Sacrificing ethics on the altar of expedience — case of unsustainable business practice

AS the economic crunch continues to sink its fangs deeper into the business operations of many entities, many have completely thrown the common decency of good ethical business practices into the bin in pursuit of survival.

People Management Issues: Robert Mandeya

The question is on the sustainability of bad business practices. Whilst such practices bring a temporary reprieve, business should look beyond the short-term gains, into the long-term benefits of sustained organisational success.

The Sunday Maverick, of this week’s edition of The Standard Business, features an article by Gloria Ndoro-Mukombachoto, in which she unravels some malpractices by big corporates, of withholding payment of services/products supplied to them so as to “… use small firms’ withheld funds as cheap working capital.”Gloria further opines that because of this practice “many small and medium sized businesses (SMEs) in Zimbabwe are struggling to survive.

This revelation by Ndoro-Mukombachoto resonated perfectly with the submission of the CEO of the small organisation in which I am a board member. The CEO presented challenges of non-payment for services by some very big and reputable corporates to the board meeting we had a day earlier before Mukombachoto’s article on Sunday 19 August 2017.

In one of my previous installments I alluded to the old adage, “…when you are up to your [posterior] in alligators, it’s difficult to remember the original objective was to drain the pond.” Like I pointed out in the article, “the down economy has very understandably caused businesses to focus attention on the immediate task of survival. Research shows that both people and organisations are far more highly motivated to take action by the possibility of loss than by the prospect of gain.”

However, I am not a proponent of playing dirty to survive in business. I concur with Ndoro Mukombachoto, who asserts that “sustainability in a unique market environment such as ours lies increasingly in both tangible (fiscal and monetary) policies and intangible values such as ethics, knowledge, relationships, innovation and razor-sharp focus..” As she succinctly points out, these are values that cannot be matched easily by unscrupulous competitors.

When organisations fail to uphold ethical standards of business, the cost to society can be considerable. This can be illustrated through the collapse of some small to medium businesses as they are subjected to unfair competitive playing field and collusion by the big entities to push the small players out of business. The resultant impact includes loss of social, financial/economic, or environmental value, reduced services, deprived stakeholders; the need for government bailouts and subsidies, loss of revenue, increased unemployment, and in extreme circumstances, civil unrest.

Therefore, the call by Ndoro-Mukombachoto for responsible authorities in the mould of Ministry of Industry and Commerce and Ministry of Small to Medium Enterprises to “intervene and create a level playing field where the sustainability of the different sector clusters is maintained to the benefit of entities” cannot be over emphasided. It would also take the SMEs themselves to put their act together and exploit their platform (the SMEs membership body) and others like the Zimbabwe National Chamber of Commerce to lobby for such interventions to be instituted without delay.

Implementation of effective governance, risk management, and internal controls.

The challenges organisations are facing will not be solved through bad business practices. Rather, business and government should acknowledge the importance of governance, risk management, and internal control to successful and sustainable organisations. It is in the public interest that organisations should strive for integrated and effective governance, risk management, and internal control, embracing conformance and performance aspects.

Public Interest

It is in the public interest for organisations to be well managed, act ethically, consider long-term organisational performance, be transparent, and be responsive to a abroad range of stakeholders. These objectives can best be achieved when organisations integrate governance, risk management, and internal control within their organisations.

Ethical behaviour

According to a letter dated June 5, 2012 to the G20 Leaders Summit-June 18-19 2012, a central feature of most organisations that effectively integrate risk management and internal control in their overall management systems is a robust ethical culture. The document further posits that the systems, processes, and practices of organisations, should typically embody and reflect strong ethical behaviour, emphasising the importance of ensuring not only that well designed and effective arrangements are in place, but also that ethical behaviour is expected, required, recognised, and rewarded. So in this regard it is critical for organisations to adhere to certain fundamental principles such as transparency, trust and integrity.

However, it is common that governing bodies, management, and other employees are at times presented with ethical dilemmas and conflicts. It is therefore important for organisations to have in place arrangements and processes to enable these dilemmas and conflicts to be addressed and to ensure that appropriate behaviour ensues. At an organisational level, it is proper for codes of conduct to be established, promoted and enforced. Typically, these codes should provide a means or process by which those confronted by an ethical dilemma or conflict can address them. At a personal level, the board of directors, managers and other employees who are members of professional organisations are typically obliged to comply with codes of ethical behaviour for their profession.

Transparency and reporting

Organisations should be transparent in reporting on the structure and performance of their governance, risk management, and internal control arrangements in their reports to internal and external stakeholders.

Mandeya is an executive coach in human capital development and corporate education, a certified leadership and professional development practitioner and founder of the Leadership Institute for Research and Development (LiRD). — robert@lird.co.zw, info@lird.co.zw or +263772466925.