Ethics and Entrepreneurship
As an entrepreneur you are in a perfect place to create the business you've always wanted to be a part of. Your legacy can be the creation of a workplace that people LOVE to work in. You can create a company that is not only profitable, but one that develops people. You contribute to their life as they contribute to yours.

A deeper understanding of the interdependence of organizational effectiveness and ethical behavior can offer new insights into simple (not easy) and cost effective ways of improving the bottom line while increasing morale and product/service quality. Ethics can an engine for success!

Why is ethics versus business even a question? Often people see this as a tension - an either/or kind of situation and that kind of thinking is based on a false understanding of the relationship between effective and powerful business practices and ethics.

This confusion leads to a number of myths that allow people to rationalize behavior they would be ashamed to claim in any other endeavor. Human beings are very good at compartmentalizing thinking and different aspects of life, but they often pay for that "freedom in both physical and psychological ways. Sickness and high turnover costs are both ways that companies pay for their willingness to ignore the core needs of people at work.

What is Ethics?
At its heart ethics is all about relationship. There are three approaches:
1. Rules of behavior = command and control management style
2. Actions that support relationships = collaborative management style
3. Actions for the highest good - innovative management style

Ethics as Rules
Leaders who have a command and control leadership style often see ethics as "rules. Rules are seen as an "objective approach and standardization of behavior. It is a "one size fits all approach to relationships. The irony is that only by having a really good understanding of the rules can you break them well. Here duty and "shoulds hold sway over people's feelings or needs. When rules are coupled with protective values, then the rules become selectively enforced, depending upon the status and relationship of the individuals involved. Liberties are taken in the name of loyalty and in the name of vengeance. This is an area that is key to the violence in the Middle East.

Protective values themselves, offer rationales about why the rules should be selectively applied. The need to bow to an authority makes possible the opportunity to reframe the rules based on an interpretation of the desires or dictates of that authority by anyone with enough power or status to claim intimate knowledge of the authorities desires. This is one of the issues in many fundamentalist religions and cults.

This is where the confusion arises between ethics and the law. In the Middle Ages common law was designed to be simple so that everyone could understand it and hence obey it. We've come a long way baby and the statement that "ignorance is no excuse is an example of just how far. You might remember that the Clinton's were accused of breaking laws they didn't even know existed. What is true is that so many laws are created by lobbying and special interests, that the law can actually prevent you from being ethical. Tom's of Maine had to get the laws rewritten to avoid testing his toothpaste on animals: the law mandated animal testing.

Ethics as Relationships
Leaders with a collaborative management style see relationships as an important aspect of ethics.  Relationship can be used in two ways here. It can be used as an understanding of the interrelationships between all parts of living systems. Or it can mean the interrelationships between people. Here I am discussing the interrelationships between people. 

When relationships between people are not infused with respect, appreciation and self-knowledge the desire to be in relationship can become a need that damages integrity. This is one of the criticisms leveled at people who are seen as being too touchy feely. There are times when having lose personal relationships prevents people from making 'hard decisions like firing someone who is really not good at their job, but is a friend or family member. However the ability to act from the intrinsic instinct of caring and generosity will open up new ways of relating that bring out the best in everyone. The tension between what the situation calls for and the commitment to act with respect and appreciation will engender new ways of being together that will be both instructive and incredibly satisfying. The key is the ability to hold the tension until a new path appears.

Ethics for the Highest Good
Leaders who see their role as the development of others often have a higher purpose in mind for their business while making a profit at the same time. Here is where the interrelationships of all parts of the living system are taken into consideration. It is life itself and the growth and development that it represents that become the key measure of success. There is no losing n this scenario only win-win. The sacrifices needed to ensure long-term and system-wide success are seen as key to becoming and staying a strong player in the mutual victory that is a measure of success and the purpose of the engagement.

Johnson & Johnson is the most talked abut example of this approach. When they recalled their drug - way above expectations - they sent a message that people, their customers, were more important than profit. In so ding they achieved a reputation and improved profits! It is inclusion that pays off and it is inclusion that is the highest ethical path.

