Sustaining and growing your business – Part III: Ethics as a competitive advantage
In my last article about sustaining and growing your business, I spoke about the importance of looking after both internal customers (staff) and external customers, and provided specific points on how to care for internal customers, so that they can take care of external customers. Indeed, when we speak about value creation, we must understand that value must be created for both internal and external customers. This week we will look at other factors required for a successful and sustainable business.
Those factors include: Practicing Ethics/integrity and seeing it as a competitive advantage, clarifying your mission, vision and values, establishing standard operating procedures and knowing how to use feasibility studies, business plans and business models. Today’s article will focus on Ethics as a competitive advantage.
Many of us are put off when we hear the word, Ethics, because we feel that the only way to “make it” in Nigeria is to give in. Indeed, many think it is impossible to do business ethically in Nigeria, and besides, we think it implies being less profitable. This general mindset makes it easy for people to accept giving or receiving bribes, or accepting to inflate prices to the advantage of a procurement officer. Evidence however shows that such companies never really last. Examples of large and small companies abound, but will not be mentioned here, out of respect for those involved. Nigeria recently experienced the shut down and take over of some of our biggest banks that for many years, enjoyed stratospheric profits, until regulatory authorities clamped down on them for major infractions. They would still be in existence today, if they were doing things right. Many companies also find themselves paying huge tax penalties, after “smartly” thinking they had successfully evaded taxes for years. Unfortunately, most of us bring this down to bad “luck”.
The point however is that being ethical provides a huge competitive advantage, especially in an operating environment where unethical practices are prevalent. This is because you suddenly become the only provider customers can trust. A good example is the mobile phone company, Slot. This company has over the years become the destination of choice for customers who don’t want to be cheated into buying fake products. While the industry is filled with many players who compete keenly, Slot stands out easily. The Slot advantage comes from being the most trusted provider of genuine mobile phones and accessories, in an industry where fake products and unethical practices abound. Slot has since surpassed all the other players that existed before them as most high net-worth individuals and organisations head straight to Slot for their mobile phone requirements. Slot, with a current turnover in the range of N40 billion, has been the industry leader for over 10 years, despite turning down significant businesses when they demand bribes, kick-backs or inflated pricing. In the long-run, the patronage of customers and organisations seeking an honest supplier has surpassed the quantity of unethical businesses turned down by the company. In addition, they have attracted dealerships and partnerships with global brands. These mutinationals, after carrying out a thorough due-diligence on the company, and finding that they have clean records, willingly appoint them as dealers or partners and ship goods worth millions of Dollars to them on credit. This credit advantage is a huge financial advantage for Slot, as it enhances cashflow and profitability. The lesson here is that being ethical in business pays in the medium to long-term, even though it entails sacrifice, in the short-term. Once the market begins to identify your company and staff as people of integrity, it is only a question of time before your company becomes a respected and preferred choice, especially if other players are known to cut corners. This is how being ethical can become a compelling competitive advantage.
A further disadvantage of being unethical is the impact it has on employees. Once an entrepreneur begins to engage in unethical deals or is cheating customers either with fake products or fake promises, employees soon learn to do the same. They also will not feel bad cheating or stealing from the company, because their boss is doing the same to others. Being unethical destroys a company both internally as well as externally. On the other hand, when employees see their boss do the right things, they also learn to do the same. Even if some bad eggs are discovered among them, they will usually be few and their negative actions will usually be on a smaller scale due to the fear of being caught. It is therefore difficult for an unethical company to expand to a number of outlets because it will be more difficult for the business leader to effectively monitor the actions of such employees. On the other hand, when a company has a general culture of being ethical, it makes it a lot easier to groom employees who can successfully manage other branches. A company should however have checks and balances in their system, irrespective of the culture. An ethical culture however reduces the motivation to find ways around the system to cheat the company or customers. Consequently, as an entrepreneur, if you want to run a profitable and sustainable business, it is important to think about the values that need to be enshrined in your practices, and ethics should be a very important one of them. In the well-known book titled, “Good to Great” by Jim Collins, his research findings showed that the fundamental reason why some companies go from good to great, while others don’t, was because the great companies never compromised their values, no matter the situation. He concluded that,
“Enduring great companies preserve their core values and purpose, while their business strategies and operating practices endlessly adapt to a changing world. This is the magical combination of ‘preserve the core’ and ‘stimulate progress’.” If entrepreneurs imbibe this principle, they stand a strong chance of building a successful and sustainable business. The next article will focus on how clarifying your mission, vision and values can contribute to building a successful and sustainable business.
Dr Henrietta Onwuegbuzie is a globally certified Management Consultant and a Senior Lecturer in Entrepreneurship at Lagos Business School: Twitter: @honwuegbuzie; email: email@example.com
No comments yet