8 Reasons Ethics Make Good Business Sense

8 Reasons Ethics Make Good Business Sense

good business

8 reasons Ethics make good business sense
 
Facebook is the latest company to learn the hard way that bad conduct affects stakeholders. The share price has seen a 13.5% drop since the Cambridge Analytica drama. Here are eight reasons why ethics are good for business.

Shareholder Sentiment

Trust and confidence in management affect shareholder sentiment. News related to unethical behaviour negatively impacts this level of confidence. Negative shareholder sentiment does not attract investment.

This is relevant to private companies too, especially family businesses, where reputation and standing of the company impact the family name. Family businesses also have other stakeholders to bear in mind – other family members used to dividend payouts.

Engagement and Retention

Employees prefer working for companies that treat people with dignity, respect and fairness. An environment where employees feel valued. When employees see, hear or experience negative behaviour or practices misaligned with their principles, their trust and loyalty to the company erode. Hence ethics = higher engagement + retention.

Customer Satisfaction

Would you want to do business with a company you don’t trust? Other customers wouldn’t either.

Companies with high levels of customer satisfaction tend to generate a higher degree of customer loyalty, repeat business and greater market share.  Moreover, businesses that genuinely contribute to their community and maintain good relationships with other businesses tend to be more successful in the long run.

There is a caveat to this. Companies who have corporate social responsibility initiatives but poor business practices are in danger of breeding cynicism and mistrust. This is counter-productive to building brand and customer loyalty.

Focus on Creating Value

A business needs its people to focus on activities that grow the company and create value. Unethical practices are more likely to open a company up to unwanted distractions such as lawsuits. Why would a business engage in activities that detract from creating value?

“Ethical business practices are sound business practices.”

Financial Records

The last two decades have seen a number of cases centred on fraudulent financial reporting. Whilst the effects of misleading financial reporting may boost the company’s stock price in the short-term, there are almost always ill effects in the long run.

Accurate financial records are more than a regulatory requirement. They are key to sound decision-making and long-term success.

Green Practices

I was once told ‘whether you’re chopping trees or hugging trees, people look for returns.”

The fact of the matter is if you don’t keep an eye on your bottom line, the business will be unsustainable. The bottom line is affected by people’s perception, belief and likeability of your company. The internet and social media have provided stakeholders with greater insight into the impact businesses have on our environment and society. Customers seek to do business with companies that reflect their values. Suppliers and investors would be wise to follow suit.

Unforeseen Circumstances

Waiting until a crisis strikes to instil and encourage good behaviours is a poor strategy. It takes time to overhaul embedded systems, beliefs and practices, so businesses are better off setting off on the right foot, rather than trying to course correct when calamity hits.

Genuine errors and unforeseen circumstances do happen. The ability for a business to respond appropriately and speedily speaks volumes in the eyes of stakeholders. When bad news hits, taking prompt and proper action is essential. Delayed decisions fuel negative public opinion, causing a downward spiral in relationships with stakeholders. This is not good practice for any business that needs customers, employees, suppliers and/or investors to thrive.

Counteract Apathy

Some may still argue why change when some are getting away with it. Others may wait for regulatory bodies to force them to clean up their business practices. But the fact of the matter is, we can no longer ignore the impact business has. We can no longer exonerate our actions through corporate social responsibility. We need to challenge the status quo bred under the guise ‘but this is business’. It’s smart to start right – acting responsibly in the first place.

Originally featured in Fresh Business Thinking and updated on 25 April 2018.

Facebook is the latest company to learn the hard way that bad conduct affects stakeholders. The share price has seen a 13.5% drop since the Cambridge Analytica drama. Here are eight reasons why ethics are good for business.

Shareholder Sentiment

Trust and confidence in management affect shareholder sentiment. News related to unethical behaviour negatively impacts this level of confidence. Negative shareholder sentiment does not attract investment.

This is relevant to private companies too, especially family businesses, where reputation and standing of the company impact the family name. Family businesses also have other stakeholders to bear in mind – other family members used to dividend payouts.

