Why ethics and profitability can co-exist in business environments
|Image credit: Wikimedia/Anna Chromy|
Others believe there is no such thing as business ethics because, ultimately, it comes down to personal ethics which trickle into business decisions. After all, entities are made up of thinking people, and a company cannot think for itself because it isn't a thinking individual.
Then there is the school of thought that believes that the only responsibility of a business is to its shareholders and to no one else; corporate social responsibility is a non-issue because those kinds of issues are not the responsibility of the company because there are societal ones.
Although times they are a changin'. Today there is a definitive link between operating in an ethical fashion and profitability. While it is true ethics can be very subjective depending on personal values and beliefs, or dependent on cultural or societal values, there is also the law to take into consideration. If it's illegal, then this falls into the unethical category. It's the gray areas where businesses need to watch. A solid reputation is one of the more welcoming results of practicing good ethics.
Integrity draws attentionMost people prefer integrity, as they are naturally drawn to truthfulness, honor and reliability. Companies that show altruistic tendencies will garner good press, which will, in turn, attract customers. A positive impression can bring in more business, whereas a poor reputation will turn business away.
And first impressions mean everything. Bad press and word of mouth, especially Internet and social media comments, are likely going to decrease a company's intangible values. On the other hand, positive press, word of mouth and other affirmative referrals are great stamps of approval. Consumers are more than likely to sit up and take notice of these businesses, increasing potential for patronage and profitability.
Build trust with customersThe bottom line is consumers want to shop from merchants or do business with companies they can trust. Regularly practicing good ethics draws customers to a business because they want to feel as if they've been treated fairly, received quality and know the business will stand behind its guarantees and/or promises.
Companies that have developed a reputation of poor business practices are not going to garner the important consumer trust that is so pivotal to the success of a business. Customers will be "one and done", that's if they make it in the door in the first place. All businesses should put heavy priority on earning trust and building goodwill.
Grow a loyal followingWorking off strong ethical principles leads to creating a loyal following for a brand name. Customers tend to shy away from businesses recognized for poor ethical decisions, and all it takes is one bad experience or news piece to flush a company's reputation down the drain. In today's competitive environment, it has become more important than ever to treat customers with the utmost respect, and this includes all of society, because anyone is a potential customer in today's global business environment. One bad deal or impression can lead to an immediate drop of customer loyalty.
On the other hand, consistent trustworthy and ethical decisions will generate positive impressions and increase business potential. If a business can build a loyal customer base, this will secure long-term profitability, but quick sales based on shoddy practices are only a short-term gain: no long term profitability is likely to be realized.
Not just about the moneyGranted, the primary responsibility of a for-profit business is to return healthy financial numbers to shareholders, but the thinking of this school of thought is in some ways narrow. It is entirely possible for a business to act with ethical and even with altruistic principles in mind and profit from this philosophy. Although, CSR can be hard to link to profits, the other tangible benefits cannot be ignored.
Companies who engage in illegal behavior or act within the gray areas of the law in the pursuit of profits in the long run can do irreparable damage to their reputation. They act in a questionable fashion and gain some healthy short term profits, but once they're caught or negative press arises, all is for naught, and innocent people get hurt in the process. While it is true some companies do come out of public thrashings seemingly unscathed, regaining public and consumer trust is costly and time-consuming to build back up. Wouldn't it be easier to avoid the bad press, lawsuits and damaged reputation in the first place? Isn't it smarter to use perceived good ethics and profit in the process?
By establishing a good ethical foundation for the organization, a company can carve itself a competitive advantage, grow the business organically through good practices, ultimately increasing profits. There is no reason why ethics and profits cannot co-exist in harmony.
The link between profits and ethics is real even if the numbers don't immediately show it. In today's business environment, it is probably now more important than ever for a company to act with integrity. Today's market is a consumer-driven one, and if they don't like the way a business behaves, they'll quickly turn to a competitor.
Business survival depends upon other motivators besides profit these days. Good ethics is an important part of the equation.