Literature Review
Discuss about the importance of ethics in any business and the ethical challenges faced managers as well as the contribution of business ethics to an individual or organization.
Business ethics plays a fundamental role in the success as well as growth of a business. Business ethics are moral principles that guide the way a business functions on a day to day basis. These ethics determine the business’s actions towards its environment. These ethics must be defined at the inception of a business and every decision made the business must be in line with the ethical policies of the organization.
Effective ethics of a business firm help in setting the right positioning in the minds of customers. Since these ethics help the business take appropriate decisions and hence lead to improved growth. Ethical organizations attract investors as well as employees. Such organizations adopt competent strategies to ensure employee retention and even employees prefer associating with such businesses in the longer run. Not just employees, even customers tend to get attracted towards ethical businesses. This report highlights upon the importance of ethics in any business, the ethical challenges faced managers as well as the contribution of business ethics to an individual or organization. Real world examples of business organization have been discussed who have set the right examples depicting the importance of ethics in a business.
There are various strategic management experts who have thrown light upon the importance of business ethics in any organization. Being an ethical organization is a difficult road to follow but it certainly comes with its own set of advantages. Mehta, Kurbetti & Dhankar (2014) state that the level of employee retention is directly related to the strength of business ethics adopted by a business. An ethical business attracts competent employees who relate to the same set of ethics. This helps the business in recruiting manpower which is proficient. Employees tend to feel safer and more secure in a business that is ethical in nature. An unethical firm leaves the employee at the risk of being associated with unethical actions. Therefore before joining an organization, employees consider the ethical values of the business to be an important criterion.
Every business requires investment from several external stakeholders. These investors evaluate the firm on the basis of various criteria before finally investing their money. One such critical criterion includes the ethical values adopted by the business. The ethics adopted by a business assure investors about appropriate usage as well as the return on the funds provided by them to the business (Crane & Matten, 2016). The ethical stance of the business will enable the management to effectively utilize the funds provided to the business.
Importance of Ethics for Employee Retention
Every industry is getting increasingly competitive. The number of players is on a rise leading to increased competition. Every organization is adopting several strategies in order to gain a competitive advantage in order to sustain within the industry (Gamble et. al., 2013). In the face of fierce competition, it is imperative that organizations remain ethical.
Several situations require businesses to take a strategically important and critical decision. It is the ethics of the business that guide the management to take appropriate decisions leading to long term sustainability of the business (Trevino & Nelson, 2016). The decisions made by the business are strongly influenced by the ethical policies of the business. Various leading organizations have adopted a strict ethical policy and ensure that all their employees also effectively follow the same.
A strong ethical business policy creates a positive workplace environment within the business. Ethical businesses tend to create transparency in the organization. Communication within an organization forms the backbone of the business. A culture of open communication and transparency creates a participative work culture which fosters creativity and enhances transparency in the business (Cooren et. al., 2011). This builds trust and enables employees to work together in a coordinated manner. The theory of system development ethical theories state that organizations should be sensitive enough to develop a work culture which is sensitive and supportive of ethical conduct.
Customers of any business are also becoming increasingly aware. There are various factors that influence customer behavior. The ethical values of a business also play a key role in influencing consumer behavior. Customers associate with the ethical values of a business and establish the brand’s positioning. Hence an ethical business will always find it easier to ensure customer loyalty or build and sustain long term relationships with customers (Mandhachitara & Poolthong, 2011). Customers believe they can trust a business based on its ethical values and policies. Moreover, an ethical business also ensures efficiency of customer service because such a firm believes in complete stakeholder satisfaction and delivering quality of product or service.
Business marketing and promotions are a competent way to reach out to customers and enhance brand awareness (Malik et. al., 2013). The promotional strategies and advertising methods espoused by a business set the positioning in the minds of customers. False advertising and over promises made by businesses during their promotions are not uncommon. But such strategies may attract customers towards purchasing the product but can never be sustainable. Such strategies are unethical in nature and with the advent of internet and social media; the tactic is bound to fail.
