LEADERSHIP AND MANAGEMENT Bernard Liebowitz what's wrong with being "borderline ethical"? Everyone would agree that lying, cheating, stealing, or creat- ing dangerous working conditions just to increase profits are unethical business practices. Examples abound in the news today of business leaders that have been charged, and sometimes convicted, of such practices, to their shame and the general condemnation of the public. But what about business practices such as cutting prices not just to make the sale hut to purpose- fully destroy a competitor, or keeping employee salaries low without compensatory benefits just to increase profitahility? Perhaps such "borderline ethical" practices could be characterized as acceptable in a highly competitive environment. Indeed, it could he argued that in such an envi- ronment, ruthless business practices are neces- sary for a business to survive. Yet something is wrong with this picture. Engaging in borderline ethical hehaviors is ulti- mately self-defeating. Businesses, whether for- profit or not-for-profit, should always strive to operate profitably. However, borderline ethical behaviors can curtail profitability. Maybe not today, maybe not until the market has redefined itself, but sometime in the future, it will happen. The Costs of Borderline Ethical Behavior Consider the following two examples. A firm is out to destroy its competitors, and it is in a good position to do so. The organization's culture emphasizes competitiveness and rivalry among its management team and its departments. Micromanagement is the order of the day, and reprimands for not meeting stiff goals are doled out liberally. As a result, employees face a great deal of stress in their work environment. Turnover is high and the cost of replacement (including money spent finding, qualifying, and training new employees to rebuild the "team") is also high. The organization also incurs costs that are much higher than the industry norm for employee visits to physicians (for problems such as marital and individual therapy, ulcers, and ten- sion), workers' compensation (for an unusually high number of accidents occurring within the company), and poor-(juality workmanship. The organization succeeds in destroying its immediate competition, but soon, a more efficient and pro- ductive competitor appears on the scene to "eat their breakfast, lunch, and dinner," Another firm, wbich specializes in home con- struction, pays its employees the bare minimum wages and demands that its employees work long hours with minimal compensation. It "nickels and dimes'" its suppliers with bare-bones orders and late payments. The firm cuts corners wher- ever possible, neglecting to provide custom fea- tures originally promised to wealtby customers at no extra costs. When a customer argues for the feature, the firm adds it to the price of the home and hopes the customer won't notice. The firm has been able to get away with this type of behavior without s ...

1. LEADERSHIP AND MANAGEMENT
Bernard Liebowitz
what's wrong with being "borderline ethical"?
Everyone would agree that lying, cheating, stealing, or creat-
ing dangerous working conditions just to increase profits are
unethical business practices.
Examples abound in the news today of business
leaders that have been charged, and sometimes
convicted, of such practices, to their shame and
the general condemnation of the public.
But what about business practices such as cutting
prices not just to make the sale hut to purpose-
fully destroy a competitor, or keeping employee
salaries low without compensatory benefits just to
increase profitahility? Perhaps such "borderline
ethical" practices could be characterized as
acceptable in a highly competitive environment.
Indeed, it could he argued that in such an envi-
ronment, ruthless business practices are neces-
sary for a business to survive.
Yet something is wrong with this picture.
Engaging in borderline ethical hehaviors is ulti-
mately self-defeating. Businesses, whether for-

2. profit or not-for-profit, should always strive to
operate profitably. However, borderline ethical
behaviors can curtail profitability. Maybe not
today, maybe not until the market has redefined
itself, but sometime in the future, it will happen.
The Costs of Borderline Ethical Behavior
Consider the following two examples. A firm is
out to destroy its competitors, and it is in a good
position to do so. The organization's culture
emphasizes competitiveness and rivalry among its
management team and its departments.
Micromanagement is the order of the day, and
reprimands for not meeting stiff goals are doled
out liberally. As a result, employees face a great
deal of stress in their work environment.
Turnover is high and the cost of replacement
(including money spent finding, qualifying, and
training new employees to rebuild the "team") is
also high. The organization also incurs costs that
are much higher than the industry norm for
employee visits to physicians (for problems such
as marital and individual therapy, ulcers, and ten-
sion), workers' compensation (for an unusually
high number of accidents occurring within the
company), and poor-(juality workmanship. The
organization succeeds in destroying its immediate
competition, but soon, a more efficient and pro-
ductive competitor appears on the scene to "eat
their breakfast, lunch, and dinner,"
Another firm, wbich specializes in home con-
struction, pays its employees the bare minimum
wages and demands that its employees work long
hours with minimal compensation. It "nickels

