It’s Profitable to be Ethical
Alankar Karpe

"Any idiot with a strong enough stomach can make quick money, sometimes a lot of it, by slashing costs and milking customers, employees, or a company's reputation. But clearly that's not the way to make a lot of money for a long time. The way to do that is to create so much value that your customers wouldn't dream of looking for another supplier. Indeed, the idea is to build a value creation system of superior products, service, team work, productivity, and cooperation with the buyer." - Thomas Teal, former senior editor of the Harvard Business Review, in Fortune.

"Ethics is the new competitive environment." - Peter Robinson, CEO, Mountain Equipment Co-op.

Ethics is often believed to be an expensive practice that causes an organization to forego profits. Organizations must remember that any benefits from lying, cheating, and stealing usually come at the expense of their reputation, brand image, and shareholders. Therefore, leaders and managers should work hard to be ethical and remain that way. Some project managers believe that being ethical is too expensive for the project and that it may cause them to forego profits. It's not true. It's not unethical to make profits, but it does matter about the way profits are earned. Ethical companies are more trusted by people and this trust provides higher chances that the organization will remain profitable and continue to grow for many years. There are studies which show that people are willing to pay a premium for an ethical company's products and that ethical organizations have continued to survive and grow.

Resorting to shortcuts and unethical means in order to generate profits will be disastrous for a project, client, and an organization in the long run, and highly damaging to its social image and brand. For new-age companies, being ethical is becoming an increasingly important component of their business practice, particularly in the era of the Internet, powerful social networks, and smart instruments where opinions and perceptions can flow fast.

Why Being Ethical Matters

Unethical behavior can be extremely profitable in the short run. But a business is supposed to create long-term value for its customers and shareholders, and unethical tricks will not last for that long.

Sometimes the ethical violations committed by a project manager, project members, or the organization look profitable for the short-term.

However, being ethical pays future dividends. If a project manager or business leader is ethical, often the employees or team members feel safe and secure enough to air their thoughts, thereby promoting innovation. Today's young workforce is dynamic and full of new ideas and, therefor , they feel comfortable joining teams and companies which welcome new ideas. Leaders who are ethical in their practices are the most sought after by the millennial generation. According to Deloitte's fourth annual Millennial Survey, which included 7,800 of tomorrow's leaders from 29 countries, the value of strong business ethics is increasing. This stresses the fact that today's young workforce prefers to join ethical organizations that they can trust for their future growth.

Ethic = Profit

In an experiment conducted in 2008 by Remi Trudel and June Cotte, it is proved that ethical behavior and actions are a wise investment. Their study showed that if you act in a socially responsible manner and advertise that fact, you may be able to charge slightly more for your products. On the other hand, it appears to be even more important to stay away from goods that are unethically produced. Consumers may still purchase your products, but only at a substantial discount.

In this study, customers were told of the practices of the companies producing the coffee they bought. They did not mind paying a premium for a company with ethical practices, as opposed to that of a company that offered no information on its business practices. But when customers were told that the company was involved in unethical practices, they punished the product by asking for heavy discounts. Some customers were not even willing to buy the product.

The lesson is clear. Customers, who care about high ethical standards, are the ones who can contribute to the biggest potential profits on ethically produced goods. There should not be any hesitation in being ethical as this is a long-term investment in making current and future customers your loyal partners. When companies work ethically, they naturally outpace competitors who are unethically working for expanding profits. It is simply because customers see them as a trusted partner, not only for what they do, but for how it is delivered.

(Alankar Karpe works as senior program manager for Altisource. He has an overall experience of 15 years. He is a member of PMI's Ethics Member Advisory Group, which is a global team of experienced volunteers who are committed to facilitate learning and discussion about ethics and professional conduct in project management.)

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