The Importance of Leadership Ethics and Values in the Work Place

The Importance of Leadership Ethics and Values in the Work Place

When we come into this world, we are a blank canvas ready to be painted on. Those whom which are responsible for the first initial painting are our parents. Teaching us how to talk, how to walk, and eventually educating us on right from wrong and what we should value. Although this may be the case for most of us, there are some individuals that were never taught these lessons, or were simply mislead on acceptable societal values. Ethics and values are not innate with birth, but instilled into an individual with outside societal norms. Furthermore, if one is ill advised their ethics and values might have devastating effects not only on business, but society as a whole.

When a company selects a leader, it is imperative that the individual’s ethics and values meet the company’s standards as well as the society in which the company resides. Ethics are defined as “a moral philosophy or code of morals practiced by a person or group of people” (YourDictionary, 2012). It is important for companies to have in place a code of ethics to illustrate what is expected from individuals working for the company and the leader is not only the demonstrator, but the enforcer. Values are defined as “a person’s or society’s beliefs about good behavior and what things are important” (YourDictionary. 2012). Subsequently, because we all come from different backgrounds and experiences, it is essential to attempt to accurately determine if values and ethics are similar to the company’s before hiring upper-level management.

The survival rates of corporations are dependent upon implementation of a code of ethics and selecting leaders that emulates and enforces them. Thus, maximizing profit, with the efficient utilization of business resources, and creates goodwill in the market (Dogra, 2010). If this approach is not taken, serious problems may occur internally, dangerously reducing the life expectancy of one’s company.

Maximizing Profit

Often when discussions amongst leaders turns to enhancing ethical standards and values of the company, many believe that unnecessary precious capital will be expended, thereby threatening the company’s viability. However, this perception is inaccurate.

Let’s look at increasing ethics and value awareness within a company, as a new project that company “A “ is considering taking on. For purposes of illustration, the project start up cost are fifty thousand dollars, which covers the costs of materials e.g. paper, ink, etc., labor hours, and implementation into the corporate culture. Also, assume that it will take at least a year to fully apply it into the work environment, where no questions will be asked. The life expectancy of this project is endless. Meaning that it will continue to preform for the life of the company. So what exactly is our return on investment? McMurrian and Matulich (2006) suggest that:

A reputation for ethical business activities can be a major source of competitive advantage. High standards of organizational ethics can contribute to profitability by reducing the cost of business transactions, building a foundation of trust with stakeholders, contributing to an internal environment of successful teamwork, and maintaining social capital that is part of an organization’s market-place image. (p.11)

By effectively implementing the strategy internally, within the first several years, one will begin to build awareness in the local and or global community. Thereby, allowing businesses to increase their capital by establishing trust with their shareholders, customers, and suppliers. After all, the job of a company is to create value for their shareholders.

However, these are not the only advantages that can be gleaned by focusing on the importance of ethics and values. According to McMurrian and Matulich, the advantages of ethics and values embrace greater tiers of competence in processes, greater tiers of warrant and trustworthiness from staff, greater tiers of perceived product worth, greater tiers of customer devotion and preservation, and a greater monetary implementation. Obtaining these endless results, with proper monitoring, and continued utilization seems to be an effective yet, budget oriented way to increase capital and shareholder value (“Building Customer Value and Profitability with Business Ethics”, 2006).

Efficient Utilization of Business Resources

But, what is needed to get to that point? Having an ethical and value oriented leader will influence all the factors above. One of the most important of these factors is customer loyalty and satisfaction. Without it, the overall image of the company can easily be tainted. Having high employee loyalty is not only beneficial to financial performance but, to the overall presentation of the company. As we have discovered, having a strong influence in ethics and values leads to a sufficient increase in capital, in addition to the other factors discussed above.

The role of the manger or leader is to act upon the values and ethics of the company on a daily basis thus, creating a positive image for the staff and creating a trust in his or her followers. This ongoing practice will help prevent any ethical or value based problems from occurring in the future, creating a positive image to employees, customers, shareholders, and society. Dogra (2010) states:

In an organization, individual’s working at the junior levels often emulates individual’s working at the top. The same applies with ethics too. If the management or seniors of an organization follow ethical business practices, i.e, they do not bribe to get their way or they do not cheat the customers, investors, suppliers, etc., the employees will follow suit. The employees too will refrain from using the office property or resources for personal benefits. This will result in better and efficient utilization of the business resources. (p.1)

By reducing the amount of supplies being used for personal benefit, costs go down, and new capital is available to be invested elsewhere.

Creates Goodwill in the Market

Our third and final subsidy of implementing ethics and values into the workplace is an overall enhanced benevolence. With an improved company persona, financiers or venture capitalists are more enthusiastic with investing in a company that can be trusted. Shareholders are also influenced by this factor, and are often less likely to sell (Dogra, 2010). This new profound goodwill has not only giving the business a new image, but, has created an improved form of capital to assist in creating new projects to surge shareholder value.

The Ford Motor Company is a perfect example of creating goodwill in the market place. By successfully implementing ethical policies they have been able to obtain a large amount of their market share and have even won an award for World’s Most Ethical Companies by Ethisphere Institute in 2010 (“Ford Motor Company: “Best Ethics Management System,”” 2010). Ford has been able to do this by focusing on six ethical issues: environmental issues, conflict of interest, anti-harassment, health and safety, product quality, and encouraging ethical decisions and reporting (“Ford Motor Company: “Best Ethics Management System,”” 2010). According to Best Ethics Management Systems (2010),

Allen Mulally, President and CEO of Ford Motor Company is quoted as saying the following about their Code of Conduct Handbook, “By reading this Handbook and following its guidelines you will help us enhance our reputation as an outstanding corporate citizen. This is not only the right thing to do – it is the best thing to do to secure the future success of our Company.” It is clear that Ford Motor Company has realized the clear connection between high ethical standards and success. Their Code of Ethics and Code of Conduct both have detailed descriptions of what the company defines as acceptable and unacceptable. Encouraging and enforcing these values as well as taking action in areas that are of great importance to them is what makes this company deserving of recognition for the Best Business Ethics Management System (p 1).

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