Archive for February, 2014

Does running a business ethically add value or not?

This question was raised at a Business Exposure Group meeting after a comment by David Warrington, ‘How can a business, given its economic mission, be managed with appropriate attention to ethical concerns’. 

Below is a summary of some of the points raised:

–          Is doing business ethically a luxury reserved for optimistic economic times, or do periods of austerity make it even more important for business owners to consider potential risks to your business posed by poor ethical standards in the workplace. 

–          Employees representing your business make decisions based on their own values, which will be different to you as an owner, but nevertheless dilemmas begin to creep in even though we all want to run an ethical business.  For example: 

The Salesman – My sales figures are low, I’m going to have to make this sale whether or not this product is right for the customer

The Manager – We’ve got to meet this deadline, so it will mean cutting a few corners. 

The Employee – I know one of the team is fiddling, but I can’t tell anyone in case my colleagues turn on me. 

The Owner – My cash flow is limited, so do I delay payment to suppliers and HMRC.  My business may not survive if I don’t accept this contract, but I don’t feel comfortable with what they want me to do. 

These were all valid comments made once we drilled down into the subject.  Paying late perhaps rots the company’s culture from inside.  Late paying is an abuse of power and unethical. However, it is agreed that if handled correctly, and an upfront explanation given, then this was perfectly acceptable business practice. 

When trying to gain the competitive edge over competitors many businesses focus on reducing prices and improving customer service.  Yet research by the Institute of Directors has found that companies displaying a ‘clear’ commitment to ethical conduct consistently outperform companies that do not show this intention. 

After a good discussion, it was unanimously agreed that acting ethically makes good business sense, with the advantages of higher revenues with improved brand and better employee retention, outweighing the disadvantages of higher cost of supply and higher overheads because of extra staff training. 

However, most attendees at the meeting felt that customers were not prepared to pay more for dealing with an ethical business, and although the subject is really important, few of the businesses represented actually talked about ethics in team meetings unless a problem had arisen. 

It would be interesting to hear your comments and experiences when running your business.

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