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Making your company ethical.

All too often, we think of business ethics and associate it with the offenses we read about in the paper. A chemical company pollutes a river, destroying the water supply to the surrounding area. The president of a local Saving & Loan lives the "lifestyle of the rich and famous", while squandering the savings of a couple on the verge of retirement. Or Michael Miliken, who lied and cheated his way to a fortune, setting in motion a chain of events that destroyed dozens of companies and affected the lives of countless thousands.

But these are not the most serious ethical problems that affect business. They are only the tip of an iceberg. The real danger lurks below the surface: the thousands of times each day that people act unethically, hurting others, hurting themselves, and slowly eroding the organizations for which they work.

Business can and should be exciting. It provides the chance to pursue a vision, often filled with great hope and promise. We take pride in our accomplishments, and justly so.

But our achievements are fragile. What each of us does remains vulnerable, and it always will. The effort of years can be destroyed in a moment by careless or inappropriate action.

In business, the greatest danger does not come from beyond our office walls. You can face the challenges of the marketplace. No, the danger comes from within, from you and members of your organization, because there lies the ability to tear down what has been built up. Each of us has the power to prevent the ambitions of our companies from being realized.

Why Do Companies Fail?

Most organizations do not fail from causes beyond their control. The roots of their demise lie in the organizations themselves - in the way people act, the values that have led them, the policies they have adopted, the goals they sought to achieve. Most often, organizations destroy themselves.

Your future - and your organization's - will not be dictated by who you say you are, or what you seek to accomplish. It will be directed by how you seek to accomplish your objectives.

Father Michael Scanlan, president of the Franciscan University of Steubenville, has a sign on his desk that reads Faithfulness, not success."

This is a complex statement. It is far more than just a theological proposition. It reflects a critical principle for success: we must be preoccupied not just with what we do, but with how we do it.

This brings us to the subject of ethics. Rather than discourse on Plato, I want to share some of my own experiences, because most of what I now know about ethics was learned through the mistakes I made: errors in the way I managed my company, lessons that were often purchased with a lot of pain.

"I Didn't Know It Was Wrong"

One story begins with a call I received from a printer with whom I had been doing business for many years. He explained that his firm would no longer bid on work for our company.

They had decided that their success at winning our business over the past year had been so poor that the investment in time and resources to prepare bids was not justified. He thanked me for the relationship we had had in the past, and ended the call by suggesting that he wasn't sure our bidding process was being managed in a fair and equitable way.

I was shocked. I hadn't paid much attention to this area of our business because there didn't seem to be any problems. I was deeply troubled by the polite allegation that our tendering process might be flawed.

A quick review of computer printouts confirmed that we had been giving most all of our business to a company I had never heard of, and none to the companies which had served us so well in the past.

Armed with a ream of paper, I marched down to Ann's office. Ann was responsible for all of our purchasing, and I thought she was doing a great job. What had happened?

In a few minutes, I had the answers. Ann was very open with me. It seems that she had become friends with a young man operating a small printing company. He was having a tough time getting started, and his problems were compounded by a young family and a pile of bills.

Ann thought she could give him a break. "I didn't do anything wrong," she said, "I just helped him win some business that he really needed."

"You see," she explained, "I would tell him to hold his bid until all others had been received. Then I'd call him and explain that if he could beat their prices the business was his. We always got the best price for our company and he got a break."

I came unglued. "Don't you see what you've done?" I yelled. "You've violated the principles of the tendering process. You've misrepresented this company to all of our other suppliers. You've made a mockery of our reputation."

Ann looked at me in complete surprise. "I didn't know I was doing anything wrong," she said.

I walked away shaking my head. How could I have misjudged Ann's character so badly, given her responsibility that she obviously abused? Perhaps she should be fired.

While I pondered what to do with Ann, I came to a troubling realization. I had assumed that she knew how to act ethically in situations she confronted in her job - but she didn't. I believed Ann was sincere when she told me she didn't know that what she had done was wrong.

Ann is not alone. Most people don't know that they're making an ethical error at the time of indiscretion. Translating ethics into business practices is not easy. It requires us to take general principles and understand what they mean in the dozens of different events we encounter each day. Without guidance, we make mistakes.

I didn't fire Ann. I realized that it was my role to help her understand what was right and what was wrong conduct in her job. Part of my responsibility as a manager was to make sure she knew how to handle the ethical problems that she faced.

I had not done that. I had assumed that she knew the difference, that she knew what being ethical meant with respect to the tasks that she had to perform. Since she did not, I realized that I had to share the blame for what had happened.

A Code of Ethics

We cannot assume that people know how to act ethically or morally in the work situations which confront them. We must help them. It is a responsibility that management cannot ignore.

I realized the need, as many companies now do, for a code of ethics which gives moral leadership to every staff member - a code which helps them to decide what is right and wrong in all the situations they encounter.

