Sunday, June 07, 2015
Ethical business behavior translates into more than profits
I'm often asked if good ethical behavior in business translates into profits.
Forty-five years ago, economist Milton Friedman famously wrote an article for The New York Times Magazine entitled, "The Social Responsibility of Business is to Increase Profits." Some (including me) have argued that this might suggest that a business that boosts profits by any legal means is doing well even if it exhibits a total lack of social responsibility.
However, I'm convinced that even Friedman might acknowledge that if acting in a socially responsible way regularly increases business and profits, then such behavior is a good thing for business.
If a business exhibits socially irresponsible behavior, there's certainly a good chance some customers will take their business elsewhere. Goodbye profits.
I'm regularly reminded of how the behavior of those working in business affects how much business I do with their companies, or how often I shop one place instead of another.
Two recent experiences that involved businesses not charging me as much as they might have, or not selling me something they easily could have, drove the point home that when it comes to building profits, establishing long-term repeat business is critical.
A small incident at the bakery of an independent grocerystore resulted in the baker charging me 25 cents less than the price marked for each macaroon I'd ordered.
"I think you may have undercharged me," I told the baker. She came around the counter to look at the prices and commented, "Well, those were on sale until yesterday and I didn't realize we raised the price back up to normal." When I offered to pay the difference, she responded, "My mistake. Enjoy the cookies."
Later that weekend, I stopped at the small hardware store that has been in our village for about a century. I needed to touch up the stain on some shingles that had suffered through a tough New England winter. I brought the 5-gallon container of stain from my last go at the shingles, hoping the clerk could match the color in a new can.
He asked if I had any stain left in the container.
"Some," I replied, "but I'm not sure it's still any good."
He opened container, stirred the contents around, and said, "It looks pretty good to me and you've still got a good gallon of stain in there. You need more than that?"
I didn't. He shook the stain up for me and handed it back, asking if I needed any wooden stirrers. He could have easily sold me a new $35 gallon of stain and I would have thought nothing of it. Instead, he charged me nothing, but helped me figure out what I needed, shook my hand, and said, "Stop in any time."
When businesses do the right thing -- even if it doesn't result in a sale -- can translate into customer loyalty and long-term profits. When I needed a new turnbuckle for a wooden screen door, I never considered going anywhere but the same hardware store. That the bakery happens to be on the way made a quick return stop there a no-brainer, as well.
Jeffrey L. Seglin, author of The Right Thing: Conscience, Profit and Personal Responsibility in Today's Business and The Good, the Bad, and Your Business: Choosing Right When Ethical Dilemmas Pull You Apart, is a lecturer in public policy and director of the communications program at Harvard's Kennedy School.
Follow him on Twitter: @jseglin
Do you have ethical questions that you need answered? Send them to firstname.lastname@example.org.