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Strategy

How Ethical Principles in Business Affect The Bottom Line

Follow these ethical principles in your business, but remember that, at the end of the day, you have to make the choice that's right for you.

Adam Fout
January 12 2018

When it comes to the customer experience you provide, perhaps nothing matters more than the exercise of ethical principles — in business, success or failure can often hinge heavily on how what you say and what you do align.

To some reading this article, this may seem like a load of hogwash, and to be fair, more than a few businesses are getting along better-than-average by being severely unethical. That being said, there are a few things to keep in mind about unethical businesses:

  1. They are the exception, not the rule
  2. Management in these places tends not to last and incriminate themselves and the company, resulting in huge fines and jail time
  3. You have to be really, really big (or do something that literally no one else can do) to get away with unethical practices, and even then, you won’t get away with them for long

What do I mean when I talk about unethical businesses? Enron comes to mind (only made it 15 years until their unethical practices caught up to them). A good recent example is Takata, which is facing both criminal charges and billions in lawsuits and penalties, not to mention bankruptcy. Crazy Eddie, who only made it about 16 years is one of my favorites.

All of these businesses (and many more over the centuries) engaged in unethical business practices. Most of them were unable to get away with their shenanigans for long.

And here’s where we get to the heart of my argument, that what you say and do affects the bottom line.

A Lack of Ethics Always Ends Badly

You’ve probably never heard of McKesson & Robbins — that’s because their unethical practices lead to their company dissolving.

However, some companies do bounce back. Equifax (formerly the Retail Credit Company), ran into some trouble, changed its practices, rebranded, and made a bit of a comeback.

Of course, now we know that their unethical actions have caught up to them again, they may not survive this time.

The point is this: If you follow ethical principles in your business, you’re setting yourself and your business up for long-term success. Brands that lie suffer worse than brands that simply screw up.

There’s a Big Difference Between Making a Mistake and Lying

It’s just like when you were a kid — you make a mistake, big deal, no one cares, just pick yourself up and try again.

But if you make a mistake, lie about it, cover it up, and try to cheat your way through… you better hope you don’t get caught.

Here’s the difference: When you’re a kid, you’ve only got parents and teachers watching you, and frankly, they’re not watching very closely. When you’re running a business, you have some very interested governmental agencies watching your every move, not to mention your investors and other interested parties.

In business, you can’t get away with deceit and fraud forever — it always comes out. Just ask Bernie.

But you can survive a mistake.

Many businesses have made mistakes, owned up to the mistakes, and powered through, lasting decades, even centuries, because despite screwing up, they were honest about it and did their best to make it right.

Examples of this run the gamut, but Nintendo comes to mind. The businesses listed above began with just bad numbers and simple mistakes, all of which could have been fixed. Instead, they covered it up and lied, and they paid the price.

Nintendo handled it differently.

Just a few years ago, they pushed the Wii U out into the wide world, only to have basically everyone call it one of the biggest pieces of garbage ever created.

Today, they’re riding high on a huge wave of success, with the Switch leading the way. They made a mistake, their business suffered, but they rebounded from what could have been a potentially fatal failure. Why? Because they admitted that they screwed up, owned the mistake, and worked their butts off to make it right.

Their customers appreciated their honesty, but it certainly doesn’t hurt that the government had no reason to shut them down.

It’s not illegal to screw up.

Their customers were also willing to forgive them.

It Saves Your Brand and Keeps Customers Around

I want to talk about this Nintendo example a little more in depth, because, as a huge Nintendo fan myself, what they did and said had a huge impact on me as a customer.

I’ve been playing Nintendo games since 1990. I’ve owned every Nintendo console since the NES.

I didn’t buy a Wii U. The reason was simple — it wasn’t a great product. Nothing against Nintendo, but it just didn’t do anything for me, and there weren’t great games on it to draw me in (I’ll be honest, I just wanted a new Legend of Zelda).

But I didn’t start hating Nintendo for it. As a brand, they had built up a lot of credibility over the years. They had turned out quality products on a pretty consistent basis for a pretty long time, and I was willing to give them the benefit of the doubt.

Then, I heard that they came out and admitted the Wii U was a failure. This had a huge impact on me as a customer. It was a breath of fresh air. Rather than go around pointing the finger and blaming others for the failure of the Wii U, they very publicly owned up to their mistake.

Neither did they try to hide the bad numbers or lie about sales — no, they were adults about the whole thing. This was probably very difficult, but I had a lot of respect for them for doing that.