With the development of that code comes the responsibility of managers to ensure that their staff knows what constitutes right and wrong action. To have meaning, the code of ethics must be accompanied by training so that staff members know how it applies in their work.

Most importantly, there must be a clear demonstration of commitment to ethics at the highest levels of the organization. If the senior managers do not demonstrate that the code of ethics is more than a public relations gesture, that it is central to the organization's culture, it has no value. Leadership in ethics must begin at the top.

A recent poll of CEO's identified "lack of managerial commitment" as the primary obstacle to making business more ethical.

If you're a manager or supervisor, do you have a code of ethics which provides leadership to your employees? Not one that's phrased like the Ten Commandments, but in specific terms which provide tangible guidance in everyday work situations?

If you're an employee, do you know how to deal with the ethical issues that arise in your work? Has your manager sat down with you to discuss the problems you may encounter, and how they should be handled?

The vast majority of people who have been convicted of ethical transgressions have honestly stated, "I didn't know it was wrong."

Don't let that happen to anyone in your organization. Take steps to ensure that everyone knows what behaviour. . . what action. . . is expected of them.

Little White Lies

The story of Marie is somewhat different. She was my secretary: loyal, capable, and caring. Marie would never intentionally do anything wrong. Just the same, she fell victim to the most common ethical error in business.

For months, I had been pursuing a very important client. The potential contract was very large, and I chased the business aggressively.

Finally, after months of discussion, it looked as if we had a deal. The contract was ready to be signed, and then - suddenly - everything fell apart. The client backed away, the deal was off, and I had no idea why.

Many months later, we met for lunch and I asked this man what had happened. Why had he changed his mind and not done business with us?

He explained that the company he ran had been founded by his grandfather, passed on to his father, and was not his. It represented three generations of labour and accomplishment for their family.

In hiring me, he said, he would be placing the company and its heritage into my hands. He had to know if he could trust me. Was I honest? Did I keep my promises?

He went on to explain that one morning he had called my office to ask a few questions. Marie had told him I was not in, that I would call him back as soon as I could - but in the background he could hear my voice. I was buried in work and Marie was using a lie to give me the time I needed to catch up.

The man's answer to me during that lunch was that he did not hire me because he wasn't sure he could trust me. After all, my office had lied to him, and I had sanctioned that lie.

One telephone call - a "little white lie" - and months of trust and goodwill were shattered. A simple act, made with seemingly good intentions, destroyed my credibility and that of my entire company.

Each of us has the ability to destroy part of our organization by the way we act. You can be an ambassador who builds the respect and reputation of the company you represent - or you can tear it down.

Marie's story illustrates one of the most common practices in business. We bring dishonesty into our relationships with people. We break trust.

How many of us have done it? Our motives are sometimes honourable. We were protecting someone. Or perhaps the truth might have been embarrassing. But in the end, the result was still the same: we acted unethically.

Top executives across the country agree that the greatest ethical problem in business is a lack of honesty.

If you do not cast aside the dishonesty so common in business, how can you succeed? Will the breaking of trust, or violating the truth, not catch up with you eventually?

Think about some of your company's business practices, including the simple, day-to-day ones. Which do you need to change?

The Ends And The Means

George ran one of my offices. He knew that we tried to run our company on the basis of ethical principles. And I believe that George was a pretty honest man. But George was faced, like many of us, with a contradiction.

We said that we believed in values. We said that the quality of our work came first, that the customer should always be well-served, that the staff should be dealt with fairly - and a whole lot of other nice-sounding statements.

But George was also told to achieve a certain level of business growth. He was told to increase the profit margin for the office, and that his salary and future career path with the company would be based on how well he met those targets.

George did what so many people do (and if we're honest, let's admit that we tend to admire this character trait); he embraced the goals I set for him as the guidelines for how he undertook his work. They became the centre of all that he did. They were the goals - the ends - he was going to achieve, regardless of what he had to do to realize them.

George developed an almost fanatical commitment to managing by objectives. He was going to please me. He was going to achieve the objectives I had established.

Well, George met his goals all right - but he did it padding his invoices and overcharging his clients. He fell victim to a system which told him that what he did was more important that how he did it.

Cheating and theft have become all too common in business, and they're being used to meet both corporate and personal goals. A recent British study calculated that corporate theft in the average company had reached the level where it had the same impact as doubling the corporate income tax - a rather sobering statistic.

Don't let your company fall into this trap, which is the cause of so much unethical behaviour and personal and corporate pain.

The end does not justify the means, the best price is not worth it if the way you obtain it is wrong. The loftiest goal has no value if you have to violate what's right to reach it.

If you're a manager, make sure you don't ask your staff to achieve their goals at all costs, or place demands on them that will cause them (or tempt them) to act unethically or immorally.

Don't make them feel the need to break the rules, twist the truth, be dishonest or steal because of what you ask them. Let them know that failure is acceptable - and honoured - if the alternative to failure is unethical.

Remember the sign on Father Scanlan's desk? Faithfulness, not success. The end does not justify the means.

