Why It’s Time To Strengthening Your Small Business’ Focus On Ethics –


If you are a lawyer, doctor, CPA, financial planner or other professional, there are clearly defined ethical guidelines to which one must adhere; but when it comes to small business, ethical standards are less well defined and must be spelled out by the organization.

Small businesses are faced with all kinds of ethical choices today: there are internal ethical concerns involving each business function (accounting, HR, IT, operations, engineering, sales, marketing, safety, and so forth,) as well as external ethical issues involving things like the environment, intellectual property, trade, and competition.

Business ethics is defined as the policies, procedures and culture of doing the right thing in the face of difficult, and often controversial, organizational issues and it appears that there is plenty of room for improvement.

A Harvard Business Review article published on March 1, 2019 entitled “Companies Need to Pay More Attention to Everyday Unethical Behavior,” argues that employers must exercise caution when encouraging employee actions that are in the best interests of the company, because if deemed reasonable, the employee has no personal connection to the other party, and/or if employee performance goals are too aggressive, more than 50% of employees will act unethically.

Fortunately, the solution can be found in a series of studies conducted by the Ethics Compliance Initiative about businesses that have established an ethics program. Consider the following statistics:

– 23% of employees who work for companies without an ethics program feel pressure to compromise standards vs only 3% of those with an ethics program;

– 62% of employees observed organizational misconduct in companies without an ethics program vs 33% of those with an ethics program; and

– 59% of employees experienced retaliation at companies without an ethics program vs just 4% of those with an ethics program.

Other studies have demonstrated an ethics program can lead to better decision making, customer loyalty, employee satisfaction / retention, and long-term success.

A sound ethics program starts with a written code of ethics. Guidelines for developing a written code of ethics include:

1. A commitment to business ethics that starts from the top and is shared by the entire management team;

2. A code of ethics that works in conjunction with a company’s vision statement, mission statement, core values, business purpose and cultural description, and provides clearly defined rules for employees to follow to ensure they maintain the company’s ethical standards;

3. Employee training on how to deal with ethical standards, including examples of ethical dilemmas and appropriate responses to help employees understand how to avoid problems that could negatively impact the business;

4. A procedure to respond to ethical issues that is honest, fair and timely; and

5. Firm, fair and consistent enforcement of the company’s code of ethics by management.

Your code of ethics should, moreover, list principles and practices important to the company, spell out lines the company will not cross, be mindful of past ethical problems with which the business has struggled, and include input from your employees. If you are not sure where to start, there is plenty of information on-line to further assist you. The University of St. Thomas, for instance, just launched the Business Ethics Resource Center (BERC,) which is a great resource for SMBs.

After developing a code of ethics, however, there are many other ways a company can improve its focus on ethics. Here’s my short list:

– Strengthening HR hiring practices through testing, background & reference checks, and interview questions that reveal how an applicant would handle ethical issues;

– Adopting on-boarding practices that teach each new employee important rules & regulations governing the business, company processes, policies & procedures, customer service best practices, workplace safety, etc.;

– Modifying employee’s job descriptions to make business ethics the responsibility of each employee;

– Instituting approaches to mentor employees about ethical behavior, as the focus of improving ethics in the workplace should be more of a coaching exercise than one focused on disciplinary action;

– Rethinking existing processes, policies and procedures around the objective of ethics;

– Creating an “Ethics Officer” and/or an “Ethics Committee” to make recommendation to the President about ways to improve workplace ethics and focus the organization on continuous learning and continuous improvement;

– Implementing a “whistle blower policy;”

– Identifying metrics to track the company’s efforts at improving its ethical behavior; and introducing incentives to reward the company’s success in this area; and

– Becoming an “accredited business” with the Better Business Bureau (BBB) to demonstrate your company’s commitment to customer satisfaction.

With the rise of the Internet, acting ethically can have a significant impact on a business’ success. A few negative on-line reviews can significantly impact consumer sentiment and your future sales and profits. So, if you need a reason why your business should be doing everything it can to act ethically — beyond the reason that it is the right thing to do — creating an ethics program is easy, affordable, can generate a significant ROI and is a great way to distinguish your business from your competitors.