University of Bucharest Business Administration Master of Business Cosulting

CREATIVITY IN ECONOMY AND BUSINESS

Ethics in business consulting

Project made by: Diana Dorus

Bucharest 20 !

"thics means #doing the right thing$% refering to a legal matter &ith moral values and 'rinci'les% even if &e are tal(ing about common life or business life) "thics &ould mean &al(ing on the right 'ath to maintain integrity and follo& a diligent method) *n an ethics frame&or( * believe the first dimension to focus on is to determine &hether something is legal or illegal first) "thical means to avoid also other 'eo'le &ith unethical manners% to (no& &hen and ho& to say #+o$% so you &ill not be 'erceived as unethical also) ,al(ing about ethics in business and management consulting% it is very im'ortant because it reduces the need for legal and informative 'recautions bet&een the negotiation 'arties) "thics can be re'resented by a 'erson or a grou'% but &hen refering to an organisation% &hoever ta(es the decisions &ill be influenced by the culture of the com'any) ,his means that the em'loyees must decide and adhere to the ethical course of action) * believe there is an ethical a&arness since more and more 'eo'le-com'anies loo( in this direction) Mainly because the 'ublic is a&are of the subject% and media is re'ortig more and more the issue% increasing the 'ublic interest) .ince 'eo'le can see a lot of e/am'les of com'anies being unethical% and there are more and more #bad businesses$ that move through ,0% literature% and movies% the rulers of the organi1ations are seen as the villains engaged in bad 'ractices) Business consulting based on ethics &ill gro& more and more% as the la& &ill have a big im'lication as &ell% since it &ill consider ethics as very im'ortant &ithin the business consulting) .ince the la& is the one that dictates the course of action% it is re'resented as the starting 'oint of a business% although there are a lot of businesses that have their o&n standards and 'olicies) 2hen refering to ethics in a business% it can be defined as the behaviour that the business ado'ts in its daily dealing &ith the rest of the &orld% customers or com'etition) 3or e/am'le% there are businesses that are considered unethical just because their main interest is ma(ing money% or also if they ma(e business &ith other organisations that are &ell (no&n as unethical) Business ethics don4t allo& an organisation to chose &hatever method to ma(e money) Cor'orate social res'onsibility dictates that businesses must 'rovide safe &or(ing conditions and use manufacturing 'ractices that do not necessarily harm the environment) Business ethics also re5uire that com'anies 'rovide accurate financial data to stoc(holders and avoid advertising their 'roducts and services to consumers under false 'retenses) *t is necessary to (no& ho& to distinguish bet&een ethics 'racticed for the good 'ur'ose% and the ethics created just for the

image) .ince there is a very soft borderline bet&een being ethical or unethical% 'eo'le became more and more 'recautios &hen it comes to judging if a com'any really deserves the god 'osition in the to' or not) *t should be 'retty sim'le to identify the unethical business 'ractices) A good e/am'le can be re'resented by the com'anies that use child labour% or the ones that get involved in bribery% or use co'yrighted materials or 'rocesses) Being ethical and having a cor'orate social res'onsability% can bring a lot of advantages% li(e for e/am'le: Customer attraction regarding the 'roducts-services of the com'any% this &ay increasing 7oialty bet&een the em'loyees% &hich &ill reduce the turnover and increase 'roductivity6 Attracting ne& em'loyees that &ould li(e to &or( for the com'any% reducing this &ay the Attracting investors% (ee'ing the com'any4s share 'rice high)

the sales and 'rofit6

costs and getting talented 'eo'le6

,al(ing in com'arison no&% an unethical behaviour &ithin a business can destroy the organi1ation4s re'utation% being less a''ealing to sta(eholders) ,his &ill conclude to 'rofit loss) As the entre'reneurs should develo' their on set of ethical behaviours% * can consider the follo&ing as a #to do$: ) *dentify the standards and 'rinci'les that you &ant to rule under% so it &ill be a #fair$ business6 2) 8evie& the standards &ith the business associates6 !) ,hin( about statements that &ill hel' the business em'loyees ma(e the ethical decisions6 9) All the codes of ethics should have the form of a &ritten 'olicy% so that the business can be o'erated under them) ,he code of ethics &ill guide al the managerial decisions% &hich &ill rule under the same frame&or(% and all the decisions &ill be ta(en under it) ,he code of ethics is a very good &ay to 'rotect the com'any4s re'utation% image and legal standing if there is a breach of ethics by an em'loyee% for e/am'le6 :) ,rain the em'loyees to (no& ho& to ma(e ethical decisions in regards of the business)

