Business Ethics Models: Advantages of Operating an Ethical Business

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Introduction

The morals of a person can determine how the individual can manage a business. A virtuous personality is most likely to make a good business manager as compared to someone who does not possess any virtue. However, though persons may share the same virtues, their leadership, and management styles may be different because there are different business ethics and principles that the managers adhere.

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Most entrepreneurs believe that the main purpose of going business is to make money; this “money-minded mentality” has harmed most businesses. These negative implications are because they end up collapsing due to mismanagement and lack of business ethics. It is for this reason that there is need to critically look at the issue of business ethics. The purpose of this paper will be to look at business ethics and its advantages. The paper will define the term ethics in relation to business and discuss the relevant business ethical models used in the business. We will also discuss how employees can contribute to successful implementation of business ethics. Briefly, the paper will look at constraints that organizations may face in their quest to instill business ethics in the organization. Several recommendations will be given on how an organization can improve on its business ethic. The paper will close by giving a review of the important points discussed during the course of study.

What is Business Ethics?

The rapid growth and development of the internet have changed the way nations and different organizations conduct business, from the ancient barter trade to the modern E-commerce. This has also changed the business ethics that organizations adhere to. Crystal states that business ethics is the behavior that an organization and its personnel adhere to in the day-to-day activities of the business as observed by Crystal, (2010). The business ethics does not only apply to how the organization conducts its internal affairs but how it interacts with the customers on a personal level and also other business associates and international clients. In addition to the above-mentioned points, business ethics can be said to be the acceptable personal conduct allowed in an organization.

Ethical practices go a long way to provide a framework for effective communication and strengthening of institutions. Creation of policies and practices that can provide consumers and managers a wealth of ideas regarding improvement of relations and service delivery is part of the greater benefits of ethical practices as observed by MapXL (2010). However, ethical considerations strain due to lack of goodwill by top-level managers. Most managers are to blame for their toxic brands of leadership described as ‘bad-boss syndrome.’ They rather function as semi-autonomous sections of the organization and consolidate immense power that allows them to dictate terms and conditions, subsequently, hindering change, accountability, and functionality of the organization.

Types of Business Ethics

Business ethics is a general term used to refer to the overall behavior and conduct that an organization can adapt to in order to satisfy consumer and shareholder needs. There are however different types of needs that can be implemented in an organization. MapXL has given the main types of business ethics are; corporate social responsibility (CSR), fiduciary responsibility, corporate governance, industrial espionage, hostile takeover’s, corporate manslaughter and political contributions as argued by MapXL, (2010).

Momment (2010) stated that business ethics serve different purposes in an organization and in the modern business world; companies are hiring different professionals or outsourcing for professionals to successfully the implement the various types of business ethics.

An organization with a good business ethics is more likely to prosper as compared to an organization that does not apply any ethics when it comes to handling its customers; this is despite the expensive investment in infrastructure human capital. Momment (2010 a) says that there are several other significances of ethics in an organization.

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Significances of Business Ethics in an Organization

When an organization projects itself as a credible and one to reckon with, it allows consumers to feel acknowledged and in return, they want to associate with it. Ethics can be defined as the overall goodwill to perform strictly under the basis of stipulated guidelines as explained by Momment (2010 b). Respecting the law, being accountable, respecting employees and performing under the doctrine of accountability is ethical practice. Good ethics in organizations can bring immense potential especially where relationships with consumers and stakeholders come into view. Good ethics in an organization translates to good business. Jain (2008) has stated that some of the importance of positive ethics in business include;

Employer-Employee Relations

According to Lautenslager (2010), most organizations have different independent departments like finance, human resource, sales, and marketing among others. each of the departments performs different roles that contribute positively to the growth of the business, therefore by incorporating positive ethics in business, the management of the organization ensures that the personnel in these departments work cohesively so that each of the employees can give the best outcome.

Employer-Employee Relations

According to Essortment (2010), the relationship that the top management of an organization establishes with its lower-ranked employees can hugely contribute to the good performance of the organization. Ensuring there is discipline and mutual respect across all levels of management to the bottom of the hierarchy, discipline is achieved. An organization that employs orderly conduction of its business ensures that there is transparency in all its activities. Moment argues that this especially has to do with financial spending which makes most firms go underground. A business where there is no respect and integrity among the employees and the management is bound to fail. Juan states that the employee behavior determines how customers will relate to it. Reidel (1999) states that managers should adapt to the democratic leadership approach where all employees have an equal chance to contribute to matters related to the organization. In organizations, where there is democracy, most employees feel oppressed and have been denied a chance to express themselves and as a result there they may not show integrity when carrying out the organizations activities. It is important that organizations have ethical considerations as a management and practice policy. This policy denotes the ethical practices when processes like addressing employees, issues, and problems.

