Can a business be more successful by acting ethically, becoming a good role model, and adhering to social norms? New research from Effat University suggests yes.
The research, led by M, K Rahatullah, Associate Professor, also indicates that ethical cultures contribute to leadership effectiveness, credibility, and higher effectiveness standards.
Benefits of ethics in family business
Ethical practices have a serious, meaningful impact on a business. As stated by the study, “once the trust components like, credibility, integrity and benevolence prevail, securing the partner commitment becomes easier and leads to a competitive advantage.“
In submissions of the questionnaire, business owners reported that employees “perform comparatively more efficiently and produce quality output while working in an ethical environment”. Additionally, “customer relations are built on ethics.”
Examples of unethical behaviour that harmed employee happiness and trust in the business include monitoring employee emails, dishonesty in the company’s finance and accounting and failures in gender equality. Engaging in these practices can also cause legal issues for companies.
But how is an ethical business culture achieved?
Implementing ethical processes
The study tells us that the following are all important for family run businesses to nurture an ethical culture: regular training, a manual or a code of conduct, engaging employees in discussions, reporting, and a manager that acts as an ethical role model.
A theme among the 12 businesses interviewed was that ethics at work should be communicated to employees. But the business can’t just talk the talk, they also have to demonstrate ethics in their actions.
The study lists 11 possible tactics in implementing ethical business processes:
- A statement of enterprise's core values
- A compliance manual
- A code of conduct
- A mission statement
- Anonymous hotlines
- Job descriptions
- Training in ethics, evaluation of ethical behaviour
- An ethics committee, an ethics audit
- Sanctions for ethics abuse
- Ethics standards and indexes
- An ethics consulting service, an ombudsman and ethics advocate and a manager responsible for ethical issues.
And more..
The role of senior employees like the CEO and managers was highlighted as important in executing the structural or institutional policies. In other words, ethics in family business has to come from the top down.
Methodology
The research took the form of a 31-question questionnaire, which gave real Saudi Arabian business owners the opportunity to share their insights into how to run a business with integrity and how that benefits them.
The full study
As the study states, “ethical policies are very important and these are the foundation of the business and its culture development”. This research, and further research in this area, can benefit the growth and stability of small businesses everywhere, and might also be applicable to larger organisations.