Ethics as an Engine of Success
The following adaptation of David Klein's idea as shared in The Systems Thinker, graphically explains the dynamics at work in organizations. Adapting both his work and that of Jean Tully, ethical attention to relationships and communication will result in a deeper understanding of applied ethics and that will inform the actions and generate results that will be ethically robust.

Diagram removed.

Most companies and most leaders pay attention to results and try and monitor and control actions, but they ignore the 80% that informs both. The blue arrows demonstrate the accelerating path. In this direction each step builds upon what went before. Actions, learning, beliefs that enhance life improve the next step.

The dotted arrows show the dampening path. Here each step diminishes the previous step when it next appears. This is a destructive path and things begin to fall apart in these kinds of circumstances. The dotted arrows demonstrate a diminishing rate of return.

Ethical Illusions
* There is a negative tension between ethics and productivity/profit.
In the real world, these are tightly intertwined. What makes an organization effective is also what makes it ethical. Use rules to enhance and clarify relationships - not control behavior. Use relationships to enhance results through learning and shared knowledge and mutual support, use the notion of the highest good to inform purpose and thus action.

Leaders can only manage well when they have honest information. Quarterly r3eports are infamous for their optimistic hyperbole. You know the old saying,
"Garbage in, garbage out. True in management too.

* Ethical approaches versus management/leadership styles.
Leadership that uses rules to control behavior is coming from fear and distrust and generating fear and distrust. Leadership that seeks to create collaboration is focused on learning and therefore improvement and progress. Leadership that is focused on the highest good, allows for creativity and innovation. Emerson electric requires its managers to fill out 57 reports monthly. Their belief that you must know everything and that they need to too has resulted in an atmosphere that has killed creativity. They have been reduced to buying it, by purchasing other companies.

* Strategy versus leadership. Leadership versus culture. Culture versus strategy effectiveness.
Actually each strategy demands a certain leadership style and a certain kind of culture to be effective. Leadership creates the culture ( You can go to my web site: www.ethicalimpact.com and download the book, Strategic Imperative - Culture as a Key to Success, for more information of culture).

* Values guarantee success and strong principles.
There is a difference between lived and espoused values - honesty, for example. I've never been n an organization that declared, "We don't want honest feedback. However almost every company I've been in has killed the messenger when honest feedback was offered.

Certain lived values fall into two systems. These systems have two very different purposes - protection and effectiveness. These values misapplied create corruption. So it is possible to do bad things with the best of intentions (I have a workshop on this - Why Good People Do Bad Things, see web site, www.ethicalimpact.com)

* That control is possible.
Control as manipulation is possible - for a short time, for certain situations, and for limited results. People will do as they are told only if you can affect them in some way. If you are bigger and more powerful you can get your way, but only for as long as you have a presence.  Control through positive influence will generate better and more long lasting results. Control through appreciation will increase your results exponentially, but it may feel like you are out of control. You need to give up your ego and walk your highest self to make this work. Business becomes a spiritual discipline.

* What you see is what you get.
The reality, as evidenced in the success engine, is that the most important things are invisible. You can't see relationships, but you manage them, monitor them, grow and destroy them all the time. Now it is time to pay attention to them in new ways.

Systems Thinking
There is much in systems thinking that when applied, will give a deeper and more profound understanding of the dynamics that either increase or weaken ethical behavior.

Autopoiesis - how living systems are self-making and renew.

For living systems small things - especially at the beginning - make a big difference. It is through the small, moment-by-moment understandings we generate in every interaction about how the world works for us that informs our next action. These small understandings form the foundation of our belief systems and hence the constraints, limitations and allowances of all our actions from then on.

If we create beliefs based on fear and protection, then we constrain our possibilities. This makes renewal and the flexibility need to address changing conditions very hard to come by. It is like going white water rafting in a wood or steel boat. Renewal and responsiveness require a rubber raft. The flow of information is necessary for people to make informed decisions. When fear creates secrecy, then good decisions are very difficult Without correct and timely information people cannot respond to sudden and dramatic changes effectively.

