Sometimes intangible topics like business ethics drive tangible issues like government regulation of an industry. Right now a battle is being fought between the financial service industry and the Department of Labor (DOL) over a proposed set of rules dealing with qualified plans. These regulations would create a new standard by which qualified plan services and products would be judged. The opponents counter that this added regulatory layer will only make these services and products more expensive and less accessible.
The driver for the DOL’s ill-advised regulations is the past bad behavior of some individuals and companies. The rules aren’t targeting the crooks and villains of the financial industry - the Bernie Madoffs and Allen Standfords. Instead, they’re aimed at those who put themselves above the client. Those who dance too close to the fire, work on the fringes, put greed over good.
The issue is ethical business behavior. The DOL wants the advisor acting in the best interests of the client. A worthy goal, but is this achieved through piles of paperwork? Can you legislate individuals and companies into performing ethically? Doesn’t the very definition of ethics assume actions are done voluntarily?
A better motivation for inspiring ethical behavior is the benefits it provides, both personally and financially. Besides feeling good about doing the right thing, principled business conduct can also be profitable. Ethical behavior is good business.
Easier Accounting
I knew a business owner who kept four sets of books: one for the IRS, one for his bankers, one for his family, and one that reflected the true economics of his business. It was exhausting work for him!
The fact is that massaging the numbers, cooking the books or otherwise bending the truth is both confusing and expensive. “The truth shall set you free” is more than a platitude. It’s an expression of how much easier it is to run your business when you use real numbers and honest accounting.
Better Branding
Even greedy business owners have a conscience. They’re not sociopaths; they’re just misguided. The good news is that if they cease their shenanigans and do what’s right going forward, they will feel better about their business.
Feeling better about the business has marketing advantages. First, the ethical business owner is a confident business owner. It’s easier to brag when there’s nothing to hide. And honesty generates passion. The owner believes in the business and wants to tell the world. So, when ethical behavior generates both confidence and passion, you have a business owner who inspires trust. Trust with employees, suppliers and customers. What better way to improve brand than by creating trust?
Improved Bottom Line
I once consulted with a business that wanted to improve how its sales representatives work with customers. Complained one top executive, “their mentality is to eat what they kill.” This executive was painfully aware that it’s easier and more profitable to sell to an existing customer than it is to sell to a prospect. He wanted to change his reps’ treatment of customers so that the company could drive more repeat business.
Customer satisfaction is not an amorphous, aspirational goal. With the instant feedback loop that is driven by technology, businesses quickly learn when customers are happy … and when they’re not. Angie’s List, Yelp, TripAdvisor and myriad other on-line services expose all to the public. This leaves little room for a business to run roughshod over customers. Bad behavior leads to bad reviews. And that’s bad for business.
On the flip side, when customers are treated ethically, word now gets around quickly. They come back for more, and they make referrals. The business is not only rewarded with good ratings; it gets a boost to the bottom line.
Better Health
Running a business is stressful. The fear of being caught pulling a fast one only adds to an owner’s angst. It’s tough enough making payroll without also worrying about being caught doing a no-no.
Want to relieve stress? Run the business ethically. Adopting and owning a set of ethical standards not only is the right thing to do. It also reduces the owner’s anxiety and improves personal health. We all feel better when we do what’s right.
A business consultant tells you she can make your accounting easier, expand your brand, add to your bottom line, and improve your health. And the only cost is doing the right thing. Who can resist this offer? Good ethics pays.