Importance of Ethics for Investors
The growth of social media has enabled a supreme level of transparency between a business and its customers that did not exist before. This has shifted the power dynamic and today customer holds the ability to make or break a brand. Ethics of a business are no more the business’s personal affairs but rather become public. Customers resort to social media platforms to express their grievances and issues with the business (Tuten & Solomon, 2017). Hence it becomes the responsibility of the business to address these issues in an effective manner. Business ethics plays a critical role in the strategies adopted by the business to ensure a clear and positive image on all of its social media platforms in the minds of its consumers.
Even within the business, the shared ethics of the manager and the employee help in creating improved team work and leads to effective coordination among employees (Rajhans, 2012). Owing to the ethical values shared by the business, employees are treated in a fair and polite manner leaving room for discrepancies or any form of employee de-motivation.
An ethical organization follows the most appropriate path and is consistently guided by set principles. This in turn reduces the risks taken by the organization and hence leads to improved overall productivity. Sales management is an essential part of the business. This sales process helps in bridging the gap between business offerings and its customers (Tanner et. al., 2014). Business ethics lead to improved sales management and better employee performance owing to improved customer relationships and honesty as well as integrity of the sales team (McClaren, 2013). Customer relationships eventually lead to creation of a loyal customer base and hence provide the business with stability and consistent growth.
Overall the ethics of a business that guide the organization towards long term sustainability and growth. These ethics form the backbone of a business because they not only assist the business in making strategic decisions but also guiding the organizations in ensuring customer as well as employee loyalty. Various facets of a business including stakeholder satisfaction, customer buying behavior and brand positioning are all directly impacted by the ethical policies of the organization.
Various literature discussed above depict the importance of ethics in any business. It is the responsibility of every employee associated with the business to ensure the integrity of the organization. The managers of the business play a significant role in establishing and maintaining business ethics throughout the organization. There are several leading organizations that are renowned for the ethical responsibility that they demonstrate through their actions as their contribution to the world.
Importance of Ethics for Competitive Advantage
Organizations are often faced with critical situations where they are expected to make ethical decisions (Weiss, 2014). A leading clothing brand H&M recently became the talk of the town when it released an advertisement across all digital and print platforms depict the release of a new hoodie. The hoodie had a picture of an African child with words “Coolest monkey in the jungle”. The advert was clearly racist in nature and the brand faced the wrath for it from several stakeholders across the globe. Owing the reach of social media platforms, the new spread like wild fire and several of H&M’s customers took to twitter and Facebook to shame the brand for such a move. Leading celebrities like rapper G-Eazy, Basketball legend LeBron James and influencer Mina Mayweather actively dissed the brand on several social media platforms (The Independent, 2018).
The theory of deontology states that people must adhere to their duties when engaged in the process of decision making at the time when ethics are in play. This is role and power of ethics in any business. The managers of H&M resorted to their code of conduct and decided to take down the ad immediately. Their CEO made a public apology and assured that there was a clear difference between the impact and the intent of the advertisement. This helps in understanding that every communication conducted by the business must be driven by strong organizational ethics (Collins, 2012). Without that, the brand would have to bear the brunt of it.
An active wear apparel brand Patagonia based in the UK has time and again been referred to as a firm with strong ethics in place. Patagonia has a strong code of conduct which continues to back the business in times of crisis. The brand has consistently put efforts in maintaining its ethical sanctity and taking ethical decisions even in the face of severe adversity or competition. Patagonia has established ethical sourcing policies which ensure that all their raw materials are sourced from environment friendly sources. The brand has also been putting remarkable efforts to reduce its carbon footprints. Their “1% for the planet” motto allows the brand to devote 1% of the business’s total sales towards environment sustainability and growth on a year or year basis (Stevenson, 2012).
