Business Ethics – Why Are They Important in Small Business?

Business Ethics – Why Are They Important in Small Business?

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Rarely is there an individual who does not encounter an ethical or moral dilemma at some point in his or her business life? Whether that individual is the owner of a multinational corporation, a small business entrepreneur, or a new or established employee, everyone will likely have to face such an instance eventually. Much like a personal ethical dilemma, an individual is faced with making a decision based on how it will affect not only himself but on how it will affect the organization as a whole. One of the major problems when dealing with an ethical dilemma in business is that business profits and the legality of a decision often sway individuals.

The Institute of Business Ethics, whose slogan is “doing business ethically makes for better business,” describes the term business ethics as such.

Business ethics is the application of ethical values to business behavior. It applies to any and all aspects of business conduct, from boardroom strategies and how companies treat their suppliers to sales techniques and accounting practices. Ethics goes beyond the legal requirements for a company and is, therefore, discretionary. Business ethics applies to the conduct of individuals and the conduct of the organization as a whole. It is about how a company does its business, and how it behaves intrinsically.

As clear as this definition is, it is certainly open to interpretation. Therefore it must be understood that applying business ethics to any situation is entirely subjective.

One can also understand business ethics, and ethics of any kind, as applying a sense of fairness to a situation. Even with a sense of clarity applied to the use of business ethics, reaching a just and moral decision can be a complex process for most individuals. The subject of business ethics has been a source of great debate in recent years as the heads of major (and minor) corporations are revealed as less than ethical characters both in the way they do business and in their personal conduct. However, it may be said that any individual who does not practice business ethics cannot be personally ethical, even though the reverse may not also be true. Ethics generally has a long history of applications. Centuries ago, a man’s ethical practices defined himself as an individual. However, as populations grew, the necessity for incorporating the best business practices into a company became somehow less important because there was always another customer around the corner and the owner of a business was rarely the focus of attention in a community the way he or she may have been in the past. A company’s administration took a seat in the background and hired representatives to deal with any fallout. Ethics rely on several factors, one of the most important of which is culture. Again, like the business person of the past, a culture’s ethical practices will largely depend upon the value that is placed on them. Business ethics have the unappealing conflict of often being contrary to what is legal. Often what is “right” is not necessarily what is legal, and a business must consider this conflict when making ethical judgments. Although many in the business world believe that a business has no room for ethics if it is to function competitively, the numbers of corporate whistleblowers indicate that there is still room for ethics in business.

Western societies place a great deal of emphasis on success. However, in business, there are often conflicts between ethical behavior and business success. This disparity is often multiplied for the small business owner. To compete with larger businesses, it may be tempting to abandon ethics to make an adequate profit. Additionally, the small business person is relatively autonomous in his or her decision-making; he or she does not have to answer to a large employee base or a corporate governing board. It is also interesting to note that the small business leader often has his or her decisions impact a greater number of individuals than the employee of the small business. For instance, a small business owner may have his or her decision affect his or her customer base as well as his or her employee base. The employee will likely find that his or her decision will only directly impact his or her immediate circle of coworkers. However, the pressure to succeed is both internal and external pressure and often leads individuals to make ethical decisions that are based more on those pressures than their own moral judgment. As consumers grow wary of those that they do business with, one must understand that there is cause for such wariness. The cynical American consumer has learned, often the hard way, that there is little room in business for ethics. In a society where the customer used to be king, the consumer has more often than not experienced several distasteful experiences with businesses, both large and small.

Some experts argue that any focus on profitability is bound to test the limits of ethical practices. They assert that to assume that the primary function of a business is to serve its client base ethically is idealistic and that the nature of a free economy dictates that ethics must take a back seat to increase profits. Although it is rarely the conscious intent of a business to harm the public interest, reality dictates that the business’s ability to increase profits will determine its success. Publicly owned companies experience extra pressure in this arena. It isn’t easy to draw investors to a company based on its ethics. Investors are looking for a return on their investment, and ethical performance does not equal dollars. Some economists assert that, in any competitive economy, ethics are impossible to uphold, and that a company can legitimately bypass ethics with the excuse that unethical practices are the only way to make a profit.

Unlike larger corporations, the small business leader is uniquely positioned to shape the ethical practices of his or her business. Small businesses have a smaller employee base to police when applying ethical policies than do larger businesses. It is important to understand that, similar to the ethical dilemmas of large corporations. However, an individual surely knows the difference between the correct ethical decision and the wrong road, the choice to throw ethics to the wind is often made because the unethical choice is more profitable. This may, however, happen much less often in smaller organizations because the individual or individuals who are harmed by the unethical decision, and someone who is always harmed, is more visible to the small business. Major corporations and their decision-making machines are often far removed from the individuals that their immoral and/or unethical decisions affect. This may make the wrong decision much easier to make.

The unique position that the small business owner is in regarding the formation of an ethics policy yields a great responsibility. A proactive business leader formulates a statement of organizational values that employees of the company are expected to embrace – at least while performing duties in the company’s service. An organizational ethics policy is an announcement to the employees, the customer base, and the community as a whole that the business is prepared to conduct itself and its practices on an ethical level. Such statements invite the respect of all parties involved in doing business with such an entity. However, it is imperative that the small business owner not make the same mistake that larger organizations often do; the ethical policies that a business develops must not conflict with the organizational goals. It is unethical in itself to develop an ethical policy that an employee cannot possibly follow and maintain his or her employment. When faced with the decision between an ethical decision and his or her https://www.papublishing.com/ job, an employee will almost always choose the job.

Therefore the policy must be in reasonable alignment with the organizational goals of the business. It is equally important, and maybe more so, that the small business leader lead by example. Employees, especially in a smaller organization, are less likely to conduct themselves ethically if they receive implicit permission not to. The end result of such a practice is that the small business owner can be assured that he or she is conducting business in a manner that encourages the trust of his or her customers as well as his or her employees. And since consumers have become very wary of doing business with an entity they feel they cannot trust, the small business can enjoy the profits of a loyal customer base. The small business owner has an advantage over the larger corporations in that it can elicit the consumer’s trust by applying ethical business practices that give the customer the feel of an equal business relationship rather than one where the consumer buys based on need alone. Many believe that such practices can draw businesses away from large corporate entities and back into a customer-focused business format.

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