Engagement and Retention

Employees prefer working for companies that treat people with dignity, respect and fairness. An environment where employees feel valued. When employees see, hear or experience negative behaviour or practices misaligned with their principles, their trust and loyalty to the company erode. Hence ethics = higher engagement + retention.

Customer Satisfaction

Would you want to do business with a company you don’t trust? Other customers wouldn’t either.

Companies with high levels of customer satisfaction tend to generate a higher degree of customer loyalty, repeat business and greater market share.  Moreover, businesses that genuinely contribute to their community and maintain good relationships with other businesses tend to be more successful in the long run.

There is a caveat to this. Companies who have corporate social responsibility initiatives but poor business practices are in danger of breeding cynicism and mistrust. This is counter-productive to building brand and customer loyalty.

Focus on Creating Value

A business needs its people to focus on activities that grow the company and create value. Unethical practices are more likely to open a company up to unwanted distractions such as lawsuits. Why would a business engage in activities that detract from creating value?

“Ethical business practices are sound business practices.”

Financial Records

The last two decades have seen a number of cases centred on fraudulent financial reporting. Whilst the effects of misleading financial reporting may boost the company’s stock price in the short-term, there are almost always ill effects in the long run.

Accurate financial records are more than a regulatory requirement. They are key to sound decision-making and long-term success.

Green Practices

I was once told ‘whether you’re chopping trees or hugging trees, people look for returns.”

The fact of the matter is if you don’t keep an eye on your bottom line, the business will be unsustainable. The bottom line is affected by people’s perception, belief and likeability of your company. The internet and social media have provided stakeholders with greater insight into the impact businesses have on our environment and society. Customers seek to do business with companies that reflect their values. Suppliers and investors would be wise to follow suit.

Unforeseen Circumstances

Waiting until a crisis strikes to instil and encourage good behaviours is a poor strategy. It takes time to overhaul embedded systems, beliefs and practices, so businesses are better off setting off on the right foot, rather than trying to course correct when calamity hits.

Genuine errors and unforeseen circumstances do happen. The ability for a business to respond appropriately and speedily speaks volumes in the eyes of stakeholders. When bad news hits, taking prompt and proper action is essential. Delayed decisions fuel negative public opinion, causing a downward spiral in relationships with stakeholders. This is not good practice for any business that needs customers, employees, suppliers and/or investors to thrive.

Counteract Apathy

Some may still argue why change when some are getting away with it. Others may wait for regulatory bodies to force them to clean up their business practices. But the fact of the matter is, we can no longer ignore the impact business has. We can no longer exonerate our actions through corporate social responsibility. We need to challenge the status quo bred under the guise ‘but this is business’. It’s smart to start right – acting responsibly in the first place.

Originally featured in Fresh Business Thinking and updated on 25 April 2018.

Water and Wealth Creation

On a trip to Kenya, we were faced with a village that required access to clean water. Their wish was to have water, to grow crop that would in turn provide them with the money to educate the boys and the girls of the community (traditionally only the boys were...

Character and Corporate Culture

Character and Corporate Culture

It is not in calm seas that our character and integrity are tested but in times of crisis. It is at these times that mistakes are likely to happen.

When people think of ethics and social responsibility in the corporate context, they perceive it as a simple matter of determining what is right and wrong. Since we do not live in a world where decisions are a matter of black or white but more in shades of grey, steering the right course is not always a clear cut decision. With increased diversity of cultures and nationalities in the workplace, the topic of ethics and social responsibility becomes ever more complex, and one that should be treated with attention and focus.

Every company in hiring executives seeks people with integrity and good moral standards, but how do these translate to the corporate culture?

Every organisation has a value system. But is what the company says it stands for and the value system communicated, aligned with desired behaviours, practices and reward systems? There is little point in having formal policies and procedures that prescribe one mode of behaviour, if people are positively rewarded for achievements where an alternative and ‘non-desirable’ behaviour is applauded in terms of raises, bonuses and promotions.

