Welcome to our column on ethics and small business. Do you have an ethical dilemma? Write to The Ethics Coach at ethics@entrepreneur.com.
Trust and reputation are assets entrepreneurs must work continually to increase--consider them as "currencies" that can be measured far beyond dollars, and that are quickly spent when decisions are made to ignore or mishandle ethical issues. Let's tackle your questions on these valuable commodities.
Q: My partner and I run an insurance brokerage firm. We hire good people, have a code of conduct and reinforce to our producers the importance of reputation, integrity and putting clients' interests ahead of their own commissions. However, the system creates an inherent conflict of interest, as compensation is directly correlated to the amount of coverage producers sell. For example, a client's advisor requested quotes for $15 million of coverage despite the fact that our producer's client review revealed a need not exceeding $5 million. Clients, and often their advisors, have no idea what the suitable need is, so they look for advice from the producer--who can rationalize that more is better for the client.
How do my partner and I uphold the integrity of our brand and reputation in a system set up to promote those who take advantage of clients? How do we ensure our producers operate with transparency?
A: It sounds like you and your partner are setting high and appropriate standards for your team. It is important that everyone understands that commissions aren't the only currency the firm values; therefore, identify the others and communicate why they matter. These could include creating trusting relationships with clients and other team members; building the firm's and employees' reputations; differentiating the company brand; and committing to personal and professional development. Regularly reinforcing what it takes to be successful in your firm creates clarity and alignment.
The term producers refers to those generating money ; as you expand that definition, connect it to the broader list of currencies they produce when they consistently put clients' interests first.
If you've hired people who align with your firm's purpose, they are motivated by more than money. By learning about what inspires them, you can reinforce it and recognize them for those contributions.
The integrity and reputation of your brand is built on your collective accountability. When mistakes happen, they are easier to absorb if you are a learning organization that collaborates to help one another succeed. Listen to your team members and your clients to determine what needs tweaking. Encourage the team to tell stories about successes and frustrations and how they overcame them.
Q: A large developer, a client of our construction company, requested we make a contribution to the campaign of a particular political candidate. If we refuse, the developer says, we will be the only company it works with that is not contributing; the implication is that there would be repercussions. It sounded like a threat that we would lose business.
We have a practice against taking sides in politics (and now realize we need to have an actual policy in place). But we also don't want to lose the developer's business.
A: I'm glad you're not considering leaving unmarked bills in a drop-off box. On the surface, you have two choices. If you make the contribution, consider meeting first with a lawyer who specializes in political law; if you decline, think through the most effective and diplomatic way to handle the client relationship.
Below the surface, consider the message you are sending. To employees, is it that business trumps values, or that we don't compromise who we are to do business? The implications are huge for what trust means in your organization. To the developer, if you contribute, the message is that we say we don't do this, but we will for you, so coercion works with us. To the community, if what the developer is doing goes public and you are part of it, the message could harm your reputation.
I checked with Rebecca Walker of Kaplan & Walker, who specializes in compliance law. While not offering a legal opinion, she gave the contribution a thumbs down. She suggested your CEO meet with the client and, using a light touch and some humor, explain that your firm can't make the contribution. You will have a stronger argument in the future when your practice of not making political contributions is a written policy.