All these strategies clearly evidence the strong ethical value set of the brand and highlight upon the efficiency with which Patagonia consistently works towards ensuring environmental sustainability. As a result, today Patagonia is a leading apparel brand with a positive brand image throughout the globe. Patagonia is known for its ethical stance and hence is trusted for the quality that it delivers. The brand’s customers are staunchly loyal and all of the business’s stakeholders have developed a long term and sustainable relationship with the brand.
Importance of Ethics in Decision Making
Leading software giant, Adobe is leading protagonist for business ethics. The brand is known to be trusted and respected among customers and other stakeholders owing to its strong ethics. The brand consistently strives to contribute to the environment and create value for all their stakeholders. Adobe has initiated over 70 programs for conservation of energy in order to create sustainability. Adobe’s ethics have effectively trickled down from the top management to the bottom in an efficient manner. The code of conduct at Adobe also ensures that not just the leadership but even employees participate towards building a sustainable environment. Over 2000 employees are engaged in recycling and composting programs of Adobe which has helped in directing approximately 97% of the site’s solid waste from landfills (Sharma, 2017). The business’s code of conduct guides all the stakeholders associated with Adobe and ensure optimum utilization of resources through all business processes.
Adobe’s strong ethical values drive every significant aspect of the business including inventory management, recruitment, recycling, working conditions and promotions. The brand has the most number of green offices in the world and still consistently aims to reduce its carbon footprints on the planet. The future plans of the brand include more than 2000 new projects with the aim of development of environment and ensuring ethical decision making.
Employees of any organization play a significant role in defining and sustaining the ethical values of a business. In fact, employees can drive businesses towards a more ethical approach. Google’s staff has spoken largely against the Department of Defense’s maven project. The opposition among employees against an ethically wrong project was witnessed in the form of several resignations followed by written letters signed by thousands of employees. The appeal ended with the non-renewal of the contract (Forbes, 2018). This is a clear example of how employees can drive an organization towards a more ethical business strategy.
There are several aspects of ethics in business. In fact, ethics plays a critical role in everyday business functions right from recruitment to procurement and marketing. Customer service also falls under the large spectrum of business ethics as it involves ensuring that the business delivers value and believes in long term association with all business stakeholders at large. Businesses often gain perspective on their ethics after putting efforts in communicating with customers of all sorts. This is why businesses largely focus on after sale service delivered to customers.
Importance of Ethics for Positive Workplace Environment
Similarly, while conducting recruitments and through the entire process of selecting employees for the business from a bunch of interested candidates, ethics play a critical role in ensuring that the most competent candidate is shortlisted for the job irrespective of their backgrounds, caste, connections, race or gender (Holland & Jeske, 2017). This also creates a culture of equality in the face of staunch diversity. Business’s ethical policies and strategies as adopted by the seniors of the business largely impact every important function within the organization. These ethics define the business and its stance in the environment of global competition.
Ethical philosophy of the business and its stakeholders also leads to increased effectiveness. These ethics guide the business and eliminate the chance of high risks. Not only organizational efficiency, but associating with an ethical firm also results in personal growth and development of business stakeholders in their personal lives.
Conclusion
Business ethics form the core of any organization. These are strong values that drive the business in several different situations that the business encounters in its lifetime (Michaelson et. al., 2014). These ethics adopt a top down approach and trickle down from the top management to all employees of the business. Several organizations have been known to adopt and maintain strong ethical policies which have helped them build a strong customer base, loyal stakeholders and a positive positioning in the market of operation. In the face of increasing competition, it is a tough choice for organizations to make between taking the unethical road in order to make profits and grow business or remain ethical and work hard to survive the competition with increased innovation, improved strategy and effective management of resources.
Ethics are critical in every facet of the business. All business functions are strongly driven by the ethical policy of the firm and these ethics are reflected in several business functions starting from recruitment and selection to operations management or financial sourcing. This report has highlighted upon the role played by ethics in business by understanding examples of three highly ethical firms. These strong brands have achieved immense appreciation and acceptance within the industry and gained a set of loyal customers through their ethical stances.
