Ethics in business: a performance enhancer

Written by Diana Zărnescu on February 17, 2015. Posted in Articles, Individual Performance, Trending

One man’s happiness is another man’s sorrow represents, by no means, the word of law in the business environment but it is, however part of the present, unforgiving reality. Basically, it translates into profit by all means. Is this a viable strategic decision? Perhaps, for a limited period of time. Ultimately, the consequences of such decisions will strike back and kneel any organization, regardless of its size. Cases such as the 2001 Enron scandal and its collapse have drawn attention to an important trend in management, namely ethical leadership.

Ethical thinking and morale standards can and do, mostly, appear as overrated clichés. Indeed, they are seen in this manner by those who fail to recognize the force these principle hold within themselves. If underestimated, they will bring down a company, as past cases had already proven. By deliberately ignoring the importance of ethics in business, a company will pay, when the crisis hits, government and stakeholder penalties, public distrust and cynicism, as well as talent drain, as employees who refuse to be associated with the organization will not hesitate to leave.

It is also important to take note that ethical or unethical behavior is cascaded top-down within the company. Therefore, ethical performance at the executive level will be undertaken by employees and it will become a routine, the immediate response in any given work situation.

But, as difficult as it may seem to tackle such an abstract aspect of management, it is important to take note that, as it is the case with other performance-related activities (profits, shareholder value), ethics in business is something that is created.

The generally accepted definition of business ethics & morality is, according to the Stanford Encyclopedia of Philosophy, “[…] applied ethics discipline that addresses the moral features of commercial activity,” and it is expressed through “programs of legal compliance, empirical studies into the moral beliefs and attitudes of business people, a panoply of best-practices claims (in the name of their moral merit or their contribution to business success), arguments for (or against) mandatory worker participation in management, and attempts at applying traditional ethical theories, theories of justice, or theories of the state to firms or to the functional areas of business.”

If the benefits of implementing an ethics-based strategy within the company are obvious, the costs a firm has to pay for its unethical behavior are more unclear as they remain linked to certain actions and are difficult to track back to the lack of a normative system for business ethics. In addition, ethical assessment is very difficult, if not impossible. It appears in no annual reports, balance sheets or income statements. For this reason alone, it often remains a neglected aspect of performance management, despite its importance.

Organizational crisis are, more or less, unavoidable. However, preventive measures will reduce their gravity and, eventually, make a difference between failed and successful crisis management. Moreover, there is a strong connection between companies with rigorous business ethics and their prestige among both stakeholders and general public.

For example, a 2014 Ethisphere global survey that ranks companies based on their ethical norms for business activities has classified Google, Ford Motor, L’Oreal, Dell Inc. and other internationally renowned organizations as the ones with the highest ethical standards. Because these are, already, prestigious firms, their normative systems for regulating ethical behavior must be very rigorously imposed from high-ranking executive positions to the entire staff.

With Google Inc., for example, though many questions had been raised concerning some of its decisions (drone-related projects, acquisition of AI technology), its general direction of action and past projects reveal a company that appears as trustworthy and ethical in the eyes of the interested audience. Such initiatives include Google Maps, Google Earth, or projects like “20 percent” (which allows engineers within the company to spend one day per week working on a project that, they believe, would benefit the public good), as well as the self-driving car project for people with disabilities.

Setting up ethical norms for the entire company to follow is a rather complex process as ethics is seen differently in various regions and it is strongly influenced by the local or national culture. However, every CEO, manager and employee is well aware of both the socially imposed ethical norms in their region and the general norms available for the business environment.

However, no matter how difficult, or complex, the process of establishing an ethical guideline for the entire company to follow may be, it is a necessary step towards achieving increased performance, towards gaining the trust of stakeholders and customers and towards ensuring a stable and clean growth for the organization.

References:

• Chandler, D., J. (2009), The perfect storm of leaders’ unethical behavior: A conceptual framework, International Journal of Leadership Studies, Regent University, USA
• 2014 World’s Most Ethical Companies (2015), Etisphere Institute
• Stanford Encyclopedia of Philosophy

Image source:

• Pixabay

Tags: Business Ethics, Individual Performance