Sharing the value system of an organisation enables the individuals within it to look within themselves and align their values and subsequent behaviour with that of the organisation, making them stronger people and better corporate citizens. Making this a topic of continual attention in an organisation has a resultant impact on the level of openness, integrity and trust amongst colleagues. Research has shown that in organisations with such systems, people within the organisation are motivated to not only be stronger representatives but better enabled to handle turbulent times such as change or crisis management. Continual attention to ethics in the work place sensitises leaders and staff to how they want to act consistently. And this comes from the top – leaders who lead by example will set the tone for the whole organisation to follow.

Ethics programmes have also been shown to support employee growth and development. A study cited in the Wall Street Journal found a direct correlation between the level of emotional health of an executive and the results of a battery of tests on ethics.

Having ethics as part of the organisation’s agenda better prepares employees to face reality with the resultant effect that they feel more confident and ready to deal with whatever comes their way.

Another benefit is the impact ethics can have on a company’s public image if people perceive those organisations as valuing the manner in which business is conducted more than profit. Recent years have seen greater attention to this factor, with more companies reporting on their social responsibility and analysts making it part of their agenda in their valuation of company stock.

In the meantime, we need to ask ourselves how are we contributing to the sustainability and longevity of the local economy? How are we ensuring that our actions have a positive contribution for the next generation and beyond?

5 things to keep in mind if you want a great culture

5 things to keep in mind if you want a great culture

Corporate Culture

5 things to keep in mind to set a great culture

Ask a person the reason they love to travel and oftentimes they say to experience different cultures. Human beings seem to be intrigued by the social norms and ways of living of their fellow man in different cities and villages around the world. Having the experience and exposure to other cultures somehow adds a certain colour to our own lives, a certain richness.

What we are less aware of perhaps are the unique cultures we create in these environments we call workplaces. Just as the reality of visiting a country rarely reflects any possible depiction portrayed in a brochure, company culture is hard to convey by text printed in a company handbook or website, but rather better experienced by its essence, its spirit. But how can we translate something seemingly ethereal into something more tangible and why is it even important? Here are five things to keep in mind to set a great culture.

The ‘spirit’ of a company

Just as any culture around the world is formed over time through traditions, cultural norms, societal needs, forms of communication, behaviours and attitudes, so too is a corporate culture. We create the environments we work in through a combination of day-to-day interactions. Environments that come with particular qualities regarding desired and accepted behaviours, attitudes, principles and modes of communication. There is one main difference though – I am not aware of any society in the world that set out to create a particular culture intentionally, consciously. Rather the culture morphed through the ages.

Some companies morphed in the same way, directed mainly through the attitude and conduct of the board, leaders and managers, and the behaviours that were tolerated. But if you stop to think about it for a moment, through corporate culture we have an awesome opportunity. Through our actions, we can shape and form a mini-society that lends itself to our highest ideals. We can enable others to step up to the plate and be their best, to focus on and achieve a unified purpose and direction.

And quite scary in the wrong hands… So how do we get it right?

Setting the Tone

If you want to set the ‘right’ culture – start with yourself. Whether you are aware of it or not, your character, your personal conduct, value system and manner of treating others is akin to a metronome, the timekeeping device used in music to keep everyone in sync. So ask yourself some key questions: Who are you, what do you stand for, what drives you? How do you treat others? Are you a person of your word? Can you be trusted? Do you come across as friendly, approachable, aloof, firm but fair? What is your prefered style of communicating? Are you formal, structured, agenda-led, walk around the floor? How do people interact with you and react to you? What is your business ethos and how does it translate into practice?

Your people

The people you surround yourself with and the manner in which you interact with them speaks volumes. If for instance, you are smart enough (and humble enough) to realise that you are not great at everything and surround yourself with people who are ‘better’ than you, you have set the scene for greatness. That is of course if you also create the environment for them to speak their mind and you are open-minded enough to listen.

