What are the benefits of ethics

 

The benefits of ethical leadership

Permanently successful companies actually only differ from less successful ones in one single circumstance: They manage to combine the assurance of socially acceptable cooperation in the company and the implementation of entrepreneurial tasks with a minimum of effort.

 

However, if these goals compete with one another, this hinders the overall success of a company. So it makes little sense to have a good profit situation on the one hand, but at the same time a bad climate. On the other hand, it makes just as little sense to get along well with one another but at the same time to be on the verge of bankruptcy.

 

Ethically motivated leadership reduces costs. A study by the US polling institute Gallup had already found in 2005 that 73 percent of employees demonstrate an optimal workload when it comes to ethical leadership, compared to only 10 percent when it comes to unethical, purely functional leadership. With good leadership, 84 percent enjoy their work, with poor leadership only 14 percent.

The average sickness rate shows that bad leadership is expensive: on average, employees are sick for eleven days if they are led unethically, and only five days when they are ethically motivated. So ethics also affect the balance sheet.

It is often discussed that companies cannot afford ethics in a competitive marketplace. To be the only one to act ethically responsible means that you will soon be pushed out of the market due to tough competition. From this it follows: It must be clarified whether the costs for ethically motivated action can be borne by a company at all. If all companies were to produce at the break-even point, the costs would be too high. This is not the case. As long as companies try to create a more favorable situation and at the same time make profits, expenses for ethically oriented action are initially possible:

Financial expenses

The company provides additional services such as donations, environmental protection or does not produce goods that are generally not ethically justifiable. These services are ethically permitted.

Cost-neutral ethics

Activation of communication and conflict management skills and an update of virtues such as benevolence, patience, forbearance and trust.

Waiver of differential pension

In the case of waiver of differential pension, for example, it is about acquired business secrets that may not be used illegally.

Refraining from ethically unjustifiable practices

Refraining from ethically unjustifiable practices includes bribery or unfair competition, for example.

 

If the existence of a company can only be maintained through the payment of bribes, then the indication of job loss is not valid either. The company is not economically efficient and does not behave ethically. So bankruptcy is economically and ethically preferable.

 

The sociologist Fred Edward Fiedler also demonstrated in the 1960s that unethical leadership is expensive. With his so-called “performance bosom” he showed the connection between performance and dissatisfaction. He proved that an employee's dissatisfaction can be resilient. However, if it exceeds a limit, the performance drops. If the dissatisfaction continues to rise, the performance increases again sharply for a short time, but then finally drops to zero and the employee totally refuses.

 

In this context, Fiedler found that ethically motivated leadership has at least three benefits that affect the balance sheet:

  • The transaction costs are lower. If agreements are not kept or contracts are violated, those affected come to an agreement more cost-effectively with ethically motivated leadership. Reparation is not fought to the end. This also applies to suppliers and customers.
  • The migration costs are lower. Ethically well-managed employees, suppliers or customers do not want to change. Why should you?
  • The interaction costs are lower. Ethically motivated leadership generates fewer frictional losses and requires fewer safeguarding activities.

 

Unfortunately, these costs do not appear explicitly in the balance sheet. As a result, they don't get enough attention, even though they can drive a company to the brink of ruin.

The benefits of ethical management systems

An ethics management system is understood to be the rules of conduct in a company towards its environment. These systems can bring the following benefits to the company:

Protection against unfair behavior

The law against unfair competition (UWG) aims to protect competitors, consumers and other market participants from unfair competition methods and is intended to keep the behavior of the competing market participants "in the path of decency, honesty and good commercial morals" (BVerfG GRUR 1993, 751).

Further development and expression of leadership responsibility

You can only assume leadership responsibility for other people if you can lead yourself and your own life well. For this reason, managers must constantly develop themselves in order to be able to make ethically responsible and personally justifiable decisions.

Strengthening the integrity and competitiveness of the company

Integrity is the reputation or trust that a company has towards its environment, based on experience and expectations, with regard to the consideration of the interests of the environment and compliance with contracts as well as formal and informal rules. Building integrity is closely related to taking responsibility.

Promotion of the performance culture of all employees

Allowing employees to share in the company's success is not a charity event. Employee participation is intended to promote a positive performance culture and increase the attractiveness as an employer. The entrepreneurial thinking and acting of employees is to be promoted through material incentives in the form of success-related remuneration and profit sharing. In addition, such good employees should be bound to the company. Above all, it is important to continue to qualify employees in order to secure the company's performance.

 
Sources: www.business-wissen.de, www.vku.de, www.hfph.de, www.tuev-nord.de, www.wirtschaftslexikon.gabler.de and www.rnz.de