Good Honest Dollar $$

Today, I am delighted to have sales and marketing professional Brad Shorr as a guest writer on this blog.

Brad has many years of business experience, and in his discussion below, he talks about the need for organizations to hold discussions with their staff about the most effective ways to handle specific situations in which they may encounter potential ethical dilemmas in the course of their duties:

 
I’ve been a big fan of Andrew’s blog from the moment he told me about his theme, business ethics. It’s a topic that deserves much more attention, and I love how Andrew is able to give us a clear yet high altitude understanding of complex ethical issues.

For my guest post, I’d like to turn the tables a bit and talk about what business ethics look like from the trenches. Since that’s where I’ve spent most of my career, it seems like the logical place for me to go.

It’s been said that ethics is what you do when nobody is looking. In day to day business activities, nobody is looking pretty much all the time. I’ve worked in environments where management requires detailed call reports and looks over employee shoulders continually, but the fact is, people can get away with just about anything if they are so inclined.

Well intentioned or not, in the trenches it is difficult to tell when you’ve crossed the ethical line. Hypothetical: Supposing a customer overpays you by $10 on a $1000 invoice. Would you pocket the $10 or credit it back?

It’s quite easy to justify pocketing the $10. Processing the paperwork will cost the customer more than the $10 in question. I’ve certainly given that customer more than $10 of free service in the past, so this just evens things up. It’s the customer’s responsibility to pay properly, not mine. Ten dollars is nothing – why bother with it at all?

Even when the choice is made to refund the $10, the choice might be made for less than ethical reasons. For instance, the seller might think, I’ll show the customer how upstanding I am. Perhaps in the future I’ll be able to use it to my advantage for a greater gain.

So, even in a simple situation like this, discerning right from wrong requires a good deal of thought and reflection. But the seller could be faced with more complications still. Suppose the customer always pays 90 days beyond terms. Suppose the customer is notorious for taking unauthorized deductions or grinding suppliers’ margins into the ground? Do those considerations affect the decision of how to handle the extra $10?

And what about the big picture? In the trenches, we don’t think about that a lot. But any employee who cares about the success of his firm should. I might be able to justify keeping the $10, yet if my colleagues applied my same reasoning, my firm might overcharge customers by tens of thousands over the course of  a year. Conversely, if our firm had a policy to refund regardless of circumstances, we might forgo tens of thousands in revenue leading to a reduction in salaries and bonuses. 

In my experience, well intended business people will reach different conclusions about how to handle my hypothetical $10. Does that mean business ethics are situational? Is it possible to devise a rule to cover all variations of even the simple example in this post? I’ve been in business for more than thirty years and to tell the truth, I don’t know the answer to either question.

What I do know is, whether a firm has rigorous ethical guidelines or none at all, discussing ethical issues that occur in the trenches is a must. Discussion serves as a collective conscience. While some may not agree on the ultimate decision, everyone comes away with a new perspective and a deeper understanding. These things make it likely that the next time a problem crops up, it will be handled better and more swiftly.

How would you handle my $10 example? Perhaps we can put my theory to work and see if discussion brings clarity!

Andrew, thank you so much for giving me the opportunity to be a guest author on Good Honest Dollar $$!

 
About Brad Shorr 
Brad Shorr lives in the Chicago area, and is president of WordSell, Inc. He helps organizations strengthen their online business presence with business blogs and compelling web content.

Brad writes extensively on his own and many other blogs, mainly about writing, online marketing, entrepreneurship, sales and business humor.

The recent announcement by Wal-Mart of its intention to adopt a more stringent approach toward its supply chain in terms of labor and environmental standards represents a positive step in the right direction.

Now comes the hard part – verifiable and lasting improvement on the factory floor.

 
Wal-Mart’s strategy
On October 22, the company outlined a renewed strategy designed to produce significant improvement in terms of the management of its supply chain from a social and environmental perspective.

The centerpiece of this strategy is a new supplier agreement, to be phased in over a three year period beginning in January 2009. Under the new agreement, suppliers will be required to:

• Certify (a) compliance with all relevant laws and regulations in areas in which they operate and (b) adherence to strict social and environmental criteria;
 
• Conduct their own audits, as well as co-operate with (sometimes unannounced) audits from company representatives or independent auditors;
 
• Provide the name and location of every factory which they use in the manufacturing process; and
 
• By 2012, source 95% of all manufacturing inputs from suppliers which receive the highest ratings in relation to social and environmental practices.

In addition, the strategy also includes a range of targets relating to energy efficiency and product quality and safety, with particular emphasis upon its Chinese operations.

(Refer company announcement and International Herald Tribune article for more details)

 
Lessons from Nike
Associate Professor Chris McDonald, author of The Business Ethics Blog, draws a comparison with Nike. By all means, this is a valid comparison – Nike once had a poor reputation from the point of view of labor practices within its supply chain, but its reputation has improved considerably over recent years due to improvements in public transparency and accountability.

Nevertheless, the comparison with Nike raises three interesting issues:

 
• Wal-Mart’s efforts, at least in terms of public accountability and transparency, do not appear to be as extensive as those of the sporting goods manufacturer.