Then, along comes the Switch, the console that’s making a big splash and totally redeeming a company that many saw, for a while, as a complete failure.

And I can say that I was cautiously optimistic. In the interim, though I didn’t purchase a Wii U, I still purchased some of their handheld games, I’ll purchase the Switch in the next few months. I could have easily written them off entirely, but their honesty inspired me to continue to give them a chance.

And with the Switch, they have totally redeemed themselves.

I don’t know that they would have been able to bounce back if they had tried to lie and cover things up. Their brand took a hit from their mistake, but not the kind of hit a lie or a cover up can bring. Customers will literally never buy from Takata again, and they’re almost certainly going bankrupt.

Customers pay attention to your ethical behavior, and they want you to be honest. But it’s not just your customers who care — this affects your employees and your business partners as well. Honesty is simply a better policy for everyone, but we can go deeper than simple honesty.

Follow These Ethical Principles in Your Business

Keep in mind that honesty is really at the heart of all of these ethical principles. In business, we throw around a lot of fancy terminology and ethical terms, but the truth is, if you’re just being honest, no matter what, you’re going to go far.

That being said, we can be a little more specific, can’t we? Here are a few ethical principles to consider:

  • Honest — Being honest, upright, fair, truthful, sincere, frank, and free from deceit or fraud
  • Respectful — To hold in esteem or honor, to refrain from intruding or interfering, to defer to others when appropriate, to show regard and consideration
  • Fair — To be free from bias or injustice
  • Lawful — Acting or living according to the law — law abiding

Now we can add quite a bit to this list, but these are the core tenets that most businesses are going to benefit from. However, all the ethical principles above should be balanced with one overriding principle: Reason.

The reason (see what I did there?) we need to add this last principle, and really, to mix this principle with all the others, is simple — it’s very easy to take these principles to extremes that actually cause harm.

For example, fairness sounds well and good, but many extreme harms have been done in the business world in the interest of fairness.

For example, suppose, you take away the corner offices from everyone and put all your employees in cubicles. Certainly this is fair, but if the corner offices are rewards for hard work, all that’s been done is to punish the hardest workers because their coworkers can’t keep up.

Now is it fair? And who is to say if it’s fair or not? It’s almost certainly bad business. This principle of fairness must be tempered with reason — your reason — if it is to have any positive effect.

Honesty is another principle that can easily get out of hand if not paired with reason. Let’s say that one employee is being gossiped about behind their backs by the entire office, and you finally catch wind of it. This poor employee is completely clueless to the fact that everyone basically hates them (horrible, I know).

The honest thing to do would be to tell them.

What’s a manager to do? Let this poor schmuck know something that will almost certainly harm them? Imagine how you’d feel if you suddenly learned all your friends secretly hate you, everyone you trusted was full of it? How hostile would that workplace become?

Or, should the manager find a creative way of stopping the negative behavior while keeping the victim from learning the truth?

We can go on and on about various principles that should or shouldn’t be on this list, but I truly think this is the core.

Citizenship or caring, for example, are suggested by some sources, but this quickly becomes a matter of opinion. What constitutes “good citizenship”?

Certainly a business must follow the law or eventually meet its end, but how much of “citizenship” is simply following the law? Should businesses be required to be caring?

Think about that one for a second — what of a drug rehabilitation center? These places often emphasize the importance of families not “enabling” their addict or alcoholic family member. The center must do the same, and may even have to be very harsh to avoid enabling their patients or allowing family members to do so.

What looks on the outside to be cold and callous may be the most caring thing anyone can do.

Who are we to judge? Honesty and lawfulness are probably the only ethical principles that we can truly look at as foundational ethical principles in business, for even fairness and respect are fraught with gray area — that’s why I’m careful to add anything to this list.

It’s too easy to get carried away.

Follow Your Own Ethical Principles

At the end of the day, it’s your business. You need to do what’s best for you.

When all is said and done, you have to live with yourself and your decisions.

When conducting business, ask yourself these questions:

“Can I live with these decisions? When I retire, will I be proud of what I’ve done here today? Or will I be old, angry, and filled with regret?”

Your customers will judge you on your ethical (or unethical) practices. Your business partners may or may not leave. You may become enormously successful or completely broke, but the only thing that matters, in the end, is if you can live with yourself and how you’ve acted.

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Adam Fout

Adam Fout, resident content sorcerer at BlueSteelSolutions, turns blogs and social media accounts into marketing machines for your business. In his free time, he writes strange bits of fiction and posts them on My Website

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