Establishing Your Company's Ethical Practices

At some time during your business career, it’s likely you’ve experienced a situation in which you have been treated unfairly by someone else in a business deal. Or perhaps you’ve had a situation when you found yourself taking unjust advantage of another in a business or a personal relationship. While it may not have been illegal, it just felt wrong. Open up the newspaper or browse the business headlines and you’ll quickly realize you’re not alone — you can find examples of people behaving unethically throughout the business world.

My intent here is not to teach (or preach) what is right and what is wrong. Rather, my objective is to get you to think about how you approach your business relationships and evaluate the role that ethics plays in those relationships.

Employees, suppliers, and customers
First off, let me clarify that when I say “unethical” practices, I’m not referring to intentionally illegal or fraudulent activities. While fraudulent and illegal actions certainly qualify as unethical, there are many instances where unethical practices would not be considered illegal. In fact, one of the quickest ways someone often justifies an unethical act is to declare, “Well, it’s not illegal!” Let’s examine a few areas to consider whether you practice good ethics.

One of the key areas of focus in your business will always be the employee-employer relationship. There are certainly areas where employees can be unethical with their employer such as inaccurate time reporting, padding expenses, or just wasting time. The inundation of social media, for instance, has become a serious topic when it comes to the productivity of employees – so much so that many businesses are now setting policies to avoid the amount of wasted time that can occur.

Of course, an employer can also take advantage of an employee. For example, does it cross an ethical line when you have promised a raise to an employee but then renege on your promise for what may seem like a legitimate reason? Do you alter your employees’ hours to avoid paying overtime rates when you are legally required? You may ask yourself, “Do I completely trust my employees?” Or alternatively, how would your employees answer the following, “Do I completely trust my employer?” Depending on the answer to both of those questions, you might choose to make some adjustments in the way you interact with your employees to maintain those higher ethical standards.

What about your suppliers? Standard business practice is to get the best product or service for the best price from your suppliers. But what kind of measures are you willing to take to accomplish that? Tough negotiation is fair in any business relationship, of course, but are you crossing an ethical line when you begin to share other suppliers’ pricing structures in an effort to leverage pricing — even when you know they are considered confidential? These are tough waters to navigate when you have dollars on the line that can have significant impact on your business. The majority of us have, at one time or another, probably been on the other end of that deal –when you know you have just provided a customer a price that they are going to use to get a better deal somewhere else. If you’re like me, you feel cheated and betrayed and you will end up feeling no level of trust there.

Dealing with your customers definitely requires a relationship of trust and understanding. There will always be ample opportunity for you to take advantage of your customers, whether it be delivering something less than what they paid for or perhaps billing them for something they didn’t buy. Most of us wouldn’t do that to our customers. We all know, however, that there are businesses that in fact do operate that way. But if you’re always looking for ways to take advantage of your customer, sooner or later the client trust will be broken and you’ll lose their business as a result.

Why are we having this discussion?
I’m confident that the majority of you are, in fact, ethical and honest business people. So why even have this discussion? Well, consider this data from a Rutgers University survey:

• “Did you cheat to get into graduate school?” How many answered “Yes”? Those in Liberal Arts programs: 43 percent; Education: 52 percent; Law and Medicine: 63 percent; Business: 75 percent.

• Convicts in 11 minimum security prisons had higher scores on an ethical dilemma exam than MBAs.

• And consider these facts from surveys of college students in the late 1980s and early 2000s: 75 to 98 percent reported that they cheated in high school (versus only 20 percent in 1940); 88 percent believe cheating is common (20 percent in 1940); 68 percent used cheat sheets (34 percent in 1969); 98 percent let others copy work (58 percent in 1969); and 39 percent reported they were willing to lie to get a job (versus 28 percent in 2000).

These statistics clearly show a disturbing trend toward less honesty and less ethical behavior in the workplace. So what do we do about it? Can we, in fact, control the ethical practices of others?

I believe we can. It begins by establishing a value system for your business that clearly defines where you stand. In past columns, I’ve referred to a set of 12 core values that direct the way we operate at our business, Ferrari Color. Every employee understands completely and clearly that our vision statement, our mission statement, and our daily operations are governed by these 12 values.
One of these 12 values is integrity and states the following: “We demand the highest ethical standards and honesty in our actions.” Our goal is to ensure that if any of us — as owners of the business, or our employees — find themselves in a situation that might cross over an ethical line, that we make the right decision.

My desire here is not to send anyone on a guilt trip by preaching honesty and ethics, but rather, to instill a desire to establish clear values of honesty within your organization. By establishing ethical practices from top to bottom in your organization, you’ll reap the benefits of long term relationships between employers and employees, suppliers, and customers.