How to Build a Stronger Business? Align Your Business Ethics With Your Business Culture

Business code ethics need to be part of your organization’s culture; and recent business ethics cases prove that need. Stories of large business fraud to small business embezzlement are being reported with ever-increasing frequency; unfortunately business ethics are under attack.

How often in your business day do you need to make decisions? What is the basis for those decisions? Do you have a business vision statement and a mission statement that helps you with your decision making? That is, can you align your decisions to your vision and mission? Many business owners and managers face challenges in making decisions; not because they can’t decide, but because they need to make a decision without an ethical framework.

Developing a business code of ethics is necessary for all business ownership. You need to identify how you want your business to be operated. If you have your ethics code written and available, making tough decisions will become easier.

What should a business code of ethics include?

A focus on the organization’s long-term direction (the vision) and the shorter-term goals (the mission).
Identification of values that are important to the business. A sense of your business culture.
What ethics means to your business: your definition of business ethics.
Acceptable workplace activities and behaviors.
Unacceptable workplace activities and behaviors and the sanctions or consequences that will result if unacceptable behaviors occur.
Orientation and training that will be provided to support the values and culture and ethics of the organization.
The role of communication and ethics: how will employees and other stakeholders understand what you value, or don’t value, without communications.
The relationship and responsibility of the organization within its community.
Industry standards and practices; and how your organization is focused on meeting or over-achieving against those standards.

For the most part we all like to believe that we are ethical in our decisions, and that is likely very true where there are clear-cut right versus wrong decisions. But the bigger challenge lies in making ethical decisions between right versus right options. These types of decisions are often the most difficult.

For example, is it right to continue paying your executives a high salary while you cut the work hours (and therefore the net pay) of your lower-paid employees? Is it right to provide a price discount to one customer but not the other? Is it right to reward one employee with a gift certificate for work well done on servicing a large account when other employees have worked hard to support smaller assigned accounts?

Your code of ethics should be written in clear enough language that these, and other, decisions are easy to make and easy to support. Additionally your ethics code needs to provide a basis or framework for assessment. The framework could be questions to be asked and answered.

For example, if you are faced with a significant issue:

Identify and determine the different points of view on the situation.
Define what the cost is (both tangible and intangible) of the proposed solution(s)?
Affirm that your vision, mission and values statements clearly support your proposed solution(s); in other words, are they aligned? (If the answer to that question is no, then either your solution is wrong or your vision, values and missions statements don’t accurately reflect your culture).
Does the proposed solution or decision ‘do no harm’ (this is the basis for most ethical reasoning)?

Reports of recent business ethics cases highlight the need for businesses to operate in an ethical manner. Your business brand and identity is tightly connected to the values and the ethics you demonstrate, and commit to, in your business. Build a business code of ethics; and make sure you ‘live’ to your code; you will build a stronger, more effective and more sustainable business.

Kris Bovay is the owner of Voice Marketing Inc, the business and marketing services company. Kris has 25 years of experience in leading large, medium and small businesses and has worked hard to build a strong reputation for ethical business practices. Kris also teaches a business ethics and practices course at the largest post secondary institution in British Columbia, Canada.

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CATWOE Model and Business Ethics

Before you take a decision or implement change or introduce a new system I am sure you consider the five “E’s”:

Efficacy (will it work at all?)

Efficiency (will it work with minimum resources?)

Effectiveness (does it contribute to the enterprise?)

Ethics or Ethicality (is it sound morally?)

Elegance (is it beautiful?)

Let’s talk a bit about the fourth “E” – Ethics.

There is an ethical dimension to every decision.

Any time a human being, or entity, intervenes in the life of another human being, or entity, directly or indirectly, an ethical situation arises.

There is a story, probably apocryphal, which illustrates this.

There was a cyclonic storm and millions of fish were washed ashore and were struggling for life on the beach. A man came to the beach and patiently began to pick up the fish, one by one, and throw them back into the sea. An amused passerby asked him what difference it would make, to which the man pointed to the fish in his hand and said, “Ask this fish?”

Thus, we see that seemingly routine decisions, which at the organizational level do not appear to have major ethical magnitude, have large ethical significance at the individual level.

Some people believe that ethics is of little concern to business people. “Ethics is Ethics” and “Business is Business” they say. Thus many upwardly mobile managers of today tend to rationalize when faced with an ethical dilemma and take the position that they must wear multiple ethical hats and cloak themselves with three separate conflicting codes of ethics:

One code applicable to the professional or technical aspects of their work (Professional or Technical Ethics);
Another code for their business behaviour (Business Ethics);

And a third code of ethics for their personal lives (Personal Ethics).

This leads to the development of schizophrenic ethical personality wherein the individual may strive for professional excellence and high ethical standards for one’s own self and within one’s organization, but resort to unethical practices to succeed in business at all costs.

This Dr. Jekyll and Mr. Hyde approach is at the heart of many ethical dilemmas in managerial decision-making.

Each person, entity, group, institution or constituency that is likely to be affected by the decision is a “stakeholder” with a moral claim on the decision maker.

