HR Pulse

Business ethics: The secret to gaining the competitive edge (Part 2)

In my article last week – entitled Business ethics: The secret to gaining the competitive edge (Part 1) – I said that having a well-developed set of business ethics in your business is one of the best-kept secrets about your business' competitive advantage. In this article, I'm going to tell you how you can create a well-rounded set of ethics in your company, which will help you in your company's financial performance as well as your employee management practices. But first, I'd like to remind you of a few things.

Your people already know what's right and wrong in the workplace

"Don't go on endlessly about what your people already know," said Cynthia Schoeman - MD of Ethics Monitoring and Management Services – at the recent annual conference of the Assessment Centre Study Group (ACSG). "The bigger point of this is that ethics is a choice."

Your focus should be on saying: How do I influence and shape their choices. This is what the overlap of these two features should do and where the informal lever of ethics comes in.

Leadership is vital to shaping ethics

Ethics is an area in which leadership in organisations is not firm enough. In your company, the values that are personally held by the employees vary from good to bad, which makes your employee management practices that much more difficult.

Within the context of the workplace and the employee–employer relationship, leaders should definitely not accommodate diversity as one of the key roles of leadership in an organisation is to align the employees' values behind the values of the organisation.

Why are ethics so important?

When ethics fails, there's a massive cost that is involved, which proves that ethics is vitally important. Take this example:

Mr Smith works for Hospital X in Johannesburg. He's stolen three months' worth of ARV medication. This has been costly for Hospital X as not only have they lost the value of the stolen medication but now they're in the process of opening a case against Mr Smith. This doesn't only affect the business but also the patients as ARV medication is limited.

When a business closes down, it's the employees who suffer and not the other way round. In these instances, the negative cost that follows from the ethical failure will be shared by innocent people. The public outrage is significant and really damages a business' reputation. One needs to look at these costs and recognise these factors.

What is the ROI of good business ethics?

When you create an ethical workplace, you:

• Build trust and loyalty (and referrals) from customers,
• Motivate your sales teams as they really believe in the products and services they're selling,
• Create a culture of honesty and transparency, and
• Attract top employees who want to work for a company whose standards they respect and share.

There is one benefit that is only starting to be recognised – the issue of competitive advantage. Of course, we all know that every business needs some measure of competitive advantage, says Schoeman, but the catch in the technology era we're in is that often the window of competitive advantage is often quite small because of the ease and speed with which, for example, technology can be copied.

"If you have a unique (that which can't easily be copied) source of competitive advantage, this will be much more valuable. Ethics is just such a unique source of competitive advantage."

The secret revealed: How to use ethics to secure the competitive edge

1. Create a detailed code of conduct

Your company's code of conduct should be clear and comprehensive. It should detail what behaviour is expected from your employees when they are working in a professional company. This will go a long way in assisting with your employee management processes. By outlining what is expected from them and what behaviour won't be tolerated, they're more likely to make the right choices.

2. Guide all communication in your company

Your company needs to lay out a guideline for all communication that are sent in a professional capacity. Draft a communication strategy that encourages ethical behaviour and reminds employees about the resources available to them, and how to access those resources.

For instance, if your sales people send e-mails to clients regarding their advertising ROI, the guideline should state clearly that statistics and figures may not be manipulated.

3. Choose your leaders wisely and make sure they stick to the book

Leaders are your most powerful tool to create an ethical workplace. Leaders set the example for their employees and their behaviour shapes their subordinates' behaviour. Have a look at this scenario:

The sales director of an outdoor clothing manufacturer leads a team of 15 sales people. He is arrogant and lies to important stakeholders and customers frequently about the quality and ROI of their clothing. He often leaves work early and sometimes takes a day off without booking annual leave.

Now ask yourself this: How motivated do you think his sales people are? What stops them from leaving early?

This is an extreme example but it shows how important good leadership is in the workplace. Remember that business ethics can't be bought – it's a lifestyle you have to promote in your company.

Frew Murdoch is the assistant editor of HR Pulse. She is currently completing the last semester of her BA degree in Communications and English. Christine Botha, co-author of 'Ethics in HR Management: A guide for HR professionals and line managers', had this to say: "I stumbled across your review of our Ethics Guide published 28 June 2012 and wish to thank you for the positive and complimentary comments made – this was a lovely surprise and most rewarding. I will certainly pass this on to all co-authors of the Guide."