Ethics in Business
by Philippa Foster Back
by Philippa Foster Back
A business's approach to ethics depends on the tone set at the top by its chief executive and board of directors. By tone I mean the qualities and style that characterise the organisation's behaviour, from greeting you at the reception to honouring your invoices on time.
All of this feeds through to the tone that the company, through its employees, displays towards all its stakeholders and manifests itself in how it conducts its business. Does it always endeavour to do the right thing or does it routinely cut corners to secure that deal? There is a growing recognition that an ethically bankrupt business risks becoming a financially bankrupt one. Ethics matter.
At the start-up stage, a business's core values reflect those of the entrepreneurs who formed it. This includes the way that they interact and build relationships with other parties. As the business grows, these relationships will change. The relationship that is most affected is the one between the owners and the employees. At the outset, the owners will know everyone and the growth of the enterprise will be closely allied to the effectiveness of teamwork. As a company recruits more people, the closeness of its original team may start to diminish. New employees will bring with them different values, ideas and aspirations. These can be an important part of helping the organisation to develop, but such changes do need managing. In a small company where the directors know everyone, the tone is clear. But, as the enterprise grows – and certainly once it has got to a size where not everyone familiar is with each other – problems can manifest themselves if there's a lack of guidance on what's expected of people. This underlines the importance of leadership to guide growth.
Leadership is not only about the person at the top; it manifests itself at many levels – the team leader, the project manager, the regional director and so on. It's important that they also recognise the example they're setting. It's human nature to emulate one's leader, so, if employees see that their boss is brusque and bullying in his dealings with people, they might copy him in the belief that such behaviour is the way to advance in the organisation.
How can this risk be managed? The simple way to do it is to write a code of business ethics (business principles, statement of how we do business – call it what you will). People work best when they are provided with a non-prescriptive framework within which they can operate (see table). The code sets down how business is to be conducted. Implementation, of course, is still up to individuals, but they need to know that by following the code they will be supported. Organisations following best practice tend to make this support explicit – for example, by stating: "The company will ensure employee protection in cases where their conformance with the code jeopardises the reaching of financial or other targets."
When implementing a code of ethics, it's important that the company gives its employees the means to raise their concerns about any corporate behaviour that they believe does not conform with it. In the first instance they should be able to discuss any issue with their line managers, but if they feel they can't do this, an alternative mechanism must be available to them. Every call or email to such a "speak-up" service should be treated confidentially in all cases.
Putting in a code of ethics supports a business because it's an integral part of building a culture within the organisation. By following best practice and developing a code based on shared core values in consultation with employees, it can become the glue that cements the company together.
In the main, business leaders recognise that operating ethically is the right thing to do. They also understand that it's not always easy to achieve. It only takes one individual not to behave in the way the company would expect for a customer to be lost – potentially a real cost. So there is a defensive business case to be made along with the sustainable business case, which states that ethical companies tend to be better managed, have better employment relations and achieve better financial performance in the long run!
Having a code is widely accepted as normal business practice, but it is the embedding process, led from the top, that will make the difference. A code of ethics will be effective only if there are training programmes implemented in parallel and a mechanism established for employees to raise their concerns. After all, it's hard to manage what you aren't willing to talk about.
All of this feeds through to the tone that the company, through its employees, displays towards all its stakeholders and manifests itself in how it conducts its business. Does it always endeavour to do the right thing or does it routinely cut corners to secure that deal? There is a growing recognition that an ethically bankrupt business risks becoming a financially bankrupt one. Ethics matter.
At the start-up stage, a business's core values reflect those of the entrepreneurs who formed it. This includes the way that they interact and build relationships with other parties. As the business grows, these relationships will change. The relationship that is most affected is the one between the owners and the employees. At the outset, the owners will know everyone and the growth of the enterprise will be closely allied to the effectiveness of teamwork. As a company recruits more people, the closeness of its original team may start to diminish. New employees will bring with them different values, ideas and aspirations. These can be an important part of helping the organisation to develop, but such changes do need managing. In a small company where the directors know everyone, the tone is clear. But, as the enterprise grows – and certainly once it has got to a size where not everyone familiar is with each other – problems can manifest themselves if there's a lack of guidance on what's expected of people. This underlines the importance of leadership to guide growth.
Leadership is not only about the person at the top; it manifests itself at many levels – the team leader, the project manager, the regional director and so on. It's important that they also recognise the example they're setting. It's human nature to emulate one's leader, so, if employees see that their boss is brusque and bullying in his dealings with people, they might copy him in the belief that such behaviour is the way to advance in the organisation.
How can this risk be managed? The simple way to do it is to write a code of business ethics (business principles, statement of how we do business – call it what you will). People work best when they are provided with a non-prescriptive framework within which they can operate (see table). The code sets down how business is to be conducted. Implementation, of course, is still up to individuals, but they need to know that by following the code they will be supported. Organisations following best practice tend to make this support explicit – for example, by stating: "The company will ensure employee protection in cases where their conformance with the code jeopardises the reaching of financial or other targets."
When implementing a code of ethics, it's important that the company gives its employees the means to raise their concerns about any corporate behaviour that they believe does not conform with it. In the first instance they should be able to discuss any issue with their line managers, but if they feel they can't do this, an alternative mechanism must be available to them. Every call or email to such a "speak-up" service should be treated confidentially in all cases.
Putting in a code of ethics supports a business because it's an integral part of building a culture within the organisation. By following best practice and developing a code based on shared core values in consultation with employees, it can become the glue that cements the company together.
In the main, business leaders recognise that operating ethically is the right thing to do. They also understand that it's not always easy to achieve. It only takes one individual not to behave in the way the company would expect for a customer to be lost – potentially a real cost. So there is a defensive business case to be made along with the sustainable business case, which states that ethical companies tend to be better managed, have better employment relations and achieve better financial performance in the long run!
Having a code is widely accepted as normal business practice, but it is the embedding process, led from the top, that will make the difference. A code of ethics will be effective only if there are training programmes implemented in parallel and a mechanism established for employees to raise their concerns. After all, it's hard to manage what you aren't willing to talk about.
| A nine-step programme for developing corporate ethics |
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