Wednesday, February 3, 2010
Company doing "good deed" is good business sense?
A trained moral philosopher, Seidman has built a highly successful business on the theory that in today's wired and transparent global economy, companies that "outbehave" their competitors ethically will also tend to outperform them financially.
Many companies, including Pfizer, Wal-Mart and Procter & Gamble have hired Seidman's firm to analyze their corporate cultures, rewrite their codes of conduct, and give ethical-compliance training to their employees.
Don't nice guys finish last? Since when has success in business been about goodness rather than earnings growth? To paraphrase the 13th-century management theorist Genghis Khan, isn't it more about crushing your competitors, seeing them fall at your feet, and taking their horses?
It's true that in recent years lax regulation and asset bubbles have allowed many corporations to hide their ethical shortcomings long enough to become obscenely rich. Unhappy employees and customers can trash you globally in the time it takes to dash off a nasty blog posting or upload a cellphone video, it's becoming much harder to manage reputation the old-fashioned way, by hiding behind lawyers and crisis-management consultants.
Ultimately, the only way to enjoy a good reputation is to earn it with the highest integrity. The practice of corporate social responsibility has been on the rise for some time, evidenced most recently by the outpouring of U.S. corporate donations to support earthquake relief in Haiti.
It is difficult for companies globally to differentiate themselves based on their services alone. Whatever might be, chances are the other side of the world can copy and do for less and better. More important, companies need to compete at the level of behavior: crucially, how they treat customers and employees. It's about who has the most trust in their relationships, and where most people want to work. This will be the soft currency of the 21st century.
How to measure the impact of good behavior? One promising area of research is around trust.
The least trusted buyers in the study incurred procurement costs that were five times higher than the costs of the most trusted buyers.
Seidman laid out this vision in his bestselling 2007 book How: Why How We Do Anything Means Everything ... in Business (and in Life). Today people can see into your life further, faster, and cheaper than ever before.
The least trusted companies in the study seemed also the least profitable. And companies that trusted each other were more likely to share valuable information like new product designs. Trust between companies leads to more trust, it sets off an upward spiral of cooperative, value-creating behaviors.
Or consider the economic value of an apology. Several years ago the University of Michigan's hospital system embarked on a major revision of its medical malpractice policies. Departing from the standard industry practice of reflexively "denying and defending" most claims, doctors and hospital officials started sitting down with plaintiffs and their lawyers to discuss complaints prior to any formal litigation.
In many of these meetings the doctors apologized directly to patients for any harm that their professional actions had caused.
If it became possible to put a price on virtue, even more companies might be compelled to take the high road.
Labels: Staff Management