Businesses around the world are increasingly operating under a model that uses holistic techniques and strives to be ethical. Called holistic businesses, these organisations consider the impact of every process when developing policies and procedures. This is opposed to focusing on specific components, such as profit.
Ethical business practices involve ensuring the highest legal and moral standards are observed in your relationships with stakeholders. In other words, it involves considering the effect your business operations have on your workforce, your business partners, the community and the environment.
The approach is often described as focusing on ‘people over profits’. But by nurturing long-term relationships based on trust, your business will perform better and be more viable in the long run.
The Role of Ethics in Business
Ethics are the moral standards we rely on to make decisions. They help us define what kind of behaviour our businesses should or should not engage in. People have argued against the idea of applying moral standards to business actions in the past. The argument was that an organisation should only produce what the market needs and do so in an effective way.
But the majority of people today understand that ethical business practices are crucial for an organisation. The community expects a business to operate in an ethical manner that enhances the image of the community as a whole.
Building Trust and a Good Reputation
A reputation for consistent ethical decisions builds trust in your business within the community, with customers and with business associates and suppliers.
The benefits of having high ethical standards include:
- Higher morale within the organisation
- Attract new customers
- Build customer loyalty
- Increase the value of your business
- Reduce the risk of negative publicity or backlash
- Encourage the community to value your business
Remember, the business owner is a role model for employees. If a business owner acts dishonestly or indifferently towards people who are important to the business, the likelihood of conflict and misconduct occurring among employees and suppliers is higher.
Writing a Code of Ethics
Ethical behaviour is simply making good business decisions based on an established code of ethics. Business owners should establish a written code of ethics to serve as a framework for decisions made by them and their employees.
A code of ethics helps to instil a culture of principled and honest behaviour and decision making in the workplace. When developing this code, business owners should consider the following.
- Identify general principles that would lead to fair business practices
- Check with industry associations and similar businesses for basic standards to review
- Consider the expectations and values of the community and other stakeholders
- Remember that ethical questions don’t always have a well-defined, faultless answer
- Write specific statements to assist you and others in making day-to-day ethical decisions
- Apply this code to a written policy and procedure manual
- Train your employees and discuss the importance of ethical practice to them
Your code of ethics should apply to all business activities. This could range from how you handle employee performance problems to minimising the negative impact of your business operations on the environment.
About LJ Hooker Business Broking
LJ Hooker Business Broking is Australia’s leading business broker. Based in Sydney, we buy and sell businesses from well-known franchises like Pizza Hut as well as independent small businesses.
If you’re interested in buying or selling a business, get in touch with our team today. Call 02 9552 1111 or contact us online.