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Ethics in Business – What’s Really Important Today


ethics

By Nicolette Wuring
Also featured in The Reputation Garage blog
HR Performance Article & Bio

In the decades of mass production and mass marketing, efficiency ruled the world of business. When that ceased to bring in the returns (profit) and double-digit growth business had become addicted to, financial engineering kicked in. Business became all about creating value for shareholders, losing relevance for its other stakeholders and keeping top management’s ‘eye on the ball’ with extravagant bonuses. The resulting ‘system’ completely stopped caring about employees and customers. Integrity got lost in the quest for shareholder value and personal enrichment, and so did integrity and respect for employees and customers. The world today experiences the collapse of that system, trust has been lost at all levels.

Whether you are a marketer, in sales, in customer service, responsible for PR, for HR, for business strategy or the CEO of a company, you will increasingly come across terminology like Attraction Economy, Expectation Economy, Emotional Age, Return on Involvement, Conversational Capital, Customer Experience, Customer Dialogue, Customer Loyalty, Customer Advocacy, Net Promoter Score. You probably find yourself wondering, is this the next hype? Do I need to concern myself with this? If you find yourself in a position within a company where part of your concern is the differentiating power, the competitiveness and profitable (organic) growth of the company; retention and customer loyalty; Customer Lifetime Value; Recency, Frequency and Monetary Value; Cost to Serve; Customer Acquisition Cost; brand value; brand reputation; etc., you will increasingly find yourself in a position in which you need to concern yourself with the ethics with which you yourself, and every person working within your company are (enabled) to do business.

Ethics as a concept is something you don’t have to explain to entrepreneurs working in small businesses. They feel every day that the emotional connection they have with their customers is what drives their business. It’s what makes their customers come back, what builds preference from their customers to buy from them, even if their prices are a little higher than a competitors’ and what makes them spread positive word-of-mouth about their business, bringing in new customers. The impact on their business when the ethics with which they conduct their business fail, is immediately felt, because they loose their customers to their competitors and the negative word-of-mouth from their customers spreads fast. The entrepreneur is constantly aware of the example he sets for his employees. As he is also constantly aware of the impact of the work atmosphere within his company on the financial performance of his business. When his employees enjoy their work, when they are proud of the company they work for and their job, when they are ‘engaged’, he immediately sees that translated in the financial performance of his company.

In many large corporations these simple and straightforward dynamics have gone lost. Corporate Social Responsibility programs and compliance policies were designed to replace the personal responsibility and accountability of people. Their personal ethics became centered around their own goals, surviving and winning the games within the corporate arena. To quote Bill Clinton: “Leading by the power of your example, or the example of your power.”, the ‘example of your power’ took preference over the ‘power of your example’. To be successful in business, people complied, focusing on how to increase their power.

Brand platforms, with beautifully worded visions, missions and values were designed and communicated to create meaning for the people working within companies and their different stakeholders. But when consistency is lost or even worse, absent, between what a company says about itself and what people inside and outside the company perceive, it backfires.

Ethics cannot be forced upon a workforce (and customer base) by mass communicating a new brand positioning, relevant and unique as that brand positioning may be. When it is not credible for the employees within the company, they will never be able to make it credible for the customers they serve. Consumers nowadays relentlessly punish a company for every inconsistency between what a company says about itself and what they as a customer experience, perceive and feel. Spreading the news faster and across larger geographic areas than any company can afford itself, no matter how large its budget for marketing communication. Negative ‘press’ (WOM) about a company turns every euro spent on a brand campaign into a large disinvestment, hurting the (financial performance of the) company.

Having said that, let’s have a look at ethics- what’s really important today. In today’s world, where the power has shifted to consumers and what they communicate about a brand, whether through old fashioned word-of-mouth or in online social community settings, ethics have become crucial for the success of a company. Ethics are not about what a company says about itself, but what a customer perceives and feels as a result of doing business with a company and the consistency with what a company says about itself. In the days that success in business could still largely be created by focusing on operational excellence and/or product leadership, ethics were of less importance. Rapid commoditization, globalization and the saturation of market places have dramatically changed the rules of the games. Competitive advantages based on efficiency, economy of scale, price or innovation have a far shorter lifespan and can be challenged by providers from virtually anywhere in the global market place. Efficiency and quality are just a pre-requisite to be a player at all. Consumers have an abundance of choice, and have started to pick & choose from that abundance based on emotional connections they feel with a brand or based upon the emotions other consumers express about a brand.