Company – Customer Relations

The growth and profits generated by an organization greatly depend on its consumer base. Company – customer relationship is also referred to as the customer care service and an organization that has excellent ‘customer care service’ department is set to grow faster. According to The Times, most clients have become “enslaved” to the services and products of a particular organization because of the customer care services that the management and staff of the organization (The Times, 2010).

Company – Shareholders Relations

Most multinational companies are not sole proprietorship types of venture but a group of like-minded investors owns them collectively. These are referred to as shareholders. The shareholders are the chief financiers of the activities of the organization, it is therefore very important that the persons mandated with the management of the company on behalf of the shareholders maintain a perfect relationship between them. It will be in bad taste for the managers of a company to bite the hand that feeds them (the managers).

To achieve this relationship, good ethics is required especially on the part of the managers. This will help to build confidence among the shareholders and in most cases; they are most likely to increase their funding towards the various projects that the organization undertakes.

Company – Public Interests

When an organization establishes itself in a particular region, the first and foremost thing that it has to take into consideration is the people who reside in the area and their needs. What are the needs of the locals? If it is a factory being set up, will the locals be displaced and if so, will they be compensated? According to Lautenslager, company – public relations or public relations service is a function that most organizations use in order to determine the publics’ attitude and identify policies that an organization can implement in order to maximize profits (Lautenslager, 2010). Good public relations skills adapted by the company can help the company build a brand that can help in the marketing process and to achieve this, there is need for the company to adapt to good business ethics.

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Ethical Norms

Human behavior is dynamic and in most cases, it is influenced by social, economic, and political activities of the nation. Redial states that ethical norms in organizations are influenced by more or less the same factors as indicated. In addition to that, fellow workers can influence ethical norms, the employer, one’s profession and finally the law (Redial, 1999).

Business Model

In the business world, the company to serve different needs can adapt four main business models. According to Jain (2008), these models are; locust model, pig model, chicken model and black window model. The above models are tailored to serve different consumers needs as indicated in the table below:

Model Type of Service Solutions Offered Resource Issue
Locust Model Sells directly to the end-user Fulfillment Good organization
Pig Model Project Business Problem resolution Accessibility
Chicken Model Payment revenue Problem-solving Stability
Black Window Operates two or more business accounts Joint venture Learning

Wirtschaft, (2010 b) points out that the difference of the above models is that when it comes to transaction frequency, locust and pig models are used only once whereas the chicken and black window models are recurring models. In terms of revenue generations, the locust and chicken models have minimal revenue contribution to the organization whereas the pig and black window models contribute most revenue for the organization (EMBA, 2010).

The model that an organization settles for depends on different financial and logistical elements as well as the nature of business that the organization participates in.

The Decision Making Process
Figure 1. The Decision Making Process

Wirtschaft, (2010 a) states that, the decision-making process in a business that has not embraced positive ethics can be an uphill task. However, for organizations that have incorporated positive ethics in their management, to achieve this use of a Venn diagram can facilitate easily. The diagram combines the organizations’ ethics, economics and laws are regulations. The figure below illustrates how this can be made possible.

The Advantages of Business Ethics

Positive business ethics outweigh the negatives by far in any business. The positive business ethics can help the organization to embrace the main business principles that can ensure that business is conducted smoothly and transparently. According to Momment, these main principles are, open-mindedness, trust, transparency, mutual respect, financial accountability, and community involvement (Momment, 2010).

Transparency: In many businesses, both small scale and multinational business ventures, there are numerous cases of corruption when it comes to the tendering process. This is because there is no business ethics and the management has not taken any measure to educate its personnel on the negative effects that corruption can cause to a company. Therefore organizations that have positive business ethics conduct open and transparent tendering processes and this helps to preserve the integrity of the company (Momment, 2010 a).

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Apart from transparency in the tendering process, the human resource department can also apply good ethics when it comes to hiring of personnel. There is a tendency of racism and nepotism to be applied when it comes to hiring of personnel especially in the developing nations where most of its populations are educated but jobless.

Open-Mindedness: As indicated in the paper, the leadership style adopted by an organization determines how successful the business will be. Most managers apply four main leadership approaches. These are autocratic, bureaucratic, democratic, and laissez-faire leadership (Essortment, 2010). Each of the leadership styles has different characteristics and they play different roles. An open manager is open-minded is the one who is ready and willing to accept the views of its staff and they consider them when it comes to the final decision making. This is a positive business ethics that should be adopted by most senior managers of the business.

The employees of the business are only one branch of the business, the consumers form the other branch and they are the most important people in business. The open-mindedness approach is one positive effect that the company (managers and the human resource management in particular) can use to understand the consumers’ needs, wants, and work towards meeting these needs

Trust: One of the main pillars to the success and growth of any business is trust between the staff, managers as well as the employees, however cultivating this trust takes a lot of patience, understanding, and sacrifice. Trust can determine if the business will grow or collapse. As a positive business ethic, trust can ensure that determines the future of the business, companies should use this positive ethic to the fullest (Momment, 2010b).