Measuring success

What does success look like for you and your company? Is it just about profit at all costs? What milestones do you measure and reward? Does the manner in which objectives are met really matter and are they taken into account? Are certain behaviours tolerated, just as long as there are results?

Aligning vision with practice

A lofty and noble vision is all well and good but it’s what you do in practice that counts. Do not underestimate the impact that your individual actions and conduct have in setting the standards and the cultural tone. So ask yourself: Do you want to create an environment in which compromising behaviours are tolerated in the name of profit? Or, do you want to generate an environment that nurtures, develops and engages competence and character, to build great companies that add value to more than just their profit margins?

As featured in WorkLab

Ask a person the reason they love to travel and oftentimes they say to experience different cultures. Human beings seem to be intrigued by the social norms and ways of living of their fellow man in different cities and villages around the world. Having the experience and exposure to other cultures somehow adds a certain colour to our own lives, a certain richness.

What we are less aware of perhaps are the unique cultures we create in these environments we call workplaces. Just as the reality of visiting a country rarely reflects any possible depiction portrayed in a brochure, company culture is hard to convey by text printed in a company handbook or website, but rather better experienced by its essence, its spirit. But how can we translate something seemingly ethereal into something more tangible and why is it even important? Here are five things to keep in mind to set a great culture.

The ‘spirit’ of a company

Just as any culture around the world is formed over time through traditions, cultural norms, societal needs, forms of communication, behaviours and attitudes, so too is a corporate culture. We create the environments we work in through a combination of day-to-day interactions. Environments that come with particular qualities regarding desired and accepted behaviours, attitudes, principles and modes of communication. There is one main difference though – I am not aware of any society in the world that set out to create a particular culture intentionally, consciously. Rather the culture morphed through the ages.

Some companies morphed in the same way, directed mainly through the attitude and conduct of the board, leaders and managers, and the behaviours that were tolerated. But if you stop to think about it for a moment, through corporate culture we have an awesome opportunity. Through our actions, we can shape and form a mini-society that lends itself to our highest ideals. We can enable others to step up to the plate and be their best, to focus on and achieve a unified purpose and direction.

And quite scary in the wrong hands… So how do we get it right?

Setting the Tone

If you want to set the ‘right’ culture – start with yourself. Whether you are aware of it or not, your character, your personal conduct, value system and manner of treating others is akin to a metronome, the timekeeping device used in music to keep everyone in sync. So ask yourself some key questions: Who are you, what do you stand for, what drives you? How do you treat others? Are you a person of your word? Can you be trusted? Do you come across as friendly, approachable, aloof, firm but fair? What is your prefered style of communicating? Are you formal, structured, agenda-led, walk around the floor? How do people interact with you and react to you? What is your business ethos and how does it translate into practice?

Your people

The people you surround yourself with and the manner in which you interact with them speaks volumes. If for instance, you are smart enough (and humble enough) to realise that you are not great at everything and surround yourself with people who are ‘better’ than you, you have set the scene for greatness. That is of course if you also create the environment for them to speak their mind and you are open-minded enough to listen.

Measuring success

What does success look like for you and your company? Is it just about profit at all costs? What milestones do you measure and reward? Does the manner in which objectives are met really matter and are they taken into account? Are certain behaviours tolerated, just as long as there are results?

Aligning vision with practice

A lofty and noble vision is all well and good but it’s what you do in practice that counts. Do not underestimate the impact that your individual actions and conduct have in setting the standards and the cultural tone. So ask yourself: Do you want to create an environment in which compromising behaviours are tolerated in the name of profit? Or, do you want to generate an environment that nurtures, develops and engages competence and character, to build great companies that add value to more than just their profit margins?

As featured in WorkLab

Water and Wealth Creation

On a trip to Kenya, we were faced with a village that required access to clean water. Their wish was to have water, to grow crop that would in turn provide them with the money to educate the boys and the girls of the community (traditionally only the boys were...