It is in the act of renewal and in self-recreation that integrity is maintained. As learning happens and responsiveness is embraced the changes and shifts in beliefs and skill sets needed demands shifts in basic understandings of how things work best. Integrity is not a rigid and uncompromising approach to life, but an informed dance where the intent stays the same, but the execution changes. This is one of the conflicts in the death penalty, I believe. The purpose (curtailing crime) is confused with vengeance. The desire to respect life conflicts with the desire to see everyone safe. Without a real discussion about these hidden tensions, people with high integrity find themselves in rigid positions and at odds with one another.

Form follows function - it is all about how you do things not just what you do.

Rules create a structure and then push work and relationships through that structure. We create rules around how work is to be accomplished to: make it safe, to clarify authority and to ensure that it gets accomplished. The purpose of these rules is to control it and make sure it happens the same way every time. People are replaceable, but the rules remain and guarantee consistent results.

A relationship focus adapts the structures to fit and support the relationship. When we "play favorites we bend the rules and structures rather than risk damage to the relationship. There is another side, however. When working together is important, even necessary to get things done (concurrent engineering, for example), where teams are formed to do multiple processes all at the same time, then the structures are shifted to support and enable people to work together better. Team members may stay together for years, for instance, rather than being transferred at the drop of a hat.

Working for the highest good sets a structure that then adapts, as necessary. When openness and honesty are treasured then structures need to be created that support the openness and free flow of information necessary to allow the self-organization and spontaneous responses of employees to the shifting conditions of the market place. It is not possible to determine before hand what will be needed. Yet, at the same time, constant integration is needed to keep things together and coherent. This "tight-loose approach to management requires shifting structures and flexible applications as well s constant communication to make things work. These environments are high learning environments and very exciting places to work. A small example is a medical response team. No one is "in charge. Who ever sees what needs to be done either does it or directs others to do it. No one argues, sulks, or disobeys. The "highest good is saving the life of the patient, not making a point. The authority structure of the team shifts with the demands of the situation.

Adaptation happens by paying attention to how things are done. This is one of the major illusions in business; the fear that acting ethically ties your hands and prevents you from doing things that maybe needed to be done - for "business reasons. This little lie allows us to treat each other inhumanely. It gives us the false promise of speed and justifies cruelty. It does NOT fulfill any of these promises. In fact it just proves the adage, "The hurrier I go the behinder I get

Taking the time to act from a caring and respectful manner however will generate both speed and increased effectiveness. Rework is NOT effective. It is NOT cheap either. Caring about the outcome and taking the time to do it right, is faster and cheaper, in the long run.
 
The need for alignment in purpose.

Purpose sets both the drive and context. If there is a conflict in between purposes either within a person, between an individual and the organization or between individuals, or if there is a conflict between the workforce and the strategic needs of the company, then progress becomes difficult and ethical decisions conflicted and hard to decipher.

When purposes align then magic happens. Things become effortless, learning is cherished and other people are appreciated for the gifts they bring. The dance becomes fun, interesting and creative. The alignment of purposes generates clarity and discernment is easy. This is the holy grail of culture and the measure of good leadership.

Systems thinking is about the interrelationship between the various parts of a systems. Systems thinking gives you a much stronger understanding of the importance of the implications of the dynamics that can only be seen when looking at the "white space, the interactions between departments, for instance. It is in the interactions between the various aspects of the organization that real impact can be made. While it can seem abstract it is no more abstract than gravity. Until gravity had a name it went unnoticed. Once named, it could be studied and then used and understood in a way that allowed for huge scientific progress. Systems thinking is much the same. Know the vocabulary, understand the invisible dynamics in any system, and you can do things that would have been impossible before.

Choosing an ethical approach to business is a way of ensuring that profit will be achieved along with a legacy. Such a choice galvanizes everyone involved. There is energy and joy inherent in everyday work and a purposeful life is not a difficult thing to manifest. Profit becomes an important key measure of success, but not the only measure of success. Profit is an engine that feeds the continuing possibility of engaging with the world in ways that make the heart sing.

The Author
Kathryn Alexander, CEO of Ethical Impact, Inc. can be reached at her web site.