The Resilient Company: 3 Qualities to Succeed in the Post-COVID-19 World
Part 2 of 3: The ethical company
A resilient organization is one that is able to grow with adversity and succeed in a world of uncertainties.
To be resilient in the 21st century, companies must exhibit three main qualities: continuous learning, ethics, and a greater purpose beyond profits.
In the first article of this series, I described the characteristics of the learning organization. Here, I talk about the ethical company.
Much could be said about a topic with at least two and a half thousand years of debate. For simplicity, ethics is about relationships: What are the principles, values and norms of conduct that guide our relationship with other people and our planet? Anything goes? How far do we go and we don’t go? Do we restrict ourselves only by the law?
Ethical behavior results from the ability to reflect on the consequences of our acts and to control our selfish impulse for the common good.
The same reasoning applies to companies.
An ethical company continuously considers the impacts of its actions on its stakeholders. It assesses the merits of its decisions not only from the commercial, legal and technical perspectives, but — mainly — from the ethical perspective.
“Is this an ethical decision?”, “What are the consequences of what we are doing?”, and “Is this the right thing to do?” are questions ethical companies do on a daily basis.
Ethics is not limited, however, to reflection. It is above all about action. As Aristotle said, the goal of ethics is to practice virtue, not just being aware of what is the right thing to do.
For this reason, business ethics refers primarily to behaviors rather than corporate documents.
An ethical company is willing to sacrifice short-term gains so that its stakeholders can coexist better over time. It understands that the law is the floor, not the ceiling, of its actions.
While there is increasing scientific evidence that ethics pays off, the truth is that, in many specific situations, the idea of “no pain, no ethics” applies.
The hallmark of an ethical company is the ability to create healthy and mutually beneficial relationships with all its stakeholders. Its leaders see it as an interdependent system whose strength derives from the quality of the links between its elements.
The word “relationship” is paramount. It embodies the concept of a long-term horizon in the connections. In an extremely transactional — rather than relational — business world, building sustainable relationships is very different from carrying out a series of transactions over time.
An ethical company, therefore, genuinely cares about the well-being of its employees, customers, suppliers and other audiences. It sees them as an end in itself, not just as a means to just make more money.
That is why, in times of difficulties, ethical companies have the goodwill, trust and support of their stakeholders. These audiences actively seek to help them in these circumstances because they realize that the organization is fair and has an important role in their lives.
There are several examples of companies that only managed to survive difficult periods thanks to the decisive support of their stakeholders.
Among them are the case of Whole Foods Market at the beginning of its activities (when a flood affecting its only store was going to lead it to bankruptcy) and those of The Container Store and Barry-Wehmiller, which managed to emerge from the 2008 global crisis with record earnings in the following years thanks to the backing of their employees, customers and suppliers.
The opposite is also true. In times of crisis, ethical companies have a great opportunity to help the most fragile stakeholders of their ecosystem. This is going to leave lasting positive marks on its reputation, credibility and long-term bonds with its constituencies.
An ethical company has three main attributes: values-based decisions and behaviors, ethical culture, and a virtuous leadership style at all levels of the organization.
Let’s start with values. Roy E. Disney, former chairman of Disney’s board of directors, once said that “It is not hard to make difficult decisions when you know what your values are.” He nailed it. This is the main usefulness of values: they identify the principles or motivators that should guide people’s choices and behaviors in everyday life.
Virtually all companies have a set of noble values with references to topics such as integrity, honesty, transparency, respect for customers and employees. For most, however, there is an ocean of distance between stated or aspirational values (how they would like to live) and their daily decisions and operations (how they currently live).
The supreme value of many companies, in practice, is just how much money they make. When this happens, sooner or later there will be serious ethical problems.
On the other hand, companies that are really guided by solid values achieve several tangible benefits, such as greater employee engagement, improved talent attraction, greater innovation, less spending on controls, and even greater profitability.
The second condition for an ethical company is, of course, being able to establish an ethical culture. This requires the full alignment of two systems.
The first is the formal or tangible system. That is, what is established in the organization’s documents and procedures, such as its code of conduct, mission statement, and policies for hiring, evaluating, promoting and dismissing people.