2e can consider that business ethics is also about human behaviour in the organisational conte/t% &hich means &e have to see human behaviour as being consistent &ith norms and standards agreed by the society)

,his &ould mean that individuals recognise the issues% ma(e judgements and decisions ;based on agreed standards and norms< and then behave ethically) "thics are very im'ortant for a business% 'articularly to business consultants% because they rely on a high level of trust that the clients grants them% ess'ecially that they are offered the chance to have access to the most confidential and inner &or(ings of the organisation that em'loys them) 3ocusing on the im'ortance of business ethics% &e can 'ay attention to the follo&ing factors: ) Long-ter gro!th: *t refers to the sustainability that comes from an ethical long=term vision that focuses on ta(ing into account all the sta(eholders) 2) Cost "n# ris$ re#uction: it refers to the com'anies that recognise the im'ortance of ethics% and that they need to s'end less time 'rotecting themselves from internal-e/ternal behavioral ris(s% as they are su''orted by sound governance systems and inde'endent research)

!) Anti-c"%it"list senti ent: ,his comes as a reaction of the financial crisis that changed 'ers'ective &hen refering to the credibility of ca'italism) 9) Li ite# resources: .ince all the resources are limited% &ithouth the ethical matter that needs to be t(en into consideration% the resources &ould be used for the individual gain at a huge cost% since the 'o'ulation is gro&ing)

I %ort"nce o& Business Ethics' (ressures on Long-Ter

)ro!th

3rom my 'oint of vie&% as * had the o''ortunity to meet some Mc>insey consultants in Dubai% and had to s'end some time in their com'any% &hen * thin( about ethics% * &ould consider the follo&ing as ethical 'ressures% in regards of a business consulting com'any: ,ime accuracy and honesty about the im'lications the 'roject has) ,he client e/'ects

from the consultant to be truthful &hen it comes to accounting the &or( that has been done% and the billing 'ractices) *f these matters are not follo&ed% then the consultant violates the client4s trust and it resumes to unethical 'ractice) +ever 'romise an idea that can4t be develo'ed% trying to im'ress a 'otential client) "ven

if the client acce'ts% the chance of failure is very high% since there is a ga' bet&een the client e/'ectation and the 'otential the consultant has to offer)

Do &hat you said you &ill do) ,his is a very successful &ay for a consultant% &hen you
st

tell your client that for e/am'le you &ill finish the 'oject on before this day or on time)

of ?anuary% and you deliver it

+ever recommend 'roducts-services that the client might not need% or even &orst% &ill

affect his organisation) 3or e/am'le% if a client insists to tell the consultant &hat is &rong in his com'any and he &ill ta(e the decision on ho& to solve the 'roblems% if the consultant (no&s this is not the best idea% then the ethical &ay &ould be to ma(e the client see the best &ay% or to refuse the 'roject) ,his &ay% the client &ill a''reciate the honesty% and the consultant4s re'utation &ill be elevated) Al&ays giving the honest o'inion regarding the 'roject) .ince the client 'ays a lot of

money for the consulting firm% the best ethical &ay is to tell the client the truth and the honest o'inion regarding the 'roject and the solutions that he has) Protect the data and all the confidential information the consultant received from the

client) .ince the client trusts the consultant &ith his information% it &ould be unethical to reveal it in some other 'arties)

Disclose conflicts of interest* *f the consultant is &ell (no&n for his e/'ertise% he might

find himself &or(ing in the same time for t&o com'eting com'anies) ,he best ethical &ay is to discuss it &ith the clients and eighter sign an information nondisclosure agreement% or sim'ly dro' one of the t&o firms% as a client)

