Oct 21, 2024

How to Start a Virtuous Cycle in Your Business

In his recent article for Inc Magazine, BigSpeak’s EVP Ken Sterling explores the importance of ethical business practice in building a business customers and employees will trust– something that has unfortunately become increasingly rare.

According to a 2024 Gallup Poll, trust in big business has decreased over the past two decades. Since 2001, the number of people who say they have “quite a lot” or “great trust” in business has decreased by over 40 percent, from 28 percent to 16 percent. Meanwhile, the number of people who say they have “little trust” in big business increased from 23 percent to 41 percent (another 40 percent difference).

So what’s causing this lack of trust?

A big part of the problem can be traced to ethics. Specifically, the unethical practices of various executives at big businesses. You know who I’m talking about. Boeing placed profit before customer safety. FTX used their customers’ money illegally. And we all remember Enron, not to mention the recent debacle with Elizabeth Holmes and Theranos.

While businesses are entitled to make a profit, it can be done ethically. As my grandfather used to say, “You can do well by doing good.” Many companies do this by promoting a virtuous cycle, like Patagonia and Ben & Jerry’s.

For decades, Patagonia has made a profit while maintaining fair labor policies, sustainable practices, and transparent operations. And Ben & Jerry’s produces great ice cream while promoting fair trade practices, climate justice initiatives, and ethically sourced ingredients.

And it’s not just these companies. Companies that make up the list of JUST Capital are ethical companies where shareholders earn 1-4 percent above the market average return on investment, owners generate a higher return on invested capital, and workers earn about 20 percent above the living wage.

If these companies can do it, certainly other big–and small–businesses can, too.

As an attorney, law professor, and talent agent, I’m passionate about business ethics. I advise clients and companies on how to create ethical cultures and build a virtuous cycle, and I even teach an ethics class on LinkedIn.

So what is a virtuous cycle?

A virtuous cycle is when company leaders support ethical policies, and ethical policies support the leadership’s initiatives.

When this happens, the cycle creates an environment in which employees feel empowered to make ethical choices, leading to a more trustworthy, efficient, safe, and successful (i.e., profitable) organization.

How do you encourage an ethical culture in your business?

Ethical behavior starts at the top. Leaders demonstrate integrity by making ethical decisions and holding everyone accountable for upholding the organization’s values.

Here are the steps that I advise businesses to follow.

1. Create clear and strong policies about ethical conduct.

These policies should be:

  • Clear and concise: Define ethical expectations and outline any prohibited conduct.
  • Accessible: Make your code of ethics and relevant policies readily available and easy to find.
  • Published on your website: Hang a poster in the break room.
  • Reviewed and updated regularly: As regulations and situations evolve, policies need to adapt to maintain their effectiveness.Lead by example.

2. Lead by example.

It doesn’t matter what policies your business creates if your leaders don’t follow them. Enron had great policies that no one followed. Remember, leaders who walk the walk inspire trust and ethical behavior in their employees.

3. Empower employees.

Give employees clear expectations and the resources needed so they can make ethical choices–even in difficult situations. If they have to always ask permission to do something ethical, they may not do it.

4. Encourage open communication.

Create an environment where employees feel comfortable raising concerns without fear of retaliation. You can encourage this behavior by praising people who ask the hard questions.

5. Celebrate successes.

Share success stories of ethical decision-making within the organization to inspire and motivate employees.

6. Address violations swiftly and fairly.

Uphold consequences for unethical behavior to demonstrate the organization’s commitment to ethical conduct. Remember, if there are no consequences for people’s unethical behavior, there is no reason to act ethically.

Over the past two decades, trust in big business has decreased. Remember though, trust can be rebuilt by creating a virtuous cycle in your company that encourages an ethical culture.

Profit and doing good are not exclusive. You can be profitable and trustworthy.

I would love to hear how your business is promoting an ethical culture.