Ethics start inside and at the top. Ethics are not some trick you can apply. Ethics are all about ‘walking the talk’ from top to bottom. Ethics start with the people within the organization. A high degree of clarity about the ethics of the company they work for allows for a high degree of alignment with people their own ethics. This creates a highly engaged workforce. Why? Because when there is alignment between the ethics of the company they work for and people their own ethics, their work environment can become meaningful for people. Ethics start to create a compelling connective quality. People feel appreciated and acknowledged as a human being, instead of just a ‘human resource’, a ‘human doing’ that represents a production capacity, a means to an end. It also creates that ‘walking the talk’ comes natural to people, which has an impact on the relationships between the people within the organization. Their behavior becomes aligned with the ethics. On an organizational level, the ethics become embedded in the culture and the structure of the organization. The mission, vision and values become a representation and confirmation of what the company stands for and what it goes for (its strategy). The ethics become the guiding principles for the way the company is organized (its structure) and for its governance, the way performance is measured. The resulting consistency builds a reputation in the market place that is congruent with what the company stands for. And helps the company to achieve what it goes for (i.e. successfully execute its strategy). And last but not least builds clarity on the contribution of the company at a societal level.

You may think that this is oversimplifying the issue at hand, but the truth of the matter is that especially in call centre environments, the ethics from which the people -the largest production capacity- operate is the only way to really unleash the hidden assets they and the customers they serve represent for the financial performance and long time and sustainable success of a company. Ethics need to be intrinsically felt by the people within a company for them to become meaningful and for them to be able to create the desired perceptions and feelings with the customers they serve. In a business environment where the ticket to success increasingly hinges on the emotional connections customers feel with a company, the emotional connections the people working for a company feel are a ‘conditio sine qua non’. Take any social event. When your employees talk with authentic and genuine pride to everyone who wants to hear it about the company they work for and their job, they not only give the best of themselves at work everyday but you can also be sure that it comes across in the way they serve customers. They take a personal interest in the way they and their company makes every customer feel, and they will go out of their way to create that feeling, time and again, without having to put in place systems to control them. They see it as their personal responsibility to contribute the maximum they have to offer. And they feel personally responsible and accountable for the results of their daily tasks, focusing on the end result, instead of just the task at hand. In exchange, customers feel that they really matter, they feel heard, recognized, appreciated as a human being, instead of a means to an end. They will tell it to the world. They will recruit new customers for you. They will help you improve. They will defend and support you. And they will buy more from you. When your employees become ambassadors (advocates) for your company, they will also turn your customers into ambassadors (advocates) for your company. But you always have to remember, that advocacy is authentic behavior of customers, and requires authentic behavior of a company and its employees. The only ‘control’ you have, are the ethics from which every employee operates.

Today only one in every four employees is highly engaged in their work. Three in every four workers is disengaged. Disengaged employees give less of themselves than they could. But not only that, they also create an ‘emotional end frame’ with the customers they serve that in exchange results in customers building a reputation that forces companies out of business. On average about 40% of the workforce in companies operating in the financial services industry, the hospitality industry, the telco and cable industry, etc. feel disoriented and disrespected. For (the investments in) service to be effective, it needs to be authentic, genuine and aligned with the brand values of the company. Then, and only then will a customer really appreciate the service. When there’s a lack of affinity with the brand and no love for the work they do, service at best becomes a badly performed trick, which makes nobody happy, serving nobody, not the employee who has to ‘perform an act’ every day, and definitely not the customer, who feels cheated with, at best, a ‘plastic smile’. As human-to-human interactions become increasingly important ‘moments of truth’ for sustainable success of companies, both on the cost and the revenue side, the ethics in any environment where employees serve customers become increasingly “what’s really important today”. So I challenge you to ask yourself, what are the ethics guiding the people within your organization?

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  1. Noam Sarfati
    March 26, 2009 at 2:02 am

    Dear Nicolette,
    i do agree with your analyses and insights but how would a company can interlace ethic conducts within its own work processes? Can an ethic conduct be defined and therefore be measured?
    BR,
    Noam Sarfati.

  2. Nicolette
    March 30, 2009 at 2:20 pm

    Dear Noam,

    After Enron, WorldCom etc., seeing everything that has surfaced over the last couple of months, we can conclude that more rules and more control don’t do the trick. And that’s because it’s not a trick. An ethic code of conduct takes away the responsibility from people. Their own responsibility and taking ownership for their own behavior. As long as what they do is ‘compliant’ with the code, people feel covered. We are all experiencing where that has brought us. When people feel personally responsible, they will be triggered much more to ask themselves every time if their behavior is compliant with their own ethics. With respect to the work processes, treating people as ‘human beings’ instead of dehumaized robots (‘human doings’) will result in people taking ownership for their actions, because when they feel space, experience a safe environment, that will trigger them to not only feel the responsibility but to also use it wisely. The results can be measured in their success, i.e. the trust of the (internal or external) customers they serve. This does mean that the ethics and the inner values of a person become an important selection criterium upon entering the organisation as an employee.

    Hope this helps.

    With grace
    Nicolette

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