Nike currently provides full public disclosure in relation to (a) the location of supplier factories; and (b) the aggregate results of audits into labor conditions at supplier factories.

The announcement by Wal-Mart does not state whether or not such information will be publicly disclosed. If not, the general public will not have means by which to verify any claimed improvement in supply chain practices.

 
• Wal-Mart’s problems go beyond its suppliers.

Whilst the problems at Nike relate predominately to its external contract manufacturing practices, those at Wal-Mart extend further, and include alleged poor labor practices in the U.S.

If the company is serious about improving its reputation, it must address all of these issues, not just the issues which pertain to its supplier base.

Moreover, responsibility for improvement cannot be simply transferred to suppliers. Wal-Mart itself has a responsibility to adopt proactive supply chain management initiatives, including the training of suppliers in terms of best practice operating proceedures. Perhaps the most important action which the company could take is to cease placing unrealistic cost and time pressures upon its supply chain - suppliers must be provided with the opportunity to make improvements in operating practices without compromising the viability of their operations.

 
• Accountability is one thing, results are another.

As noted in an earlier post, whilst Nike has made significant improvements from an accountability viewpoint, its progress in terms of verifiable improvement on the factory floor has been very disappointing, with problems occurring frequently in terms of excessive overtime, poor occupational health and safety practices and failure to pay legal minimum wages.

Wal-Mart must go beyond Nike and demonstrate a substantial level of verifiable improvement at the level of the factory floor. Until this happens, no improvement in its corporate reputation will be justified.

 
Summary
Wal-Mart is to be commended on its positive initiatives, particularly its new supplier agreement.

Now comes the hard part – results on the factory floor.

When business and conservation groups fight against each other, both tend to lose out.

On the other hand, when they work together, mutually beneficial results are often achieved.

Today I would like to highlight the new Integrated Biodiversity Assessment Tool (IBAT), a wonderful example of a common sense project which can occur when large business and conservation groups work together in a spirit of mutual co-operation.

  
The problem
New business projects, such as construction of mines, pipelines, and many other forms of infrastructure, often have a significant impact on the area concerned from a viewpoint of biodiversity.

In order to prevent or mitigate this impact, or to avoid costly modifications to the project at later stages, it is crucial that such concerns are considered during the early stage of the planning process.

However there are at least two key barriers toward this end:

• Companies may be reluctant to share their plans with conservation groups until planning has reached a considerably advanced stage, lest they give away sensitive information.

• The process of conducting Environmental Impact Assessments (EIAs), which can involve compiling a substantial volume of information from a wide range of disparate sources, is arduous at best, and is often not complete prior to crucial decisions having to be made.

  
The solution
What business needs is a one stop shop – a singular, comprehensive, publicly accessible database which details, in consolidated form, complete information about each and every significant biologically sensitive area on a worldwide basis.

This is the objective of the IBAT, a consolidated web based analytical database which has been developed by Conservation International, in conjunction with a range of conservation groups and corporate partners.

  
How IBAT Works
Say, for example, that BP plans to build a new pipeline or road.

Regardless of where in the world the project is to take place, BP will be able to use the database to determine:

• whether or not any proposed construction routes intersected with legally protected areas;

• whether or not any such routes intersect with area which are not legally protected, but which are otherwise considered to be of significance from a conservation viewpoint; and

• which licenses or permits which, if any, the company will require.

Further, IBAT will also enable the company to explore each individual site in a considerable degree of detail and gain an in depth understanding of specific biological issues associated with the proposed construction routes, in turn providing guidance during the EAP process.

  
How IBAT benefits business
The benefits of IBAT to business will be twofold:

• Better information – earlier.

By helping companies indentify and accommodate specific conservation related concerns at an early stage of the planning process, the database will help to avoid: the need for significant adjustments to the project at a later stage; and/or any adverse reputational impact from allowing potentially destructive plans to reach advanced stages.

• Anonymity.

After an initial registration process, companies will be able to use IBAT on a completely anonymous basis, allowing them to search the database without fear of alerting external parties to any plans under consideration.

  
Environmental benefits
The benefits of IBAT from a conservation viewpoint are equally as clear.

The earlier that potential biodiversity related concerns are identified within the planning process, the greater the likelihood that firms will be willing to make adjustments to projects in order to accommodate such concerns.

  
Sleeping with the enemy produces results
Perhaps largely due to issues of mistrust, some on the side of both business and conservation have been reluctant to embrace any form of collaboration.

However, the IBAT initiative is a shinning example of the benefits to both which can accrue when they put aside any differences and work co-operatively toward mutually beneficial solutions and outcomes.

Dear readers,

Recently, I had the privilege of being interviewed by Saad Khan of Social Bridges, an organization dedicated to promoting responsible behavior amongst business in Pakistan.

The interview can be viewed here.

It was truly a pleasure to share my thoughts and opinions with readers of Social Bridges, particularly as I have a high level of respect for those involved with the organization and what they are trying to accomplish.

