WHY ETHICS SHOULD BE A RECOGNISED BOTTOM LINE

When ethics is a priority, it maintains a focus on how you do business and avoids the many problems which can arise from an approach of “business at any cost”. This approach gives rise to on-going incidences of unethical behaviour which continue to keep workplace ethics in the news. These ethical failures reveal a range of costs from financial ones in the form of fines or settlements, to reputational damage, eroded brand equity, and even the closure of some businesses in extreme cases.

On the other hand, companies that are seen to be ethical are increasingly likely to be rewarded - increased customer loyalty, improved investor and market confidence, or a greater ability to attract and retain key staff and board members being some examples. Ultimately, ethics can become a key source of competitive advantage, not least because it is unique in that it cannot be owned, bought, sold or copied, but rather must be lived each day.

But, how many companies are getting this right to the extent that they are publicly seen to be ethical? If asked to name three companies operating ethically in South Africa, most people hesitate and often cannot name even one company.

This raises the question of what can be done to more effectively manage ethics to achieve recognition as an ethical organisation.

First, ethics should be recognised as a key management focus area. This means that leaders need to manage ethics proactively instead of reactively after a problem has surfaced; they need to manage ethics regularly, rather than on an ad hoc basis; and the organisation’s ethics needs to be monitored, measured and reported on.

This degree of focus warrants that organisations move beyond a triple bottom line to four bottom lines - to also formally recognise ethics and their ethical responsibilities.

The rationale behind the move to a triple bottom line to include social and environmental issues applies as much to ethics and four bottom lines – that being to balance the extent of business impact and influence with a corresponding level of responsibility to society. The extent of a company’s influence on ethical behaviour can be profound, either to substantially improve the level of ethics or, of course, to erode it.

Ethics already applies somewhat to the triple bottom line in that companies that persist in pursuing a single, economic bottom line are increasingly viewed as shirking their responsibilities - maybe not as far as being unethical, but certainly as poor corporate citizens.

However, ethics warrants further recognition.

The second thing to be done to more effectively manage ethics is to prioritise ethics appropriately. Therefore, ethics should not become the fourth bottom line as regards its priority ranking.

The first priority position has long been held by the economic bottom line. This is understandable inasmuch as achieving sound financial results is not an optional extra. It really is imperative.

However, it is preferable that ethics occupies that first priority position – arguably as a first among equals. When financial results are the primary focus it risks “doing business at any cost” in pursuit of the numbers.

There are criminal examples of this, such as the telephone hacking that took place at the News of the World in pursuit of being ahead of other publications.

“Doing business at any cost” can also arise from less spectacular circumstances such as the focus on billable hours in many professions - specifically because they often include financial targets. Delivering on those targets is clearly in the employees’ best interests as it is likely to positively impact their personal rewards, whether a salary increase, promotion or a bonus. This can easily lead to expanding the scope of work unnecessarily or to inflating the billable hours. Although unethical, it can foster an “ends justifies the means” view.

Ranking ethics as a priority in the four bottom lines will also benefit the environmental and social bottom lines by avoiding them being side-lined in pursuit of profit.

The combination of just these two initiatives – recognising ethics as a key management focus area and giving it priority as a new bottom line - will make a major difference to the management of workplace ethics and to achieving recognition as an ethical organisation. All it requires is the leadership will.