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Why honesty pays in business

Oct 23, 2005 Success, Sunday Nation

To succeed in business, you have to be a bit crooked. Or, at least, you have to be willing to cut a few “corners”, make a few “friends”, enter into some “arrangements”. That is the received wisdom about business in Kenya.

It is wrong.

Business does not have to be shady in order to be successful. Quite the reverse: many studies tell us that the most resilient and most consistently successful companies in the world are those that practice open, ethical and honest business. The Enrons and the Trust Banks come and go like spectacular shooting stars and take all the headlines, but the quiet performers who consistently do the right thing are the ones who will be around for your grandchildren to see.

Michael Phillips, the developer of MasterCard and co-author of Honest Business, tells us that honesty has strategic superiority in the business marketplace. Why? Because business is about recurring transactions, not a singular event. It is repetitive and regular, and must be mutually agreeable to have a continuing benefit. This fact means that only those who openly seek mutual benefit prosper in the long run.

The consistently successful businessperson is not the one who has worked out the shortcuts; rather, it is the one who has understood something much deeper: the power of incentives. We are conditioned to think that in any transaction we must get the better of the other party – by charging more, or giving less, than was necessary. I win, you lose, ha ha. The enlightened entrepreneur understands a deeper truth: that a win-win situation is the holy grail of business. Transactions in which both parties maximise value gained are the cornerstone of present and future success. An interaction in which one party feels cheated is unlikely to be repeated; and if it is, will take place in an atmosphere of ill-will and mistrust.

Class-leading businesses know this; that is why, over time, they move away from one-off transactions with many suppliers (to maximise gain per transaction), towards long-term relationships with a small and stable set of trusted contractors (to maximise long-term mutual gain). Incessant haggling and quibbling, trying to get every extra cent out of every deal, is really for losers.

Customers value honest business. Which buyer do you know who actually likes to deal with the dishonest and the illegitimate? People may be forced to buy illicit liquor or brittle chairs by economic constraints; but as soon as their circumstances change they elevate to proper brands with a guarantee of quality. If you sell goods or services of dubious quality at absurd prices, you are sending a clear message to your customer: I despise you. And you will be despised in turn.

Employees value honest business. Who actually wants to be associated with a company known for its racketeering and patronage, rather than one which stands on its reputation and professionalism? How many CVs do you come across that highlight the jobseeker’s stint at one of our many failed banks? No, interludes like that are seen as a stain on any career, something to be brushed over rather than pointed out. Why is a firm like PricewaterhouseCoopers every young accountant’s dream destination? Not always because it pays more. Often, the motivation is to be associated with ethics and integrity. Studies have shown that employees’ productivity is boosted when they work in an environment that emphasises good behaviour and positive values.

Our biggest and best companies know this, and they work very hard to ensure that their reputation for ethical behaviour remains unchallenged. Enlightened businesses are deploying codes of conduct and policing them to ensure that every employee stays on the straight and narrow. In fact, a systematic ethics framework offers many benefits: it reduces risk; it boosts corporate reputation; it raises productivity; and promotes good behaviour in society in general.

If you study the companies that stand for integrity, you will observe many things. You will note, first and foremost, that the impetus always comes from the top. A fish with a rotten head is unlikely to waft a pleasant aroma from any part of its body. So it is with businesses. The troops do as the leader does. When the leader is a person of unquestionable personal ethics, the example is strong and persuasive. You will also find that in such businesses good behaviour is rewarded. Persons of integrity are promoted and valued, and take key positions in the company. The reverse is also true. Where the boss is a shark, the managers will be piranhas waiting to devour him.

Whether your business is big or small, honesty should be its core value. We are all given a moral compass; we just manage to mislay it from time to time. For some of us, the dust of misguided thinking becomes so thick over the years that the compass is lost deep inside. But it’s still there, still pointing to true north.

If you still doubt that honesty is the superior strategy of business, read Winners Never Cheat by Jon Huntsman. This gentleman is the boss of the Huntsman Corporation, America’s biggest family owned company and a business clocking US$ 12 billion in annual revenues. This self-made billionaire reminds us that moral values are child’s play, not rocket science. “Grey,” he tells us, “is not a substitute for black and white”.

We need more of his kind in Kenya, shouting the good message. For too long, we have made land-grabbers and the children of patronage our business role models. For too long, we have admired fraudsters and made them our guests of honour. The good guys, on the other hand, tend to be quiet by nature. It’s time for them to set modesty and reticence aside and start creating a commotion.

Many Kenyan businesspeople do not need to find their moral compass. They know exactly where it is, and use it every day. I came across a father and son running a motor dealership who have repeatedly been kicked into the cooler because of their refusal to pay bribes in any circumstances. Their moral compass regularly gets them into trouble, but they don’t throw it away. They do it because it’s the right thing, yes; but also because it’s right for business.

The ultimate power, however, lies with you, the consumer. If you believe in ethical business, then make it happen in Kenya. Exercise your spending power in favour of those businesses that exemplify good practice. Move your purchases away from those you know to be the beneficiaries of political connections, away from those who are periodically in court for malpractice. Boycott those who pollute with impunity, who steal and mimic the brands and copyrights of others, who treat their employees with disdain. Don’t be fooled by a better price or a higher interest rate. Hit them where you know it hurts them most – in the wallet.

We can cleanse the business gene pool in Kenya. Reward those who are ready to be judged on their reputations and their track record. Honest business is in your hands.

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