This stakeholder concept provides a systematic way of perceiving and resolving the various interests involved in our ethical decision making.

There is an ethical dimension to every decision. Thus any of your decisions, which affect other persons, have ethical implications, and virtually all of your important decisions reflect your sensitivity and commitment to ethics.

In summary, as you perform your job in your workplace, you must analyse and ascertain various ethical dimensions as you deal with your superiors, peers, subordinates, customers and all other stakeholders connected with your work.

Different stakeholders have different ethical perspectives.

For example, take the case of workplace romance.

Whereas, some organizations [and stakeholders] may feel that there is nothing ethically wrong with workplace romance and many even encourage organizational romance / marriage among colleagues by giving various perks / incentives, some others may discourage or even prohibit workplace-romance. Of course, sexual harassment would be universally considered unethical.

One useful technique to resolve such ethical dilemmas is the CATWOE model adapted from Systems Management.

Ethical dilemma occurs due to mismatch in ethical perspectives of various stakeholders involved in the ethical situation.

A CATWOE analysis helps the manager identify all stakeholders involved in a decision and their respective ethical perspectives.

CATWOE is an acronym to categorize various stakeholders:

CATWOE MODEL

C = CUSTOMERS, OR CLIENTS OF THE DECISION
A = ACTORS, OR AGENTS WHO CARRY OUT THE DECISION
T = TRANSFORMATION PROCESS, THE DECISION MAKER
W =WELTANSCHAUUNG, WORLD VIEW PREDOMINATLY HELD
O = OWNERS / OWNERSHIP
E = ENVIRONMENT / ENVIRONMENTAL IMPOSITIONS

To elaborate a bit:

C: The ‘customers of the system’. In this context, ‘customers’ means those who are on the receiving end of whatever it is that the system does. Is it clear from your definition of “C” as to who will gain or lose from your decision?

A: The ‘actors’, meaning those who would actually carry out the activities envisaged in the notional system being defined.

T: The ‘transformation process’. What does the system do to the inputs to convert them into the outputs?

W: Weltanschauung – The ‘world view’ that lies behind the root definition. Putting the system into its wider context can highlight the consequences of the overall system. For example the system may be in place to assist in making the world environmentally safer, and the consequences of system failure could be significant pollution.

O: The ‘owner(s)’ – i.e. those who have sufficient formal power over the system to stop it existing if they so wished (though they won’t usually want to do this).

E: The ‘environmental constraints’. These include things such as ethical limits, regulations, financial constraints, resource limitations, limits set by terms of reference, and so on.

CARDINAL ASPECTS OF ETHICAL DECISION MAKING

All decisions must take into account and reflect a concern for the interest and well being of all stakeholders.

Ethical values and principles always take precedence over non-ethical and unethical values and principles

It is ethically proper to violate an ethical principle only when it is clearly necessary to advance another true ethical principle which, according to the decision maker’s conscience, will produce the greatest balance of good in the long run

THE FIVE STEP ETHICAL DECISION MAKING APPROACH

Step Action

1 Identify and classify the stakeholders in the situation using CATWOE and understand their ethical perspectives

2 Identify their dominant ethical perspectives

3 Construct an ethical conflict web, mapping different ethical perspectives [CATWOE - six nodes]

4 Identify those strands of the web where no significant conflict may be assumed to exist. These may be removed from the ethical decision making model.

5 Concentrate on those strands where conflict does exist. Use conflict resolution techniques to achieve the “overall good” for the system

Ethical decision-making involves the process by which a person evaluates and chooses among alternatives in a manner consistent with his or her core ethical values or principles.

Thus when you make an ethical decision you:

(a) Perceive and eliminate unethical options
(b) Select the best from several competing ethical alternatives.

Ethical decision-making requires more than a belief in the importance of ethics. It also requires sensitivity to perceive the ethical implications of your decisions; the ability to evaluate complex, ambiguous and incomplete facts and the skill to implement ethical decision making without jeopardizing your career.

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Business Ethics – Why Are They Important in Small Business?

Rarely is there the individual who does not encounter an ethical or moral dilemma at some point in his or her business life. Whether that individual is the owner of a multinational corporation, a small business entrepreneur, or a new or established employee, everyone is likely to have to face such an instance eventually. Much like a personal ethical dilemma, an individual is faced with making a decision based on how it will affect not only himself, but on how it will effect the organization as a whole. One of the major problems when dealing with an ethical dilemma in business is that individuals are often swayed by business profits and the legality of a decision.

The Institute of Business Ethics, whose slogan is “doing business ethically makes for better business”, describes the term business ethics as such.

Business ethics is the application of ethical values to business behaviour. It applies to any and all aspects of business conduct, from boardroom strategies and how companies treat their suppliers to sales techniques and accounting practices. Ethics goes beyond the legal requirements for a company and is, therefore, discretionary. Business ethics applies to the conduct of individuals and to the conduct of the organisation as a whole. It is about how a company does its business, how it behaves intrinsically.

As clear as this definition is, it is certainly open to interpretation. Therefore it must be understood that the application of business ethics to any situation is entirely subjective.