The second is the informal or intangible system. It represents the implicit signals about the expected behaviors in everyday corporate life. This includes the company’s social norms, the unwritten rules for surviving and thriving in the organization, the corridor stories, and the attitudes of senior managers.
When the two systems point in the same direction, the company turns ethical decisions and behaviors into something natural, automatic and habitual. When there is a significant discrepancy between the two systems, however, formal rules become irrelevant and tacit norms and everyday habits prevail.
What is needed to build an ethical culture? Obviously, there is a good overlap with the qualities of the “learning organization” that I mentioned in the previous text, such as psychological safety and intrinsic motivation.
In addition to these elements, it is essential to create an environment characterized by high trust, transparency, care, empathy, positive emotions, and organizational justice (employees’ perception that the company is fair to them).
Most companies recognize and exalt these qualities. However, it is very difficult to convert them into reality in their daily life.
Let’s take the example of trust. It means be willing to put yourself in a position of vulnerability based on a positive expectation of how the other one is going to behave or decide.
In a transactional world where competition is the motto, there are few people and companies willing to put themselves in a position of vulnerability. Nobody wants to let their guard down. As a result, relationships of trust — vertically or horizontally within companies and between companies and their stakeholders — do not develop.
That is why, in times of crisis and major changes like this one, acting in line with declared values and practicing a culture with qualities such as trust, transparency and care becomes even more challenging.
Leadership is the critical ingredient to build and sustain an ethical culture. In particular, organizations need virtuous leaders who see themselves as curators of their organizations with a mission to hand them over better than they received them.
This is the third attribute of an ethical company.
At all levels, companies need leaders who seek to: 1) serve instead of being served; 2) coach and develop people; and, 3) create an inspiring, fair, inclusive, safe, and emotionally positive workplace.
These leaders must be able to provide their team members with two categories of experiences: one of universality and one of singularity.
The experience of universality means to make people feel united in the pursue of something bigger and broader than themselves, to make them realize that together they can achieve things they would never accomplish individually, and that they understand the importance of their work and their daily impacts on the lives of others.
The experience of universality means making people feel united in the search for something bigger and broader than themselves, that they realize that together they can reach achievements that they would never achieve individually, and that they understand the importance of their work and the daily impacts they have on the lives of others.
The experience of singularity, in turn, means to make each person feel that he or she is treated as a unique human being, with his or her peculiarities. This means to be heard, recognized, trusted, allocated to tasks aligned with what they do best, and, above all, to feel that on the other side there is a leader that genuinely cares about them as a human being far beyond professional issues.
It takes much more than analytical intelligence to be a virtuous leader. It is necessary, above all, maturity and high emotional, moral and systemic intelligence.
It is also worth noting that this virtuous leadership style requires several characteristics currently deemed as “feminine,” such as empathy, humanity, cooperation, intuition, attentive listening, and appreciation of relationships.
It is needless to write about the even greater importance of leaders in times of crisis. In these moments, it is vital to be realistic and transparent, and, at the same time, optimistic and human.
Interestingly, some of the countries most praised in managing the current COVID-19 crisis, such as Germany, Taiwan, New Zealand and Iceland, are led by women. On the other hand, this crisis, which does not forgive incompetence, has been useful in unmasking superficial and toxic leaders who offer simple solutions to complex problems.
In the next article, I will conclude this series with a debate on the importance of purpose and practical recommendations for senior executives and other business leaders.
Prof. Dr. Alexandre Di Miceli is a professional speaker, business thinker and founding partner of Direzione, a top management consultancy that provides state-of-the-art knowledge on corporate governance, ethical culture, leadership, diversity, and company purpose.
He is the author of “The Virtuous Barrel: How to Transform Corporate Scandals into Good Businesses” as well as of the best-selling books on corporate governance and business ethics in Brazil, including “Corporate Governance in Brazil and in the World”, “Behavioral Business Ethics: Solutions for Management in the 21st Century”, and “Corporate Governance: The Essentials for Leaders”.
I thank Prof. Dr. Angela Donaggio for her valuable comments and suggestions.