There are many reasons why ethical corporate behaviour makes good financial sense
It’s a familiar problem. Your boss has absolutely no desire to discuss best practices in business ethics. All he or she cares about is increasing revenue and reducing costs, not ethics.
So how can you respond to a hard-nosed bottom-line boss who has no interest in ethics?
Let’s assume your boss scolds, intimidates, and lies to employees, uses company property for personal needs, bullies suppliers and lies about payments in the mail that remain in the organisation’s bank account, ignores complaints, and refuses to recycle anything.
All the boss cares about is money, money, money, not ethics, ethics, ethics. In that case, speak the boss’s language … in the long term, the most profitable, efficient, and effective organisations are the most ethical. Then keep harping on the positive bottom-line impacts of ethical behaviours.
The link between ethical performance and financial performance is multifaceted. Use economic and organisational efficiency and effective logic when making your arguments.
Ethical organisations, compared to unethical organisations, are more likely to:
- attract and retain high-quality employees.
- attract and retain high-quality customers.
- attract and retain high-quality suppliers.
- attract and retain high-quality investors.
- earn good will with community members and government officials.
Organisations that attract and retain high-quality employees, customers, suppliers, and investors, and earn good will with community members and government officials, are more likely to have:
- greater trustworthy information for decision making.
- higher product and service quality.
- higher levels of employee productivity.
- less employee theft.
- less need for employee supervision.
- increased flexibility from stakeholders in times of emergency.
Ask your boss: “If you were a job applicant, would you rather work for an ethical or an unethical organisation?”
Ethical organisations, compared to unethical organisations, are more likely to attract high-quality employees, have higher levels of employee satisfaction, and greater employee commitment to both the organisation and product or service quality. If the pay is similar, job candidates consistently choose an ethical organisation rather than an unethical organisation. Individuals only choose job offers from unethical organisations if pay and benefits are substantially higher.
High-quality applicants seek employment with organisations on annual “best places to work” lists. These organisations are characterised by high levels of employee empowerment, fairness, job satisfaction, and employee benefits. High-quality applicants also seek employment at organisations that perform well in an area of social responsibility uniquely important to them, such as best places to work for working mothers or where there is demonstrably fair treatment of minority groups.
Ask your boss: “If you were a customer, would you rather purchase products or services from an ethical or unethical organisation?”
A stellar ethical reputation is priceless marketing and leads to higher levels of customer satisfaction and loyalty. When product price and quality are similar, potential customers consistently choose an ethical organisation over an unethical organisation. A consumer survey found that 70% of Americans had not purchased a company’s products because of its questionable ethics, and that 72% were willing to pay a modest premium for products and services supplied by an ethical company. An unethical organisation only wins out over an ethical organisation if its prices are substantially lower.
Ask your boss: “If you were a supplier, would you rather sell your products and services to an ethical or unethical organisation?”
An ethical organisation attracts high-quality suppliers and has higher levels of supplier satisfaction and loyalty. Potential suppliers consistently choose to sell to an ethical organisation that pays a fair price rather than an unethical organisation. Suppliers depend on their customers to pay their bills on time and prefer to partner with customers they trust.
Ask your boss: “If you were an investor, would you rather do business with an ethical or unethical organisation?”
High-quality investors are attracted to ethical organisations, which leads to higher levels of investor satisfaction and loyalty. If anticipated return-on-investments are similar, potential lenders and investors consistently choose an ethical organisation rather than an unethical organisation.
Ask your boss: “If you were a community leader or government official, would you rather interact with an ethical or unethical organisation?”
Ethical organisations honestly communicate with stakeholders and pay their fair share of taxes. In return, ethical organisations earn the respect of, and gain access to, community leaders and government officials. When problems arise between a company and powerful constituency groups, politicians are more likely to provide a sympathetic perspective to the company if it has a stellar community service reputation.
Also inform your boss that there are a host of secondary performance benefits that ethical organisations achieve because they attract high-quality employees and are trusted by customers, suppliers, investors, and government officials.
Ethical organisations have greater trustworthy information for decision making, higher product and service quality, higher levels of employee productivity, less employee theft, less need for employee supervision, and increased flexibility from stakeholders in times of emergency.
And if all these productivity and revenue benefits are not sufficient, tell your boss to take care not to underestimate the costs associated with unethical behaviour such as monitoring, reputation, recruitment, and turnover.
So, if your boss wants to make a ton of money by increasing revenue and decreasing costs, the most secure path to travel is to become an ethical organisation.
Denis Collins teaches management at Edgewood College in Madison Wisconsin. His book Essentials of Business Ethics provides the 90 best practices for designing ethical organisations.
business ethics Denis Collins ethical advantages responsible leadership
May 2014, London, UK
Make sustainable innovation add to your bottom line. 15+ CEOs and C-Suite from leading multinationals plus heads of CSR will discuss the future of sustainability