One can also understand business ethics, and ethics of any kind, as applying a sense of fairness to a situation. Even with a sense of clarity applied to the use of business ethics, reaching a just and moral decision can be a complex process for most individuals. The subject of business ethics has been a source of great debate in recent years as the heads of major (and minor) corporations are revealed as less than ethical characters both in the way they do business and in their personal conduct. However, it may be said that any individual who does not practice business ethics cannot be personally ethical even though the reverse may not also be true. Ethics in generally has a long history of applications. Centuries ago a man’s ethical practices defined who he was as an individual. However, as populations grew, the necessity for incorporating the best business practices into a company became somehow less important because there was always another customer around the corner and the owner of a business was rarely the focus of attention in a community the way he or she may have been in the past. A company’s administration took a seat in the background and hired representatives to deal with any fallout. Ethics rely on several factors, one of the most important of which is culture. Again, like the business person of the past, a culture’s ethics practices will largely depend upon the value that is placed on them. Business ethics have the unappealing conflict of often being contrary to what is legal. Often what is “right” is not necessarily what is legal, and a business must consider this conflict when making ethical judgments. Although there are many in the business world who believe that a business has no room for ethics if it is to function competitively, the numbers of corporate whistleblowers indicate that there is still room for ethics in business.

Western societies place a great deal of emphasis on success. However, in business, there are often conflicts between ethical behavior and business success. This disparity is often multiplied for the small business owner. To compete with larger businesses, it may be tempting to abandon ethics just to make an adequate profit. Additionally, the small business person is relatively autonomous in his or her decision making; he or she does not have to answer to a large employee base or a corporate governing board. It is also interesting to note that the small business leader often has his or her decisions impact a greater number of individuals than does the employee of the small business. For instance, a small business owner may have his or her decision affect his or her customer base as well as his or her employee base. The employee will likely find that his or her decision will only directly impact his or her immediate circle of coworkers. However, the pressure to succeed is both an internal and an external pressure and often leads individuals to make ethical decisions that are based more on those pressures than their own moral judgment. As consumers grow wary of those that they do business with, one must understand that there is just cause for such wariness. The cynical American consumer has learned, often the hard way, that there is little room in business for ethics. In a society where the customer used to be king, the consumer has more often than not experienced several distasteful experiences with business both large and small.

Some experts argue that any focus on profitability is bound to test the limits of ethical practices. They assert that to assume that the primary function of a business is to serve its client base in an ethical manner is idealistic and that the nature of a free economy dictates that ethics must take a back seat to increasing profits. Although it is rarely the conscious intent of a business to harm the public interest, reality dictates that the businesses ability to increase profits will determine its success. Publicly owned companies experience extra pressure in this arena. It is difficult to draw investors to a company based on its ethics. Investors are looking for a return on their investment and ethical performance does not equal dollars. There are economists that assert that, in any competitive economy, ethics are impossible to uphold; that a company can legitimately bypass ethics with the excuse that unethical practices are the only way to make a profit.

Unlike the larger corporations, the small business leader is in a unique position to shape the ethical practices of his or her business. Small businesses have a smaller employee base to police when applying ethical policies than do larger businesses. It is important to understand that, similar to the ethical dilemmas of the large corporations, although an individual surely knows the difference between the correct ethical decision and the wrong road, the choice to throw ethics to the wind is often made because the unethical choice is more profitable. This may, however, happen much less often in smaller organizations because the individual or individuals who are harmed by the unethical decision and someone is always harmed, is more visible to the small business. Major corporations and their decision making machines are often far removed from the individuals that their immoral and/or unethical decisions effect. This may make the wrong decision much easier to make.

The unique position that the small business owner is in regarding the formation of an ethics policy yields a great responsibility. A proactive business leader formulates a statement of organizational values that employees of the company are expected to embrace – at least while performing duties in the service of the company. An organizational ethics policy is an announcement to the employees, the customer base and the community as a whole that the business is prepared to conduct itself and its practices on an ethical level. Such statements invite the respect of all parties involved in doing business with such an entity. However, it is imperative that the small business owner not make the same mistake that larger organizations often do; the ethical policies that a business develops must not be in conflict with the organizational goals. It is unethical in itself to develop an ethical policy that an employee cannot possibly follow and maintain his or her employment. When faced with the decision between an ethical decision and his or her job, an employee will almost always choose the job.

Therefore the policy must be in reasonable alignment with the organizational goals of the business. It is equally important, and maybe more so, that the small business leader lead by example. Employees, especially in a smaller organization, are less likely to conduct themselves ethically if they receive implicit permission not to. The end result of such a practice is that the small business owner can be assured that he or she is conducting business in a manner that encourages the trust of his or her customers as well as his or her employees. And since consumers have become very wary of doing business with an entity they feel they cannot trust, the small business can enjoy the profits of a loyal customer base. The small business owner has an advantage over the larger corporations in that it can elicit the trust of the consumer by applying ethical business practices that give the customer the feel of an equal business relationship rather than one where the consumer buys based on need alone. There are many that believe that such practices are capable of drawing business away from the large corporate entities and back into a customer-focused business format.

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