CEBC IN THE NEWS

Commentary

Reaching For A Higher Standard

Published Sunday, May 27, 2001 in the Star Tribune.

By Ron James

We live in a world of ever-increasing expectations. I am reminded of the wealthy individual who, having accumulated so much, was asked, ''How much is enough?" His response: ''Just a little bit more."

Business today finds itself in the role of having to quench the appetites of such investors. And whether self-imposed or externally exerted, the pressure for "just a little bit more" is relentless and compounded by shrinking time horizons.

No longer does a business, or its CEO, enjoy three to five years to set a course, rally the employees, and accomplish big things. The new norm is ''quarter to quarter" performance. Miss the targets and the leadership and employees become expendable. Make the numbers and the rewards can be handsome.

But we must stop the merry-go-round and ask, "At what cost are we achieving the results?"

• Are we building a culture in business that rewards the fruits of short-term gain at the expense of long-term prosperity?
  
  
• Have we constructed a culture that serves not only the shareholder, but all stakeholders, including employees, customers and communities?
  
  
• Are we building an ethical culture that clearly articulates the choice when short-term gain collides with the "right thing to do?"

These questions point to a bigger challenge facing business today: The bottom line is not enough.

Make no mistake, today's business leaders have the enormous responsibility of balancing the short-term expectations of investors while building for the long term and serving multiple stakeholders. Regardless of company size, the pressures are intense.

Rules of engagement

A leader cannot do this alone. All members of the organization must be engaged to accomplish big goals. But the rules of engagement are defined by the culture created by the leadership. Culture is the set of norms and behaviors that reflect a business' true character. It often is expressed in the "values" of the organization. And any individual working within that culture can anticipate rewards and recognition when his or her behavior lines up with the culture.

Ethical business cultures reach for a higher standard. Ethical business cultures attempt to choose right from wrong and, even when the options all appear to be right, seek the choice that reaches a higher standard, regardless of whether someone ''is looking."

Ethical business cultures always seek to strike the long-term/short-term balance. And when there are collisions between short-term financial requirements and ethical practices, ethical cultures are uncompromising.

But why invest in building an ethical culture? Does it really help the bottom line? Or is this just something that "feels good" to do?

Ethical cultures build value in several ways:

• Employees are drawn to work in an environment where there is alignment of purpose and values between the individual and the company. And most people bring a set of ethical values to work that can cause them to flourish in an environment that practices the same values. As people flourish, productivity goes up, and employee turnover goes down; both are direct contributors to the bottom line. Sure, compensation matters, but there is something greater at work here.
  
  
• Customers are drawn to a company that balances its interests with the interest of the shareholder. Whether it's receiving appropriate value for payments made, protecting the privacy of customer information, or receiving appropriate dispensation when the product or service does not meet expectations, ethical cultures are known for doing the right thing. This can serve to improve customer retention, increase customer repeat buying, and attract new customers, all of which increases sales while lowering distribution costs.
  
  
• Ethical cultures recognize that they are but one component of a larger institution called a community. They invest their time, talent and treasure through volunteerism, community partnerships and philanthropy. These companies recognize that their employees, customers, shareholders and suppliers all come from communities. And the healthier the community, the higher the likelihood of business success.

Bottom-line benefits

We could go on and talk about ethical behavior toward suppliers and the environment and how it adds value, but I believe you see the pattern. Likewise, we could explore the downside of failing to behave ethically.

The headlines are filled every day with companies that failed to meet ethical standards and are burdened with tarnished reputations, financial penalties, criminal sanctions and the resulting loss of customers and employees.

Our everyday actions toward each of our stakeholders have significant implications toward the success or demise of the business. And whether the business is a Fortune 500 corporation 10-person firm, the same principles apply.

Surely executives must be concerned about things such as having the right strategy, having the right product, bringing it quickly to market and offering great service. But to build a business that truly achieves greatness, something more is required. To grow the bottom line consistently over time, one must build a culture that behaves in an ethical way in working with all stakeholders.

Now one might ask: "Do we do this to grow the bottom line, or because it's the right thing to do?"

But the end result is that we have done both. We have done the right thing and grown the bottom line.

About the Author

Ron James is CEO of the Center for Ethical Business Cultures, formerly known as the Minnesota Center for Corporate Responsibility, a Minneapolis-based nonprofit that helps companies develop ethical and profitable business cultures. The center is affiliated with the University of St. Thomas Graduate School of Business and the University of Minnesota Carlson School of Management.

© Copyright 2001 Star Tribune. All rights reserved.

Center for Ethical Business Cultures

1000 LaSalle Avenue, TMH 331 ▪ Minneapolis, MN 55403-2005 ▪ USA

Phone: 651 962 4120 or 800 328 6819 Ext. 2-4120 ▪ Facsimile: 651 962 4042

Email: mail@cebcglobal.org

© 1978-2008 Center for Ethical Business Cultures. All Rights Reserved.

Business Partnering with the University of St. Thomas - Minnesota