1. e s b 2 Small Business Ethics: A Key to Long-Term Success McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

2. e s b Objectives: ethicsethical dilemmasDefine ethics and ethical dilemmas and the relationship between them Find out why ethics are a big part of small business Understand why there aren’t any “do this” or “don’t do this” types of lists for ethical decisions ethics planningLearn ethics planning, a three-step process to help you make ethical decisions Learn the techniques of building social capital through legitimacy Learn the basic skills for handling a crisis Chapter 2 2-2

3. e s b Tobin Real EstateFocus on Small Business: Tobin Real Estate national localBig business are national, but small businesses are local. public faceSmall business owner is public face of company decisionspersonal reputation business –It is important that small business owners see their decisions, personal reputation, and their business as one thing. Chapter 2 2-3

4. e s b A system of values that people consider in determining whether actions are right or wrong is called: a)ethics b)personal values c)dilemmas d)organizational culture Chapter 2 Question 2-4

5. e s b EthicsEthics: a system of values that people consider in determining whether actions are right or wrong Ethical DilemmaEthical Dilemma: a situation that occurs when a person’s values are in conflict, making it unclear whether a decision is the right thing to do UnethicalUnethical behavior in a small business leads to lower sales or even bankruptcy. Chapter 2 2-5

6. e s b Ethics: It Isn’t Just the Big Guys When Enron imploded, the subsequent wave of corporate scandals confirmed the cynical suspicion of unethical behavior Small Businesses, often overlooked, are not angels –Simple theft, one or two bad managers, hiring unqualified relatives can all lead to disaster Chapter 2 http://www.businessweek.com/print/smallbiz/content/jul2003/sb20030725_3531.htm?chan=sb Example 2-6

7. e s b TrustTrust: a feeling of fairness in all business transactions in which the firm engages, such as financial matters regulatory compliance and complaint resolution Personal AccountabilityPersonal Accountability: a process in which people take responsibility for the decisions they make and the consequences of those decisions Chapter 2 2-7

8. e s b Organizational CultureOrganizational Culture: a set of shared beliefs, basic assumptions, or common, accepted ways of dealing with problems and challenges within a company that demonstrates how things get done start-upBusiness start-up is the best time for owners to communicate an ethical culture Chapter 2 2-8

9. e s b When key people behave in a consistently ethical way, employees do, too. role models –Small business owners are role models. 4 Key Elements to an Ethical Culture –Modeling –Consistency –Visibility –Personal Values Chapter 2 2-9

10. e s b 4 Key Elements to an Ethical Culture 1.Modeling 1.Modeling: when small business owners act in ways they want their employees to act 2.Consistency 2.Consistency: maintaining of the same behavior, attitude, or values over long periods of time Chapter 2 2-10

11. e s b 4 Key Elements to an Ethical Culture 3.Visibility 3.Visibility: demonstration of a behavior, attitude, or values in ways that are evident to others 4.Personal Values 4.Personal Values: attitudes regarding what a person believes is important in life and best way to live one’s life –Personal Ethics –Personal Ethics: beliefs about what is right and wrong which guide decisions in everyday life Chapter 2 2-11

12. e s b FlexibilityFlexibility: the freedom of not having lots of rules, policies, and procedures –“First time” situations: small business owners have to deal with these very frequently on start-up new situationsSmall businesses need to be flexible as it grows and runs into new situations. fewer resourcesSmall businesses generally have fewer resources than larger corporations. Chapter 2 2-12

13. e s b The creation of something new or trying something for the first time is called: a)modeling b)utilitarianism c)billboard principle d)innovation Chapter 2 Question 2-13

14. e s b InnovationInnovation: the creation of something new or trying something for the first time niche of customersSince small business often find a niche of customers that big business has forgotten, it’s easy for that small business to become a target if it becomes successful. Chapter 2 2-14

15. e s b Ethics planningEthics planning: a process better used to consider issues of right and wrong Chapter 2 2-15

