By Jean Kruse / Guest Editorial
Whenever there’s news of a corporate financial scandal or a negligence lawsuit, we wonder why doing the right thing is so difficult. In truth, it isn’t. Most of the time, businesses of all sizes treat their customers, employees, suppliers and colleagues with honesty and integrity. Yet, the temptation to cut corners or say something known not to be entirely accurate is always there – particularly when one rationalizes it as “just this once.”
The problem is “just this once” opens the door to doing it again and again. Even if you get away with it, you still know about it. And if you don’t, consider the words of renowned investor Warren Buffett: “It takes 20 years to build a reputation, and five minutes to ruin it. If you think about that, you’ll do things differently.”
Because the world of small business today is so complex, however, we may still encounter situations where “the right thing” may not be so obvious. Options for handling them may have trade-offs that make the choice particularly difficult, leaving you to wonder if the best you can do is something that is the “least wrong.”
One of the most important steps a small business owner can take is to set a good example. The entrepreneur is the role model for employees. If the owner lies to customers, takes money out of the cash register or takes home inventory or supplies, it will surprise no one when the employees follow the owner’s example.
And although you may have confidence in your own values, you also want to cultivate a culture of ethics among your employees. Simply establishing a zero-tolerance policy on misrepresentation, theft or other ethics violations is not always enough. They, too, may face difficult ethical decisions, and be uncertain about the consequences of reporting them. In these cases, what you don’t know really can hurt you.
Being honest with your customers and prospective customers is especially important. If your customers lose faith in your business practices or in your description of what your product or service will do for them, it won’t take long to lose your customers. Do your sales people exaggerate the effectiveness of your product or service in order to make the sale? Your business will take a hit if you’re unable to deliver the result promised.
That’s why successful entrepreneurs make ethics a regular part of their continuing education. Many utilize the Josephson Institute of Ethics (www.josephsoninstitute.org), a non-partisan organization that develops and delivers services and materials designed “to increase ethical commitment, competence and practice in all segments of society.” In addition to booklets, training and other resources for making ethical decisions, the institute offers a regular e-newsletter and podcasts from founder Michael Josephson.
Another helpful resource is the nonprofit Ethics Resource Center (www.ethics.org), which has been devoted to independent research and the advancement of high ethical standards and practices in public and private institutions for nearly 90 years. This group also offers free e-newsletters and survey analyses that explore the many dimensions of ethics in the workplace.
Most organizations and businesses do have a code of ethics of some kind because ethical behavior is a good business decision. The Internal Revenue Service requires tax return preparers to have two hours of continuing education annually on ethics. Professional workers in most industries have a code of ethics that must be followed. Employees should be required to attend training sessions about how to make ethical decisions in their unique business environment.
So how do you establish a code of ethics for your business? You start by supporting your advertising promises. Make certain that your employees and advertising consultants understand your business and do not make promises you cannot or will not provide. Set up rules as to how certain transactions are handled, and don’t make exceptions for the owner or the owner’s family.
Do you have rules as to whether or not an employee can accept a gift from a supplier or other business associate? What is your refund policy? Have employee meetings at which you explain your ethics policies, and make sure they are understood by all employees.
To learn more about management issues facing your small business, contact SCORE, a nonprofit organization of more than 12,000 volunteers who provide free, confidential business mentoring and training workshops to small business owners. To make an appointment with a SCORE mentor or to sign up for a free workshop, go to www.scorecr.org or call (319) 362-6943.
Jean Kruse is a SCORE counselor and SCORE Iowa district president. She operated her own CPA firm and in 1988 joined RSM McGladrey, a national firm, where she provided accounting and tax services to small businesses.