The Model Employee

Let me share one last story - about Dan. Dan was the model employee. He was always there whenever you needed him. If there was work to be done, he'd tackle it with vigour and enthusiasm, working as long as it took to get the job finished.

Dan would still be in the office late at night, and on Saturdays. His division was very profitable because of the countless hours he and his staff put in.

But everything changed. Dan's marriage fell apart, and so did Dan. He was devastated, and the stress led to a breakdown.

As we began to pick up the pieces and reassign his work, I realized how destructive Dan's behaviour - behaviour which we had often described in glowing terms - really was, and how inappropriate my response as his boss had been.

Dan, you see, was a workaholic. He was in bondage to his job. He made it the centre of his life, and gave it everything he had.

Rather than assume any responsibility for leading Dan away from what was ultimately a destructive lifestyle, I exploited it. He wanted new assignments so I gave them to him. He didn't mind travelling, so I sent him halfway around the globe. And as his job became his whole life, the rest of his world slowly fell apart.

Dan hurt others by his workaholic behaviour. He drove his staff hard - made them stay late again and again, had little patience with their lack of experience or skill, much less compassion for their personal problems.

Dan was ambitious and driven, and he expected - no, demanded - that the rest of the world be as well. But ultimately his success was short-lived, and the damage he did far outweighted the contribution he had made.

An ethical organization cannot ignore the Dan in its ranks. It needs to help them learn to balance their priorities, rather than simply exploit their drive and determination.

The ethical company must prevent the workaholic or the highly ambitious from infecting others with their private agendas, from demanding too much of others, from having too little respect for others' needs and too little concern for helping the staff that works for them develop and mature.

Ambition, properly tempered, creates the foundation for success. But in excess, it's often the root of destruction.

Think about your own company. Do you encourage the workaholic? Do you hold him up as a role model for others? Do you demand more from the people working for you than you should - or have the right to?

There must be a balance in every organization between the demands of the job and other priorities in peoples' lives. The employer has the right to ask for the best work possible, but not for all of an employee's time or energy. We must all create - and help others to create - a healthy balance between work and those other relationships and activities which give life meaning.

Four Key Issues

The preceding stories point up some of the ethical issues to be found in every company, and which cannot be ignored if an organization is to meet its goals. More to the point, you cannot ignore if your company is to achieve all of its aspirations!

In particular:

* You must define ethical behaviour for each employee, and not assume that people will always know what is right and wrong in job situations.

* You must incorporate the concepts of truth and fairness in all that you do - and never violate them.

* You must define your goals, and those of each employee, so that they realize and believe that how they do their job takes precedence over what they accomplish.

* You must bring respect and compassion to your management of people, and provide the leadership necessary to ensure that some people are not directly or indirectly hurt by the actions of others, or driven to give more than they can physically or mentally sustain.

These are not always easy tasks - but they are critical ones. And contrary to popular myth, being ethical doesn't mean that you will be less successful than others, or that your company will be weaker or less competitive.

It's no accident that the companies which have emerged as the strongest and most successful over time are also those which work the hardest at being ethical.

In the short term, unethical behaviour may appear justified, and our tendency to live from quarter to quarter often leads to a shortsighted perspective. But over time, the absence of ethics carries a price which is often severe and is paid in both financial and personal terms.

How's Your Report Card?

As a CEO, I earned high marks from the business community. I built a company which created jobs. It led its industry in many areas, and some of its shareholders became quite wealthy. I was applauded as a corporate star.

But there was another report card, a far more important one, that needs to be graded. What kind of values were present in my company? Did we make a positive contribution in the lives of those we touched? Were we ethical? Did we succeed because we upheld the truth?

What kind of report card can you give your organization - and yourself - today, right now?

Have you adopted some of the least desirable habits of business and reflected their weaknesses in your day-to-day activities?

Are you fair in all your business dealings?

Do you handle business situations with the appropriate degree of compassion?

Do you ensure that all employees know how to do the job the right way?

Do you sometimes avoid the truth?

Do you ask others to pursue goals blindly, without concerns for the personal toll, or the risk that they may feel compelled to use tactics that are inappropriate or unethical?

Take another look at what makes any company special. Isn't it true that it's not so much what you have done that's built your reputation, but how you've done it?

I once sought the advice of a wise old business counsellor about how to improve my profits. His answer was very simple.

"If you pursue profit as a goal," he said, "it will continue to elude you. But if you seek to be the best you can be at all that you do, you will surely find them."

I have found this advice to be unfailingly correct. Faithfulness, not success.

Michael Campbell is President of Marshall Fenn Limited, for 37 years a major consulting firm. 100% Canadian owned, with a network of offices across Canada and around the world. Michael is also Director of the institute for ethics & Leadership.
COPYRIGHT 1993 Canadian Institute of Management
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Author:Campbell, Michael
Publication:Canadian Manager
Date:Sep 22, 1993
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