16. e s b Step One: The Four QuestionsStep One: The Four Questions 1.Who will be hurt, and how badly? 2.Who will benefit, and how much? 3.What do you owe others, if anything? 4.What do others owe you, if anything? ObligationsObligations: social force which impels people to act ethically because their actions could affect many other people Chapter 2 2-16

17. e s b Step Two: Creating Options for ActionStep Two: Creating Options for Action –Distributive view –Distributive view: an ethical overview which involves thinking of problem solving as a win-lose issue Best interest for your business Short-term view Chapter 2 2-17

18. e s b Step Two: Creating Options for ActionStep Two: Creating Options for Action –Integrative view –Integrative view: an ethical overview which involves considering what is best for everyone involved in a situation Best interests of everyone Long-term view Chapter 2 2-18

19. e s b Chapter 2 Process of Integrative ViewProcess of Integrative View 1.Check for obvious solutions 2.Check for creative solutions http://eweb.slu.edu http://eweb.slu.eduUse http://eweb.slu.edu as a resourcehttp://eweb.slu.edu 3.Fill in details 4.Check for mismatches 5.Apply the integrative view 6.Make a new list, rank the options, and choose 2-19

20. e s b Step Three: The Ethical TestsStep Three: The Ethical Tests –Utilitarianism –Universalism –Golden Rule –Billboard Principle Chapter 2 2-20

21. e s b The Creation of Social Capital Social capitalSocial capital: characteristics of a business, like trust, consistency, and networks, that represent potential social obligations which are an asset of the firm or entrepreneur Chapter 2 2-21

22. e s b Two Ways to Build Social Capital LegitimacyLegitimacy: the belief that a firm is worthy of consideration or doing business with because of the impressions or opinions of customers, suppliers, investors, or competitors –3 Forms of Legitimacy: People 1.Based on Your People Product 2.Based on Your Product Organization 3.Based on Your Organization Chapter 2 2-22

23. e s b Legitimacy Based on Your People:Legitimacy Based on Your People: –Goodwill –Public recognition –Product/Service name recognition –Business Network Membership –Organizational Size –Attire Chapter 2 2-23

24. e s b Legitimacy Based on Your Product:Legitimacy Based on Your Product: –Customer service –Quality standards –Certifications –Testimonials –Industry leadership –Media product/service visibility Chapter 2 2-24

25. e s b Legitimacy Based on Your Organization:Legitimacy Based on Your Organization: –History –Hours of operation –Days of operation –Legal form –Physical setting –Internet identity Chapter 2 2-25

26. e s b Two Ways to Build Social Capital (cont.): Social networkSocial network: the entrepreneur’s set of relationships and contacts with individuals and institutions building a network –The key is building a network of people who trust you and are willing to help you. Chapter 2 2-26

27. e s b Sources for network connections:Sources for network connections: –Family –Bank –Customer contacts –Hobbies –Business associations –Other organizations –Small business support organizations Chapter 2 2-27

28. e s b Chapter 2 2-28

29. e s b All of the following are ways of handling a crisis, except: a) Admit you’re in trouble – quickly b) Communicate facts you know c) Take your time, things will work out d) Deal with the crisis quickly Chapter 2 Question 2-29

30. e s b Handling a Crisis: 1.Admit you’re in trouble – quickly 2.Get to the scene as soon as possible 3.Communicate facts you know 4.Have one person serve as the firm’s spokesperson 5.Separate crisis management from the everyday management of the firm 6.Deal with the crisis quickly Chapter 2 2-30

31. e s b Should You Care About the Bees? Honey Bees are big business: $15 billion in U.S. Crisis: An Ailment is threatening the bee population and the cause is unknown Many people have reported losses of revenue this year Many business owners are taking precautions and buying as much honey this fall as their budget allows Chapter 2 http://www.entrepreneur.com/management/operations/article178578.htmlExample 2-31

32. e s b Questions? Chapter 2 ??? 2-32