In addition, the popularity of Milton Friedman’s approach to business, with only one social responsibility of growing profits, is increasingly misaligned with the current demands of the public. This has been reflected in a forum discussion entitled “Doing business the right way” at the 2014 World Economic Forum earlier in the year. It called for more CEO engagement and a need to measure success through the value created for all stakeholders.
But how can the public and consumers start to believe that the likes of the financial services sector really want to change? The damaging stories just keep on coming. Customers are still not more important than profits, whatever the claim, and the only thing that gets addressed is a short-term change to compensation structures, which tinkers with control systems rather than addressing the deep-rooted culture.
However, the Chartered Insurance Institute (the world’s leading professional organisation for insurance and financial services) recently published a paper as part of its guidance series on ethical cultures entitled Changing the stories: reasons to believe.
This paper reviewed companies in the insurance sector attaining the World’s Most Ethical (WME) Company award as developed by the US think-tank Ethisphere. The WME companies demonstrate that organisations can be both profoundly ethical and have solid financial performance. Indeed it is their ethical cultures which provide them with competitive advantage and sector leadership.
These companies go beyond trotting out trendy statements about doing business “ethically” and translate their words into actions which then become more meaningful and believable to stakeholders. After all, actions do speak louder than words. The starting point and the key to the companies’ successes is the CEO and top team.
They are the key symbols in generating belief in organisational values. As part of this, a new term “tempo-from-the-top” has been coined to reflect the need for more dynamism, higher visibility and support from the executives than the current fairly passive term “tone from the top” implies. The organisations have to be firing on all cylinders to maintain their competitive positions and need tempo and dynamism to drive much needed “momentum from the middle,” generating a constant purposeful, rhythm throughout the organisation.
In addition, a clear sense of “how we do things around here” is also very apparent with each organisation having a visible and vocal “way” of doing things e.g. “we treat customers like family”.
They have ethical decision-making frameworks and clear expectations of internal challenge if decisions are misaligned with values.
“The way” is constantly reinforced, encouraging employees to speak-out with confidence if values are being breached.
The importance of all stakeholders and corporate citizenship are clearly reinforced showing accepted responsibility to a wider community.
These aspects are not just nice things to do. Most of the initiatives are readily aligned with organisational interests of building reputation and loyalty overtime.
Having a stock of trust and belief is a way of accounting for, and setting provisioning for, any future dips in performance.
The stories of the world’s most ethical companies show that it is possible to reconcile responsibility with strong financial performance. However, this has not happened overnight. It has required a huge amount of energy, effort, commitment and stewardship.
This is why the vision, values and vitality of the leadership team are so critical. Make no mistake, as the most powerful symbols of change, it is in the actions and behaviours of the individuals in the top team, separately and together, that will give stakeholders the reasons to believe a different story.
If UK companies want to create their own competitive advantage through ethical cultures and behaviours, generating new and better stories over time, they need to act soon – and with tempo.
Judith Cork is a business ethics consultant here in Yorkshire. She is the author of the paper “Changing the story: reasons to believe. See www.judithcork.co.uk for further details.