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The Role of Ethics in Building
Successful Businesses - Part One
This paper is in two parts - part one,
here, introduces ethics and business, and explores a primary requirement
for any business which aspires to be successful - trust. Part
two covers the contribution ethical insights can make to the
creation of trust and therefore business success.
Introduction - Ethics and Business
Ethics is a branch of philosophy concerned
with human behaviour, particularly with what is right behaviour
and what is wrong behaviour, how we decide between the two, what
we mean by "right", "wrong", "good", "bad", what reasons we can
give for classifying something as these things, and so on. It also
considers whether something can be right or wrong at all, or only
right or wrong for particular people or at particular times or in
particular contexts.
There is a sub-branch of ethics known
as business ethics, where the object is to think about what is right
and wrong in the activities of businesses and the people in them.
For example, it is concerned with the morality of profit, morality
of shareholder-owned businesses, the right way of relating to employees
and customers, the wider responsibilities of businesses (if any)
in terms of a business's impact on the local community, local environment
and even on the global environment and people living in other parts
of the world. Business ethics also shades into Corporate Social
Responsibility, by informing the attempts by business to address
needs and issues outside the normal concerns of businesses.
While all of the above concerns are
legitimate and worthy of investigation, our approach here is different.
It starts from the point of view of businesses themselves, their
experiences and their concerns. It asks what the key issues are
for businesses in terms of the ethical behaviour of businesses and
those who work in them. In other words, what sort of behaviours
which fall into the sphere of ethics are conducive to generating
more succesful businesses? And what sort of behaviours militate
against success? We then put these answers into an ethical framework
which allows businesses and people working for businesses to understand
the sorts of actions likely to contribute to business success and
the sorts or actions that are not.
This approach does not mean that there
is not a purely ethical approach to businesses, asking the deeper
questions of why, but this is not covered here other than as far
as is necessary in order to better understand how businesses can
achieve success by referring to ethical concepts.
Creating Trust - a Primary Business
Goal
From a phenomenological
perspective, one of the most significant ethical concerns in business
is trust. The need for trust, the trust deficit, the behaviour of
ourselves and others in the presence or absence of trust, are key
abiding concerns for anyone working in a business. In other words,
trust looms large in our experience of almost all aspects of working
life.
Without trust there is no basis on
which businesses can conduct business, as almost no business transaction
between companies or within companies can be undertaken without
one or both parties trusting that the other party will honour the
obligations incurred by that transaction.
For example, any business buying anything
must trust that the goods or services bought are as described and
are fit for the purpose intended, that warranty terms will be adhered
to and after-sales care will be available as pledged.
And for example, any business selling
anything must trust that the purchaser will pay fully and promptly,
that the intellectual property (if any) of the seller will be respected,
and that the purchaser will be honest when requesting warranty or
after-sales services.
Transactions needing the least trust
are face-to-face transactions of simple items of low value, which
can be counted and examined before handing over cash.
Transactions involving complex or expensive
products or services, supplied or supported over long periods, where
payment is made by cheque or electronically at some future date
require more trust.
Those transactions carried out at a
distance without personal contact, over the internet for example,
require a great deal of trust. And those transactions where there
is no possibility of recourse to legal proceedings, such as transactions
across borders between parties with a great disparity in financial
resources also require a great deal of trust.
Within companies, employees must trust
that they are going to get paid at the end of the month, that commitments
about work and the circumstances surrounding work will be honoured,
and that they will be treated fairly. And employers must trust that
employees will do what they are asked to do, will not defraud the
company and will carry out their roles in the best interests of
the company.
There are plenty of ways of reducing
the amount of trust required between parties to a transaction, for
example by checking the credit rating of new customers, taking up
references, monitoring work, and so on, and many of these ways are
built in to companies' operating procedures. Nevertheless, risk
in any transaction can only be reduced and never eliminated and
so the need for trust is always present.
Some Methods for Creating Trust
The extent to which trust can be created
in the minds of employees and other companies is a key determinant
of whether current and potential employees, suppliers and customers
will deal with you. And, if they choose to deal with you, will determine
the terms on which they deal with you, and their level of commitment
they bring. (Not to mention the degree of honesty and integrity
with which they deal with you - people who think they may be cheated
are likely to take any opportunity they can to gain advantage before
they are cheated themselves.)
Therefore, the creation of a trust
is a key business goal. There are a number of ways in which trust
can be created deliberately (i.e. as a matter of policy rather than
a side-effect of good business practice), and I will mention a couple
of them here.
- People normally have more trust in people and businesses deemed
to be successful, presumably on the basis that successful businesses
and people could only have been successful by being trustworthy
- no one would want to deal with someone untrustworthy, and
so success is a good indicator of trustworthiness.
Hence the money spent on good offices in premium locations and
on high quality web sites and marketing communications generally.
And also hence the money and care spent by individuals in dressing
well and looking the part for their business roles.
