Integrity and Ethics

Volume 132, No. 35  - Friday, February 29, 2008

Recent history is thick with hot-shot companies that flame out in scandal, but we rarely hear about real survivors in the news, companies like J.E. Rhoads and Sons, founded in 1702 and still operating, the oldest surviving American company.

Somehow Rhoads and Sons managed to survive five major depressions, the industrial revolution, the technological revolution, and outsourcing to Asia. They make industrial belts, if you don’t know.

In the 1700s their founder ascribed the company’s success to a commitment to “treat people as they want to be treated,” customers and employees alike.
His dedication to this principle has survived, and for most of the 20th century, “Rhoads family members and managers often left the company for months at a time to do work that helps mankind” (according to an article by Nancy Sheperdson from 1993).

Now that’s one technique you won’t read about in best-selling business books. Can ethics really be a key to long-term success?

According to the New Oxford American Dictionary, ethics means, “moral principles that govern a person’s or group’s behavior.” Now don’t get me wrong, I am not a moralist, nor a business guru, for that matter, a guru of any kind. I am a pragmatic person. It is my fascination with what makes businesses “work” that got me into this.

So in the spirit of better business, I invite you to consider this “definition” with me in light of your business. Is your business driven by moral principles? Not MORALISTIC principles mind you, empty memorized rules given to us by others.

But true morality, humanistic morality: what used to called an inner compass; what Emerson called the inner voice; and Confucius called the inarticulate silent tones of the heart that should be listened to even before thinking.

Doing the right thing, it seems, is inextricably tied to long-term success. It is in our own best interest, and that of our owners or stockholders, to act in the best interest of all “stake-holders”: customers, suppliers, the community, society, government, and even, forgive me, competitors.

There, I said it, though I won’t hold my breath waiting for an academy award winning film about the Market with the line “Ethics is Good.”

I once knew a waiter who after an evening at the race track told me “at one point I was up 500 dollars, just before I lost my paycheck.” (See Enron, Worldcom, Adelphia, and some would say, given their current condition, Ford.)

Short-term profit, in fact, may seem like “easy” money, but long- term profit will always overtake it in the long run, no matter how great that profit is in the short run.

Integrity is the quality that expresses ethics in action. According to the New Oxford, integrity is:
1. the quality of being honest and having strong moral principles
2. the state of being whole and undivided.
3. the condition of being unified, unimpaired, or sound in construction.
4. internal consistency or lack of corruption in electronic data.

The first is obvious, but to remain honest, and live by moral principles is easier to talk about than to act on when you are faced with whether to ship a mediocre batch of cheese or take the loss, or a tricky question related to your nutrition label. But it is these seemingly small, often occurring, day-to-day decisions that add up to an honest life lived from moral principles...or, something else. Hence the wording STRONG moral principles.

The last three definitions are interesting in light of exploring what makes a truly successful business. The state of being whole and undivided could also be described as knowing who you are, and focusing on what you can do well, one of the core principles that drives successful businesses. If you are a cheese company, this would imply, it might be considered a good idea to focus on making cheese well. Too many companies end up losing their way.

Unified evokes in me the responsibility of management is to communicate a clear vision. Once again, who are we, and who do we want to be. How do we define success, for ourselves, as a company?

Unimpaired and sound in construction brings to mind the responsibility of management to remove all obstacles to pride of workmanship, the Deming mantra. To build a sound company that follows the value-stream where anything that doesn’t add value is arbitrary and wasteful, and all waste is to be minimized, if not eliminated (which includes a great deal of the time spent in most meetings).

To be unified brings to mind skills training, too often neglected. Training forges the foundation on which consistent quality is built. And how much time and resources do you spend on training?

Internal consistency evokes written procedures, carefully crafted and followed, and constantly improved; you can’t improve a thing if you don’t know what is really being done with it. Procedures are the “social contract” by which groups of people in companies agree to work, as long as they have an avenue to improve those procedures if it makes sense.

As for data integrity, as Dr. Deming said, “without facts, you’re just another person with an opinion.” The job of accounting is to count, and paint a pretty picture for the bankers, investors and the IRS, it is not their job to dictate how the things to be counted should be made, handled or acquired.

Integrity in business implies a balance between Operations that makes, Marketing that plans, Sales that follows through and sells and Accounting that counts. Operations should not be forced to adapt how they do things to make counting things easier, in fact, the most important thing accounting can do is supply good data in simple reports that operations, marketing and sales need to to do their job in a timely basis.

Integrity further implies a balance between the commercial and the human. One of the most striking failures in current corporate law is that an inanimate entity, the corporation, is given the same rights as human beings, without many of the responsiblities, in complete denial of the obvious fact that human lives end, our time is limited and that needs to be respected.

But just because current law gives these corporations rights with few responsibilities doesn’t mean that companies can’t aim higher on their own. I am an unbridled capitalist, but that doesn’t preclude a little horse-sense.

Popular culture may glorify the myth of profit at all cost, like block-buster movies, made to appeal to 10-year-old boys, but we, as adults, don’t have to be ruled by popular culture. We have a choice. I prefer Adult capitalism to Adolescent greed, building human Capital as well as little green sheets of paper.

We need to keep our definition of “results” under careful scrutiny. Is a good result a short-term profit that leads to ultimate failure, as we have too often witnessed lately?

My vote goes to companies like Rhoads and Sons, who have ridden a sense of responsibility and community to profits since 1702. (Do the math! 8 to 10 percent net, invested for 318 years at the long- term average return of 12 to 13 percent, adjusted for inflation, adds up to a lot more money than Enron ever dreamed of.)

Here’s an idea: the next time any of us, my loyal and and patient readers, are faced with a business decision that makes us feel queasy, like a child about to do something they know they shouldn’t do, let’s listen to the inarticulate tones of our hearts even before thinking about our decision.

How’s that for practical business advice?


Dan Strongin is managing partner and owner of Edible Solutions, a consulting company focused on helping companies making great food make a profit. He will be writing a monthly column in Cheese Reporter. Strongin can be reached via phone at (510) 224-0493, or via e-mail at dan@danstrongin.com

 

Other Strongin Articles written for Cheese Reporter
dot Pricing:  The Perceived Value
Designing the Effective Sell Sheet
Common Sense
It All Begins in The Mouth
Of Cars...

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