There are several organizations which are unable to adopt to an ethical policy. Many times these businesses are caught up in fraudulent activities. If a business does not follow high ethical standards then the organization may lose customer loyalty. In order to address these problems, the following strategies are recommended.
Importance of Ethics for Customer Loyalty
The business founders must establish a formal policy at the time of the business’s inception and ensure that it is circulated among all the employees. All the managerial as well as strategic business decisions must be taken in accordance with this policy. The business must also ensure that these ethics are not only evidenced in the firm’s actions but are also effectively communicated to all business stakeholders. Long term business associations must be built with stakeholders that share the same ethics as the business. These ethics will guide the business in the right direction and ensure establishment of long term and mutually beneficial relationships.
References
Barry, N., 2016. Business ethics. Springer Publishers. United Kingdom.
Collins, D., 2012. Business ethics: How to design and manage ethical organizations. Hoboken, NJ: Wiley.
Cooren, F., Kuhn, T., Cornelissen, J.P. and Clark, T., 2011. Communication, organizing and organization: An overview and introduction to the special issue. Organization Studies, 32(9), pp.1149-1170.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
Forbes, 2018. ‘Can employees force a company to be more ethical?’. Available at https://www.forbes.com/sites/enriquedans/2018/06/19/can-employees-force-a-company-to-be-more-ethical/#38381f9d27e3. Accessed on 16 July, 2018.
Gamble, J.E., Thompson, A.A. and Peteraf, M.A., 2013. Essentials of strategic management: The quest for competitive advantage. McGraw-Hill/Irwin.
Holland, P. and Jeske, D., 2017. Changing Role of Social Media at Work: Implications for Recruitment and Selection. In Electronic HRM in the Smart Era (pp. 287-309). Emerald Publishing Limited.
Malik, M.E., Ghafoor, M.M., Hafiz, K.I., Riaz, U., Hassan, N.U., Mustafa, M. and Shahbaz, S., 2013. Importance of brand awareness and brand loyalty in assessing purchase intentions of consumer. International Journal of Business and Social Science, 4(5).
Mandhachitara, R. and Poolthong, Y., 2011. A model of customer loyalty and corporate social responsibility. Journal of Services Marketing, 25(2), pp.122-133.
McClaren, N., 2013. The personal selling and sales management ethics research: Managerial implications and research directions from a comprehensive review of the empirical literature. Journal of Business Ethics, 112(1), pp.101-125.
Mehta, M., Kurbetti, A. and Dhankhar, R., 2014. Review Paper–Study on Employee Retention and Commitment. International journal of advance research in computer science and management studies, 154(5).
Michaelson, C., Pratt, M.G., Grant, A.M. and Dunn, C.P., 2014. Meaningful work: Connecting business ethics and organization studies. Journal of Business Ethics, 121(1), pp.77-90.
Rajhans, K., 2012. Effective organizational communication: A key to employee motivation and performance. Interscience Management Review, 2(2), pp.81-85.
Sharma, S. K. (2017). A comparative study of corporate social responsibility in public and private sector organizations in India. Sage Publishers. India.
Stevenson, S., 2012. Patagonia’s founder is America’s most unlikely business guru. The Wall Street Journal, 26.
Tanner, J., Honeycutt, E.D., Erffmeyer, R. and Honeycutt, E.D., 2014. Sales management. Pearson. United States.
The independent, 2018. ‘H&M faces customer boycott over racist hoodie’. Available at https://www.independent.co.uk/life-style/fashion/hm-hoodie-racist-boycott-advertising-people-h-m-a8149246.html. Accessed on 16 July, 2018.
Trevino, L.K. and Nelson, K.A., 2016. Managing business ethics: Straight talk about how to do it right. John Wiley & Sons.
Tuten, T.L. and Solomon, M.R., 2017. Social media marketing. Sage. United Kingdom.
Weiss, J.W., 2014. Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers. United States
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
