Business owners focus a lot of their time making sure that their products and services stand out from the competition. They hire skilled employees to streamline processes and increase productivity. They pay close attention to the quality of their product offerings and services. But there is another important element that, if implemented, can differentiate a company from the competition, increase profits, reduce employee turnover, foster customer loyalty, and ensure future business growth. That element is called business ethics.
Business ethics can be defined as the values and beliefs upon which organizational policies, practices, and the behaviors and decisions of employees are based. Labor laws and compliance regulations are our government’s way of setting the minimum guidelines for ethical business practices. Beyond that, it is up to each business owner to determine its ethical business policies.
Business Ethics Starts at the Top
The best way to instill ethical business practices in an organization is to lead by example. Owners and managers set the standard by which employees conduct themselves and make business decisions. When an organization has specific ethical guidelines for how employees should conduct themselves internally with co-workers and externally with customers, employees feel secure, respected and valued. They know that career advancement will be based on their talent and productivity and not favoritism. Companies that conduct business ethically are also more likely to retain skilled employees which can reduce the cost of employee turnover.
How Business Ethics Contribute to Success
The financial benefits of ethical business practices are clear. Ethical businesses tend to have loyal customers and having a large customer base is key to long-term business success. Not only do ethical businesses reap the financial benefits of repeat customers, but oftentimes, they earn new customers through referrals, testimonials, and positive online reviews. Happy customers tell their friends and colleagues about their experience which is the best type of marketing for your business. 84% of companies that focus on improving their customer experience report an increase in their revenue.
Customers are also vocal, if not more so, about negative experiences. Negative reviews and a poor reputation can make it difficult for a company to earn new customers. In terms of marketing, business ethics makes financial sense. It is simply more costly to find new customers than to retain existing ones.
That is not to say that ethical businesses only have happy customers. Things happen. What matters most is how issues are handled when problems arise. The extent that a business goes to be honest, transparent and fair with customers goes a long way in building a positive reputation.
The Consequences of Poor Ethics
The legal ramifications of bad business practices can be extremely costly to a business. At times, companies can be tempted to cut corners to increase profits. Not fully adhering to safety standards in the workplace, substituting quality materials with substandard ones, and misleading customers are all examples of unethical business practices. If caught, a business can find itself in legal trouble and receive stiff penalties and fines. The resulting damage to a company’s reputation can be even more costly by threatening future business.
Ethics in business matters. That is why Premier HR Solutions has partnered with RecognizeGood in sponsoring the Ethics in Business Alliance. The Ethics in Business Alliance (EIBA) is a free program that provides businesses with the resources needed to develop ethical business cultures. EIBA also connects like-minded business owners and thought-leaders throughout the greater Austin area through networking opportunities and events. To learn more about the Ethics in Business Alliance and to sign up, click on the link below.