduct. Ensuring ethical practices in the workplace, such as with personnel policies, can stave off expensive litigation or fines in the future. Last but not least, it can translate to great PR for your business.

What makes for good business ethics? A few examples:

  • Treat your employees well. Pay fair wages, and keep your promises. Act quickly to put an end to any kind of harassment, and show the same high level of respect for all your employees. Payoff: Low turnover, high employee motivation and productivity. Commitment to growing your company.

  • Be honest in all business dealings. Pay suppliers the amount agreed upon, and on time. Be fair with customers, not over-charging and not inflating the quality or potential of your products or services. Payoff: A sterling reputation that will help sustain your company even when times are tough.

  • Be socially responsible. Don't pollute the environment; recycle when possible. Heed protests of company policy or actions. Give back to the community through charity fund-raising or other worthy causes. Payoff: Goodwill that enhances your reputation as a positive force in the community.

  • Back up your products and services. Provide what you promise on your service contracts and in your advertising. Example: A Canadian roofing company won't accept payment on roof replacement or repair until after a rainfall proves the roof doesn't leak. Payoff: Repeat business as customers learn they can trust you not to cheat them — and these people tell their friends.

Here are two proven ways to ensure that ethical conduct holds sway at your company:

  1. Adopt a code of ethics. This is a formal statement that sets standards of behavior for everyone in the company. Your code can range widely, from confidentiality (keeping trade secrets) to dealing with sexual harassment. Specify any penalties for violations. If the company goals in your long-range plan are respected and referred to frequently, add following the ethics code to them.

  2. Do a quick "ethics check" when necessary. If you're not sure whether a decision or action would be ethical, ask yourself:

    • Is it legal? Would I be violating federal, state or municipal law?

    • Is it in accordance with company policy?

    • Is it fair? Would anyone lose out?

    • Would I be proud of my action? How would I feel if my family and friends read about it on the front page of the newspaper?

    • How would our customers react? Would they be more inclined to trust us, or feel cheated or betrayed?

REAL-LIFE EXAMPLE [top]

"Honesty in dealing with our customers" is paramount at RMI, wholesale distributors of gas equipment in Lee, Mass., says Jim Creer, manager of operations and materials. "We'll honor the price we've negotiated with a customer — even if we've mistakenly given a price that cuts the profit margin for us," says Creer. The goodwill generated by such a policy is priceless.

RMI also "fesses up" when orders are messed up somehow. "The wrong item might be shipped to a customer and then we discover someone here made an error putting the order into the system," says Creer. Denial of responsibility — often the first reaction when a company errs — doesn't wash at RMI.

"We'll admit our mistake right away," says Creer, "and take responsibility for getting back the wrong item and making sure the customer gets the right product at no extra charge."

Though they may never say it outright, "customers fully appreciate being treated with integrity. They prove it by their long-term loyalty to a company that doesn't dodge responsibility — and quickly rectifies its mistakes."

DO IT [top]

  1. Model the ethical behavior you expect of your employees. Treat them with honesty and respect if you want them to give one another — and your customers — the same treatment.

  2. Provide employees with opportunities for personal and professional growth. Tailor incentives to individual needs.

  3. Educate employees about ethics. Use hypothetical situations: "What would you do if a valued customer kept making suggestive remarks to a junior staffer?"

  4. Empower employees to treat customers right. Don't criticize good ethical decisions made on the front line, such as taking returns from loyal customers who don't have receipts.

  5. Make sure employees are aware of your code of ethics. Encourage them to discuss ethical concerns with you or another designated individual. Take those concerns seriously, and ensure confidentiality. Consider an anonymous survey of the entire staff asking them to define the organization's ethical strengths and weaknesses.

  6. Share your code of ethics with customers. Invite them to be open regarding any doubts they have about the integrity of your company and employees. Don't react defensively.

  7. Reward ethical behavior. This can be done through raises, bonuses and employee recognition awards.

RESOURCES [top]

Books

Good, the Bad, and Your Business: Choosing Right When Ethical Dilemmas Pull You Apart by Jeff Seglin (John Wiley & Sons, 2000). Seglin, a popular writer for Inc, provides ethical perspective through a series of anecdotes.

A Better Way to Think about Business: How Personal Integrity Leads to Corporate Success by Robert C. Solomon (Oxford University Press, 1999). Solomon does not prescribe action so much as ruminate on integrity in the business setting.

Eighty Exemplary Ethics Statements compiled by Patrick E. Murphy (Notre Dame Press, 1998).

Managing Business Ethics: Straight Talk About How to Do It Right, 2nd ed. by Linda K Trevino and Katherine A. Nelson (Wiley, 1999). Managing Business Ethics is a textbook that offers more prescriptive advice than most books on business ethics.


Article

"The Values That Sustain Entrepreneurs" by Ray Smilor

Internet Sites

Fast Company: Social Justice

Ethics and Conflict of Interest

Resolving Real-Life Ethical Dilemmas

Ethics Today


Article Contributors

Writer: Kathleen Conroy

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