3. and dimes'" its suppliers with bare-bones orders
and late payments. The firm cuts corners wher-
ever possible, neglecting to provide custom fea-
tures originally promised to wealtby customers at
no extra costs. When a customer argues for the
feature, the firm adds it to the price of the home
and hopes the customer won't notice.
The firm has been able to get away with this type
of behavior without serious consequences to its
revenues and profit only hecause of a lack of
competition in its area. An influx of strong com-
petitors changes everything, however. Suppliers
hecome increasingly unwilling to work for the
firm, forcing the owner to pay higher fees and
demanding more prompt payment. Employees
find opportunities elsewhere, with bigber pay. As
a result, turnover, which had been high before,
becomes even higher, and new employees
demand higher salaries and more reasonable
hours. Although the firm's revenues keep pace
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By Linda Fisher Thornton
7 Lenses: principles and practices.
Ethical Leadership Interactive
How do you get people to act ethically at work and create an

5. ethical culture?
It starts at the top—it begins with ethical leadership. People
want
a leader who treats everyone with respect, is fully inclusive,
respects
differences, and is willing to build trust inside the organization
and
across political, economic, social and cultural boundaries.
How can leaders best address the challenges ethical issues pose
in
daily life? Ethical leaders have a great impact on how people
behave
and what they achieve. Those who succeed in leading ethically
not only
improve their business and culture, they also help make a
difference
in the world. Effective leaders focus on what’s right and
exemplify to
their people that they are there to help, and not to exploit the
vul-
nerabilities of others. Their organizations typically respond to
their
example and their desire to serve others and make a positive
difference.
Here are seven actions leaders can take to inspire ethical
conduct:
1. Face the complexity involved in making ethical choices.
Don’t
oversimplify decisions. Openly discuss the ethical grey areas
and ac-
knowledge the complexity. Involve others more in ethical
decisions.
Talk about the difficult ethical choices, and help others learn to

6. take
responsibility for making ethical decisions carefully.
2. Talk about the right thing to do in the context of your daily
challenges. Don’t separate ethics from day-to-day business.
Make
it clear to your people that ethics is “the way we operate” and
not a
training program or reference manual. Every activity, whether it
is a
training program, a client meeting, or an important top
management
strategy session, should include conversations about ethics.
3. Demonstrate respect for everyone all the time. Don’t allow
negative interpersonal behaviors to erode trust. Make respect a
load-bearing beam in your culture. Be an ethical leader who
expects
it and practices it. Cultivate a respectful environment where
people
can speak up about ethics and share the responsibility for living
it.
Build trust, demand open communication and share the
ownership
of organizational values.
4. Take responsibility broadly, and reach for high ethical
leader-
ship. Don’t think about ethics as just following laws and
regulations.
Take action and show consumers and other stakeholders that
you are
actively engaged with ethical issues that matter. Recognize how
ethics
influences their reasons to buy from you, and demonstrate your
com-

7. mitment to go beyond mere compliance with laws and
regulations.
Prove that you are committed to ethical issues, including human
rights, social justice and sustainability.
5. Hold everyone accountable, and expect leaders to model the
standards. Don’t exempt anyone from meeting ethical
expectations.
Allow no excuses. Make sure that no one is exempted from
meeting
the ethical standards you adopt. Maintain the status of ethics as
a total,
absolute, “must do” in the organization. Hold everyone,
particularly
senior leaders and high profile managers, accountable. No
exceptions!
6. When you talk about ethics, don’t just talk about the
negative.
Celebrate positive ethical moments. Be a proactive ethical
leader,
championing high ethical conduct, and emphasizing prevention.
Talk
about what positive ethics looks like in practice as often as you
talk
about what to avoid. Take time to celebrate positive ethical
choices.
7. Don’t ever stop—talk about ethics as an ongoing learning
journey,
not a once-a-year training program. Integrate ethics into every
action
of your organization – everything people do, touch, or
influence. Talk
about ethics as an ongoing learning journey, not something you
have

8. or don’t have. Recognize that the world changes constantly, and
that
ethical conduct requires that everyone remain vigilant. Ethics
has an
important and permanent role in our work lives for as long as
we live.
You will reap many business benefits from intentionally
practicing
highly ethical leadership? I invite you use my 7 Lenses as an
action-
able road map for leading ethically, engaging constituents
deeply and
building trust for the long term. LE
Linda Fisher Thornton is CEO of Leading in Context, has been
developing
leaders for 25 years, and is author of 7 Lenses: Learning the
Principles and
Practices of Ethical Leadership.
Email [email protected]
Download Linda’s article
“What Ethical Leaders Believe:
A Change This Manifesto”
Read Linda’s article
“5 Ways CEOs Can Build an
Ethical Culture”
34leadership excellence essentials presented by HR.com |
01.2014
Visit Linda’s Leading in
Context Resources page

9. http://changethis.com/manifesto/111.04.7Lenses/pdf/111.04.7Le
nses.pdf
http://leadingincontext.com/2013/11/06/5-ways-ceos-can-build-
an-ethical-culture/
http://leadingincontext.com/resources/helpful-resources/
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