Leadership Ethics: More Than Just Lip Service

By Bette Price

     Just how far do American business people bend their ethics in the name of "just getting the business?" Far more than most businesses would like to admit. Two years ago a survey conducted within the sales management sector revealed these telling statistics:

• 49 percent of sales managers admitted that their sales representatives lied on sales calls.
  
• 34 percent of the sales managers admitted to having heard their sales reps make unrealistic promises to customers.
  
• 30 percent admitted that they had customers who demanded kickbacks for buying products or services.
  

     Ethical practices have always been a critical factor for businesses that derive long-term success. Customer loyalty is only sustained when there is the confidence that the companies customers chose to do business with have chosen to take the high ground rather than merely pay lip service to "doing what's right." In the light of our recent national tragedy and the economic impact for the future, there is little question that the integrity of one's business will increasingly become a differentiating factor. The security of knowing that the customer's best interests are truly at heart and that transactions are being handled in a fair and honest manner, will determine the loyalty of the customer.

     Core principles. Ethical standards are a direct reflection of ownership's values. Jim Copeland, CEO of Deloitte & Touche, which works with companies worldwide, says that if you, as a leader, can honestly answer these three questions positively, all other ethical issues will likely fall in place: Can I trust you? Do you care about me [the customer/the employee] as a person? Are you committed to excellence? When ownership's core values are reflected in their operating standards, it is more likely that there will be consistent ethical decisions. The problem with too many companies is that they develop lofty mission statements that are more public relations oriented than operational oriented. Without a commitment to use such things as mission statements, core operation principles, etc., the documents are worthless. When they are actively used, they ensure consistency in ethical decisions.

     Bill Matthews, Managing Partner of Plante & Moran, a Michigan based public accounting firm, takes very seriously his firm's Core Purpose, Statement of Principles, and Commitment Statement. "Now I recognize these are three sheets of paper," he admits, "and there may not be a lot of difference in what they say from what you see in a lot of places. But, what we think is the biggest difference is that we work very hard at practicing what is said on these sheets of paper." Matthews says that whenever the firm is faced with a challenge of determining the right thing to do, "We say, well, what do we say in our statement of principles? And we go back to that. We constantly refer to that in making decisions on where we are going." Establishing core values enable a company to maintain control in an ethical and fair manner.

     Living up to commitments. Commitment is the centerpiece of the value system for Enherent, an IT solutions firm. It is part of the company's ethical standards. "Whether it's a customer or a colleague, helping people to understand what a commitment is and what it is not is important," says CEO Dan Woodward. "Maybe I'll try is not a commitment," he says. "You can, however, commit to commit, like-I'll let you know by Friday if I can do that by the following Friday. But a commitment doesn't exist unless there is a date and time specified that something is to happen." Woodward believes this understanding of commitment sets the stage for trust and loyal relationships to be established. Commitment indeed plays an integral role in customer's perceptions of a company's ethical practices when a problem exists. Research indicates that among the most important factors in being responsive to a customer's problem-particularly in a service-oriented business-is the firm's commitment to respond in a timely manner and honestly.

     Consistency. Employees will easily make judgments about the ethics of leadership based on management's handling of seemingly minor decisions. Let's take, for example, an employee who comes to work late frequently and is reprimanded by management. And, suppose that within the same company one of the managers is late for work with the same frequency, yet leadership fails to take any action. The perception becomes that policies are established for some and broken or ignored for others. Lack of consistency becomes an ethical issue. And, if you think internal ethical breaches like this don't impact external actions that reflect the overall ethics of your company, you might want to think about it again.

     Sometimes it appears that a company attains success despite their unethical practices. Yet in reality, it sooner or later catches up with them. And when it does, companies that lose their reputation over honesty and integrity issues often suffer insurmountable penalties. You may recall that when Texaco's top-level executives were exposed discussing racist attitudes when audiotapes were leaked, the company was forced to pay $176 million to settle a pending lawsuit-a strong financial blow, let alone the loss from its customer base. Likewise, when Len Roberts took over the CEO position at Shoney's, the fast food chain, in the late 1980's, he had no idea the company was in the midst of the largest discrimination lawsuits in history at that time. Roberts suggested that the founder and former chairman of Shoney's do the right thing and pay the bulk of the settlement-about $65 million, which he eventually did. For his high ethical standards, Roberts was let go-part of the former chairman's agreement to pay. But, Shoney's stock fell 30 percent and Roberts was hired as Radio Shack's Chairman and CEO.

     Regardless of how small or large a company is, people simply prefer to do business with a company that has a reputation for strong, ethical practices-a company they feel they can trust. And the only way to get that reputation is to be very clear about your own ethics as the company leader and then set in place standards and processes to ensure that everyone within the organization performs within those standards. Only then will your company share the rewards of sustained success.

Bette Price is an author, consultant and professional speaker who is President of The Price Group, an organization that helps organizations to achieve long-term growth through True Leader strategies so their leaders can sleep peacefully at night. She is the co-author of True Leaders: How Exceptional CEOs and Presidents Make A Difference by Building People and Profits (Dearborn Trade Press, December 2001). Contact her at 972-404-0787 or at www.pricegroupleadership.com.