Business Ethics Training Focused on Values Can Increase Profits

Business ethics is often presented as a necessary but dry (if not tedious) topic in university courses, publications and workshops. The tediousness seems to result from a focus on analyzing rules and laws from the perspective of restraining unethical behavior. While there is logic in bringing attention to rules, doing so implies that there is something within the business realm that is inherently corrupt. Business and entrepreneurship are very active pursuits, however, and the enjoyment is in being active, sometimes to the point of aggression. Competition is a big part of the business world as well, so anything that restrains the more active aspects of business is often seen as very inhibiting and even damaging.

Because business ethics training and subject matter is often presented in such a dry way, there is a temptation to tolerate it at times, but not pay much attention. The Nobel-prize winning economist Milton Friedman, known for his free market views, provided a succinct encapsulation of the private sector’s attitude toward restraints imposed by ethics in 1962: “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.”

So, it is clear that the drive business people have is of utmost important to them. In fact, they may argue effectively that in order to keep a business viable for any period of time, it is necessary for them to not have to have restraints imposed upon them. However, there are too many instances – like the recent recession – where unethical behavior in the business world caused a great deal of harm not only to the national economy, but to the global one as well. So one might say business ethics training is of paramount importance to combat such destructive behavior, but it is clear some of the perpetrators had received it, but to no avail[1].

It wouldn’t be wise to try to solve the same problem with larger doses of the same treatments. An alternative solution is focus on values, because research has linked them to something the business culture identifies with strongly – profits. In his book called Good to Great, which was based on five years of intense research into trying understand the cultures of the most profitable and productive companies, Jim Collins wrote, “To make the shift from a company with sustained great results to an enduring great company of iconic stature, apply the central concept from Built to Last: Discover your core values and purpose beyond just making money (core ideology) and combine this with the dynamic of preserve the core/stimulate progress” (Good to Great, p.190 Harper Collins Publishers, 2001).

Core values are the heart of what a company believes in, stands for and lives on a daily basis. That’s what separates them from rules, which are often something people hear in periodic trainings and then forget about them or even dismiss them entirely, because they have work to do and don’t want to be slowed down. Values though, can be talked about by leadership constantly, and used to make every important decision. Although to some people, the values approach may sound like New Age nonsense, the research conducted by Collins found that the great companies his team investigated had 6.9 times greater stock returns after they achieved greatness, and they did so with company values at the forefront of their business strategies. For example, the steel company Nucor provides employee benefits that some might consider outrageously generous, such as paying $3,000 a year for four years to each child of every employee for college education. To date, Nucor has paid $61,000,000 for their employee’s children’s college degree programs. They do so to fulfill two of their company values: education, and taking good care of their employees and their families.

Nucor employees can also pursue educational opportunities to the tune of $3,000 per year, if the course work is approved first. In addition, spouses of Nucor employees can receive $1,500 per year for two years if they want to go to school. While these benefits are extremely generous compared with many other companies, Nucor also provides employee profit-sharing and the standard benefits health insurance one would expect[2].

Nucor Steel was one of the companies that Collins and his research team rated as great, and it’s rate of annual growth from 2001 to 2011was slightly over 20%.[3]

Amgen is another company rated as great by the same researchers and this pharmaceutical innovator also used organizational values in their transition to greatness,  “The effort to clarify Amgen’s values…was the most important thing we ever did” (Dave Logan, John King, Halee Fisher-Wright Tribal Leadership, pg. 153 Harper Business, 2008). Gordon Binder was the Amgen CEO who initiated the focus on company values. He took over the Amgen helm in 1988 and retired in 2000. Investing $100 in Amgen stock when he began would have been worth about $10,000 by the time he tired. Paying attention to company values played a very significant role in that very profitable period.[4]

Ryan Vanderbilt, who wrote Building Better Businesses By Closing The Happiness Gap, reminds us that: “Studies show that people are much more productive and healthy when they can connect their values with their work.” [5] As mentioned, this is not just an ideal – it is a reality which is practiced by some very successful companies, illustrating that when the focus of business training places values above rules, it lends to the structure, substance, and profits of a company.

Angie Picardo is a staff writer for NerdWallet. Her mission is to help consumers stay financially savvy, and save some money with the best savings account interest rate.  I am pleased to add Angie as a guest blogger on my site – Chuck Gallagher, Business Ethics Keynote Speaker