Ethics AND Profits? Have Both!

by Shel Horowitz

“I have good news for you,” Shel Horowitz told the Family Business Center’s September meeting, “You can succeed and still be ethical.”

Noting that family businesses often maintain higher ethical standards and better customer relationships than larger, more impersonal companies, Horowitz, author of the new book, Principled Profit, outlined some of the reasons why ethical behavior, surpassing customer expectations, and cooperating with competitors all make good business sense:

  • Customers prefer to buy from companies that treat them well and share their values
  • Ethical companies will recover faster from a crisis
  • Honesty, integrity, and quality are key to success

For Horowitz, ethics sometimes means telling clients they’re on the wrong track. And often, that honesty is rewarded. He told the story of meeting with a group of business owners who wanted to develop a website, taking a deep breath and telling them why the domain name they’d chosen wouldn’t work. While he’d been worried about losing the account, in fact, his willingness to steer the client away from unseen potholes led to a very juicy assignment from one of the business owners.

He cited Johnson & Johnson’s rapid recovery after the Tylenol poisoning scare of 1982, when seven people died after taking Extra-Strength Tylenol that had been tampered with. The company clearly took its own credo seriously: that customer interests are above all other stakeholders. Johnson & Johnson immediately and very publicly recalled and refunded all Tylenol products&emdash;not just the extra-strength version&emdash;and started a massive outreach campaign warning people not to take the product. The firm also voluntarily changed over to tamper-resistant packaging. This cost a huge amount of money; the recall alone took $100 million worth of product off the shelves&emdash;but cemented the company’s reputation as a trusted brand that really values its customers. So it wasn’t surprising that the company was able to rebound rapidly, because consumer confidence was extremely strong.

By contrast, Ford’s profits were down 26.8% after the company ducked responsibility and pointed fingers about the Explorer rollover problem. Horowitz says that while researching the book, he uncovered evidence that Ford knew about the problem before the Explorer was even released.

Encouraging family businesses to approach their competitors from an “abundance mentality,” Horowitz pointed out several ways that competing businesses can help each other. Citing well-known examples such as FedEx and the United States Postal Service&emdash;the USPS contracts with FedEx for intercity transport of Express Mail and Priority Mail&emdash;and IBM’s joint venture with Apple to develop the vastly powerful Power PC G5 computer chip, he showed that even fierce competitors can broaden the market for everyone, achieve greater technological success, and, most importantly, deliver higher satisfaction to customers by working together.

Horowitz noted that in his own business, offering writing and consulting services, the biggest challenge is not other writers but the perception prospects have that they can do the work themselves. By teaming up with some of his own competitors, he can spread the message that using a professional can make a huge difference in results.

This idea can work in any business sector. A local example: eleven florists joined up to put a large ad in local newspapers before Mother’s Day. The headline read: “You wouldn’t buy your groceries from a florist! So, why buy your plants from a Grocer?