It is obvious that this approach cannot be relied upon on its
own, but it is an indicator whidh people often put their faith
in. Therefore, businesses and individuals should project an
image of success in their dealings with other businesses and
individuals, as one element in a number than can contribute
to the creation of trust.
- Another way in which companies and individuals can create
trust is to spend time and money on activities which are not
in the direct self-interest of those companies and individuals
but which are deemed to be worthy in some way - which achieve
some social good over and above the generation of profit through
supply of goods or services.
The thinking is, presumably, that only "good" companies and
people (i.e. those concerned with "doing the right thing", concerned
with sometimes putting others before one's own narrow interests)
do good things, and if those companies and people have done
good things in the recent past and are committed to doing them
in the future, they can be trusted more to do the right thing
by you in your transactions with them.
Corporate Social Responsibility (CSR), which encompasses activities
as diverse as supermarkets charging for carrier bags to running
overseas aid projects, has become more central to business life
at least partly as a result of this need to be seen to be more
trustworthy, and for the same reason charitable work is often
seen as a good thing on a potential employee's CV.
Again, it is obvious that this approach cannot be relied upon
on its own. This is particularly the case because businesses
and individuals who understand that doing "good" things contributes
directly to business success will engage in doing "good" things
because those things contribute directly to business success
and so they cease to be "good" things (i.e. done for the sake
of the recipient rather than the sake of self).
Sorting out the businesses and individuals with the "right"
intentions from those with the "wrong", self-interested, intentions
becomes ever more difficult when companies start competing to
be "good" in order to foster trust, in order to be more successful.
On the other hand, it is often the case that those who are most
likely to let you down will have a short-termist approach to
business - that is, they will measure business success mainly
or purely in terms of the achievement of short-term goals. This
may partly be because those who are most desperate are the most
likely to cut corners morally as well as in other ways, and
the most desperate can only focus on the immediate future.
That is not to say, of course, that all those focused on short-term
goals are untrustworthy, but in general trustworthy businesses
tend to put more emphasis on long-term goals.
Investment in CSR demonstrates a commitment to long-term goals,
as such activities can never have an immediate impact on levels
of trust. Therefore, a strong commitment to CSR (by companies)
or involvement in charitable activities (by individuals) is
at least an indicator that they are probably rather more trustworthy,
other things being equal, than others in identical situations.
Another notorious problem with CSR, though, is that what companies
hold themselves out as doing (or lead people to think that they
are doing) often does not bear serious scrutiny; and so the
value of doing CSR is devalued.
The conclusion is that investment in CSR contributes to the
creation of trust, and as one element in a range of initiatives
it can be worth investing in. But it is not enough on its own
to achieve the goal of trust in a business.
There are other ways in which companies can deliberately create
trust among particular groups, such as employees, suppliers or
customers - for example by being seen to be (or purpotedly being)
transparent and open rather than secretive, so that you look as
though you have nothing to hide and therefore must be trustworthy.
A Sustainable Method of Creating Trust
However, the creation of trust does not really come down to the
image you project through corporate branding or CSR, or any of
these other ways. Underlying these means of creating trust is
the brute fact that the creation of trust, in the medium- to long-term
at least, comes down to being trustworthy in all or at least most
of one's dealings with others (or at least most of one's dealings
that impact upon the groups one is most interested in creating
trust in).
In other words, if corporate branding or CSR is not backed up
by your actually being trustworthy in your day-to-day dealings
with staff, customers and suppliers, these initiatives are likely
to fail, or at least have their success blunted in the long run.
This is even more the case nowadays as the internet is an unregulated
and highly effective means of spreading messages, including those
which oppose the official messages companies put out about themselves
- if those official messages are not in line with actions.
Trustworthiness ultimately means two things:
- people are confident that you will do and say what you say
you will do and say. In addition to the things outlined above,
this depends two things:
- the extent to which you can convince others that you have
done and said what you said you would do and say in the
past; and
- the extent to which you can convince others that you
will continue to do and say what you do and say in the present
and future (at least in those areas which impinge on current
transactions).
The
"convince others" element has been partly addressed above, but clearly
there are other ways in which you
can convince others that you have done and said what you
said you would do and say in the past and will continue to do so
in the future - for example, by lying
and deception. This is often used by companies and
individuals, but is prone to be highly
self-defeating if detected (and, in some cases, of
course, illegal).
But
ultimately, there is only one fool-proof way to convince others
that you are trustworthy, and that
is to be trustworthy - to always, or as far as is possible,
do
and say what you commit to doing and saying.
In other words, as far as is possible, keep
commitments, do not lie, and do not mislead
or deceive.
2. you will
deal fairly and reasonably with people
even when you have the legal means or
power to do otherwise - in other words, you can be trusted to take
others and
their interests into account even if it
does not fit your narrow interests in the short term.
In summary, the
creation of trust is a primary business goal for all businesses
and all individuals in business life. Without trust there can be
no business, and the more trust there is the more business there
will be to do.
©
Martin
Ludlow 2009
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