Get a return on integrity

Workplace ethics deliver excellent business results.

ROI as the acronym for ‘return on investment’ is central to most businesses in that their investment of capital and resources is intended – and expected – to deliver a financial return.

But there is another ROI, the return on integrity. This rests on the investment in integrity which encompasses ethical conduct relative to employees, shareholders, stakeholders and the environment. There is often not as much focus on this ROI as on the return on investment. Yet, this ROI can also have a major impact on organisations.

The two ROIs are similar regarding a failure to deliver, which, in both cases, can lead to negative consequences. Continued failure to deliver a financial return does not merely risk losing shareholder confidence: it can also jeopardise the on-going existence of the company.

So, too, failure to conduct a business ethically can erode shareholder confidence, damage the organisation’s reputation, reduce its brand equity, diminish customer support, incur financial costs and, in extreme cases, lead to the closure of the business

Despite the cost of unethical conduct being very clear, for business the more pertinent questions related to workplace ethics are nonetheless likely to be: is there a return on integrity, and what is the return?

A company culture based on integrity and supported by ethical leadership can serve to reduce the risk of ethical failure, fraud and corruption and the associated costs. But, avoidance of a cost would rarely be considered a return.

A valuable return would be the creation of a more trustworthy workplace. This brings with it additional advantages such as faster and more consistent decision making, greater confidence in top management action and more individual accountability with less need for policing.

Another return for ethical organisations is the ability to attract and retain top staff and board members. In countries which face a skills shortage, such as South Africa, this is a notable benefit.

An organisation that can show consistent ethical behaviour can also benefit from improved investor and market confidence, reduced cost of capital and easier access to capital.

Enhanced corporate reputation and brand equity are also significant returns on a corporate investment in integrity.

Adding to these returns, competitive advantage can be regarded as the most important return. Although it is critical for almost all companies, it is frequently limited because of the ease and speed with which many sources of competitive advantage can be copied. A unique source of competitive advantage, which cannot be easily copied, therefore has far greater value.

Workplace ethics offers just such a source: ethics is not easy to copy, it cannot be bought or sold, it cannot be owned, but must be lived every day. While this benefit relative to competitors may not be an easily measureable return, that does not diminish its value.

For these reasons, the view that ethics is a luxury which organisations can’t afford because of competitive pressure is increasingly giving way to an acceptance that ethics makes great business sense – not least because it delivers good returns.

However, getting from an acceptance of that approach to reaping the rewards of an ethical organisation is not automatic. It will rest on leadership commitment, organisational will and the effective measurement and monitoring of the company’s ethical status.

By Cynthia Schoeman

Published in HR Future, March 2013