During the interview, Saad asked some thought provoking questions relating to Corporate Social Responsibility and Socially Responsible Investing, and I was challenged to think deeply about my responses.

This is the final article in a series of posts about Corporate Social Responsibility (CSR).

In this article, I would like to focus on the more practical aspects of designing and implementing effective CSR policies and programs.

I have provided some of my own ideas below. However, as I do not have specific personal experience in this area, I feel that the most interesting and valuable part of this discussion would be the professional experience of readers.

Accordingly, I cordially invite you to share any personal experience which you feel may be of particular interest or relevance to other readers.

 
Key principles in designing and implementing CSR policies

Listed below, in no particular order, are seven key principles relating to the effective management of Corporate Social Responsibility:

 
• Apply similar principles to managing CSR as with other aspects of the business.

In order to implement CSR in an effective manner, it must be managed like any other aspect of business. Amongst over things, this involves the setting of key objectives, priorities and performance indicators, the creation of action plans and subsequent performance evaluation.

The principles of effective management apply to all aspects of a company’s operations, including CSR.
 

• Keep it simple.

The entire approach of organizations towards CSR should be kept as straightforward as possible.

A more straightforward approach offers several benefits. First, under a simpler approach, it becomes easier for management and staff to maintain focus on the bigger picture of what the firm is trying to achieve. In addition, a simpler approach also increases the likelihood of staff understanding CSR policy and becoming engaged in CSR effort. Finally, under a simpler approach, CSR is likely to be managed more effectively – fewer complications, fewer opportunities for mistakes.

Simply put, simple is better.

 
• Focus on core principles, not policies and procedures.

Whilst specific policies may be necessary to provide clarity to employees in some circumstances, the focus should be upon core principles rather than detailed policies or procedures.

An organizational focus based primarily around core principles allows employees the flexibility to apply a common sense approach when dealing with situations which may arise, whilst still ensuring actions and practices which are consistent with the key values of the organization as well as the principal objectives of CSR policy.

 
• Set measurable outcomes, goals and objectives.

As with any other area of business, the process of setting goals, objectives and measurable outcomes is essential for the effective management of Corporate Social Responsibility.

These provide focus and direction for CSR effort as well as a mechanism to measure and evaluate organizational performance.

 
• Focus upon specific industry concerns.

All firms should aspire to good corporate citizenship in common areas such as the environment, labor relations and corporate governance.

In addition, all firms should aspire to conduct their business in a manner of honesty and integrity.

Beyond this, however, organizational effort relating to CSR should focus predominately upon areas of specific concern to the industry in which the organization operates.

Manufacturers of alcoholic beverages for example, should focus CSR efforts upon programs to prevent under-age drinking, drink-driving or other forms of alcohol abuse. Timber firms could focus upon forest regeneration. Fast food companies could focus upon health related programs, as well as the minimization of harmful ingredients in their food. And finally, financial institutions could refrain from lending to certain clientele. (such as weapons manufacturers)

By focusing CSR efforts upon areas of specific relevance to their industry, organizations maximize the impact of their CSR effort both from a public relations viewpoint and from the viewpoint of the broader community benefit.

 
• Communicate, involve and engage.

No man is an island in himself, nor does any business operate in isolation.

Companies should seek input from key stakeholder groups throughout the CSR process, particularly during the process of setting goals, objectives and key priorities.

Not only will stakeholder input help the organization to identify and focus upon areas of greatest importance, the process of engagement will also help to strengthen key stakeholder relationships.

In addition, companies should also seek the engagement of employees. As the group which puts company policy into action, employees have considerable influence over the outcome of CSR effort. Where possible, staff should be given to opportunity to provide input into decisions relating to CSR policies and programs. In addition, companies should clearly communicate the reasons behind CSR effort, including the anticipated benefits from the perspective of the community, the organization and, where applicable, employees themselves.

In cases where staff have a clear understanding of the reasons behind CSR policies and programs, and are provided the opportunity to provide input into decision making, they are more likely to apply CSR policy in a diligent manner. They are also more likely to participate actively in specific CSR programs.

 
• Don’t leave it to the PR or legal department.

Many organizations view CSR as primarily a form of public relations, or risk mitigation. Accordingly, organizations may view CSR management primarily as a function for the public relations or legal departments.

Whilst these departments may be well positioned to provide valuable input into CSR management, there are drawbacks in viewing CSR in this manner.

Where CSR is left predominately to the public relations department, the resultant communication may come across as ‘spin doctoring,’ As a result key stakeholders, as well as the general public, may distrust the sincerity of the organization’s efforts, thereby limiting any positive impact upon corporate reputation.

Moreover, delegating CSR to one department misses the point. CSR is more than simply a public relations exercise. It is not simply a task to be delegated to one department and ignored by the rest of the organization.

CSR is fundamentally a way of doing business, and should be a factor in guiding organizational behavior across the entire spectrum of operations.

It should not be left to one department.

 
Over to you

I would like invite all readers to share any thoughts, opinions or specific experiences relating to the above topic which you feel may be of interest or value to other readers.

Please feel free to add your comments by clicking on the ‘comments’ section below.