Mutual Respect: Lack of respect definitely spells doom to both the organizations’ employees and consumers. This principle (respect) is one of the main advantages of positive business ethics and if well utilized it can help the company overcome many negative challenges and obstacles that it may face.

Mutual respect does not apply to the organizations’ employees alone but also to the consumers. For an organization to make a positive impact in the job market, it should ensure that there is total mutual respect between itself and the clients. This will help them (clients) be loyal to the company and its products and services, however the mutual respect is supposed to be built by the junior employees who interact with the customers on a day-to-day basis but not the managers who in most cases rarely interact with the clients.

Financial Accountability: In any given organization, nonprofit making or profit-making organization, money is the driving force of most of its activities. It has however been saying before that money is the root cause of all evils, which is true. Most organizations’ employees especially those in the finance and accounting departments are often slapped with criminal charges of misappropriation of funds. This is because of negative business ethics that involve corruption and shoddy deals. An organization that cultivates positive business ethics in relation to finances can help to ensure that its accountants and financiers are open and transparent when it comes to financial accountability. The same can be said of the company’s business associates and suppliers when they are bidding tenders to supply the company with goods or provide services.

The Community: Giving back to the community through various philanthropic activities is the surest way that the company can interact/involve the community in its development projects. Most locals however expect that once a company establishes itself in a particular region, the first thing it should do is absorb the locals in its management ranks, the limitation to this is that the locals may not have relevant academic and experience for the vacancies announced. As positive business ethic however, the company can also “create” several vacancies for the locals who have the required experience.

Limitations to Successful Implementation of Positive Business Ethics

As indicated in the paper, the advantages of positive business ethics outweigh the negatives, there are however some limitations that can prevent an organization from rolling out a successful positive business ethics.

Leadership Style: Bureaucratic leadership style can be equated to a dictatorship in an organization. This is where the manager’s word is final. Most decisions made by the manager are always self-centered and do not reflect the needs of the organization, this is a negative business ethic that can destroy the well-being and growth of the company (Wirtschaft, 2010a).

Management Models: There are different management models that can be in an organization. Adapting a wrong management model can be an obstacle to the businesses’ desire to implement positive business ethics that will ensure its growth and prosperity (Wirtschaft, 2010b).

Review of the Paper

For successful growth and stability of any business enterprise, it is important that the management rolls out and implements a viable business ethics model that can be used as a road map on how the employees will work and implement decisions. The management of the organization should work closely with the human resource department to ensure the success of the project. The human resource department should organize seminars and conferences for its personnel for them to be trained on different business ethical methods that they can use in the day-to-day activities of the business. The past decade has seen most businesses adapting to online (E-commerce) form of doing business, therefore most businesses can use the vast business-related information found on the internet to their advantage and ensure that they adhere to pos

This research paper started by giving a detailed definition of the term business ethics, the different types of business ethics have also been discussed in the paper. In addition to that, the paper has analyzed the different importances of business ethics in a business. Ethical norms are an important factor in the growth and stability of a business, the paper has looked at different factors that influence the ethical norms in an organization. These normative principles allow cohesive functionality of the organization. Ethics will go a long way to make the organization become stronger and accountable.

There are four main different models used in the modern business world. These are mentioned and discussed in the detail during the course of the study. A relevant example of the decision-making process using the Venn diagram has been explained. The main purpose of the paper was to identify and discuss the advantages of business ethics and the role they play in the growth and development of a business. These advantages have been discussed. A preview of the limitations to the successful implementation of the business ethics has also been discussed. The paper has closed by giving several recommendations on ways that the company can use to ensure that all its employees are well trained on positive business ethics. It therefore upon the organization and its employees to work hard to ensure that they promote positive business ethics , it is by so doing that the company can increase if client base and profitability.

Reference list

  1. Crystal, G. (2010). What is Business Ethics? (Online)
  2. EMBA. (2010). Types of Business Models.
  3. Essortment. (2010). Styles of Leadership. (Online)
  4. Jain R.(2008). Importance of Ethics in Business. (Online) Web.
  5. Lautenslager A.J. (2010). Why You Need PR. (online)
  6. MapXL. (2010). Business Ethics. (Online)
  7. Momment R. (2010). 7 Principals of Admirable Business.
  8. Momment R. (2010 a). 7 Principals of Admirable Business. (Online) Web.
  9. Momment R. (2010 b). 7 Principals of Admirable Business. (Online)
  10. Reidel J. 1999. Business Ethics Model. (online)
  11. The Times. (2010). The Importance of Customer Care Service. (Online)
  12. Wirtschaft, 2010 a. Business Ethics, Business Philosophy, & Corporate Philosophy. (Online)
  13. Wirtschaft, 2010 b. Business Ethics, Business Philosophy & Corporate Philosophy. (Online)

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BusinessEssay. "Business Ethics Models: Advantages of Operating an Ethical Business." December 3, 2021. https://business-essay.com/business-ethics-models-advantages-of-operating-an-ethical-business/.