+ever brea( the la&% even if the client as(s you to do it in an indirect &ay) ,a(ing bribe

or bra(ing the la& is an unethical 'ractice) *f for e/am'le a client as(ed the consultant to mas5uerade as customer and try to obtain information on a com'etitor) ,he best &ay to solve this is to re&or( the 'roblem statement and methods &ith the client) 2ith the 'roblem statement refined% you may find o''ortunities to solve the client4s 'roblem in a more 'alatable &ay) As already discussed% there is an ethical code that all the com'anies should follo&) *f that code of ethics is not follo&ed% usually it &ill result in the loss of the client in another com'any4s benefit% and also there &ill be for sure a lot of legal im'lications and conse5uences) ,he consulting com'anies should (ee' the client4s 'ersonal information confidential% not using it for 'ersonal benefits at the com'etitors for e/am'le) Also% consultants should treat each

client in an individual matter% not using the same methods and strategies for all of them% as each com'any is uni5ue% and it has its o&n needs)

2hy are the code of ethics im'ortant for a business@ *t is im'ortant to define the behaviours that the com'any &ill acce't6 to 'romote high standards of 'ractice and a &ay of self evaluation for the members% regarding on being ethical or not6 to develo' a frame&or( for 'rofessionals regarding res'onsabilities and acce'ted behaviours6 to develo' an identity of the business6 to im'rove 'erformance lin(ing the business value to the individual success6 to create an environment based on mutual trust and res'ect% thus hel'ing to the organi1ational effectiveness6 to encourage% recogni1e and re&ard the value based behaviours% thus ma(ing a stronger culture &ithin the organisation) .ince ethics affect a consultant4s &or( on a daily basis% the code of ethics is really im'ortant during &or( and &hen dealing &ith the client) *t also de'ends% if the consultans in an e/ternal or an internal one) 2hen refering to an e/ternal consultant% they &ould need to follo& a strict code of ethics &hen establishing ne& clients or even dealing &ith the old ones% as it follo&s: >ee' all the information confidential% be im'artial% and give inde'endent advice6 Agree &ith the client before starting the 'roject for the 'rofessional charges6 Develo' realistic and 'ractical solutions to the client4s issues6 *nform the client about the terms of the contract and the advice you are 5ualified to give)

*t is not ethical to &or( for a client4s issue that you never e/'erienced before% or you have too little information on6 >ee'ing the client information secure% since consultants &or( in the same time &ith

many organi1ations% even from the same industry% or even &ith com'etitors) Ao& can a consultant o'erate using a consistent a''roach to deciding &hat is right and doing the right thing@ ,he a''roach is described in the diagram% and it 'roves that the 'rocess is very com'le/% and not linear% &hich means that de'ending on the situation and the decisions that need to be ta(en% the consultants should travel around the &heel as many times as it is needed)

+e"tures o& the Ethic"l Decision-M"$ing ,heel

+e/t% * &ill describe each ste' of the "thical Decisions B Ma(ing 2heel% for a better understanding of each ste' that needs to be ta(en) The Intern"l Voice Although it is a rational 'rocess% it should consist also in an internal reflection) 2hen you feel li(e the issue% re5uest or the consultancy 'roblem is rising 5uestions% this means considering the issue in a more detailed 'ers'ective% not sim'ly avoiding the subject) +"ct +in#ing Although it is difficult to gather all the information available% it is better to get all the information before 'roceeding to action) Many 'eo'le no&adays 'refer to ma(e decisions before seeing all the variables available)

I#enti&- the Con&lict ,he first thing to as( is if the subject has any ethical issues or is related to any conflicts) As there can be many issues that can relate from one subject% it is better to analyse first and sto' after each issue that comes in mind) Recognise the Actors At this ste'% * am refering to all the 'arties that are affected by the decision ma(ing% also the ones that ma(e the decisions and last but not least the sta(eholders that are involved) Re.ie! (ossible Outco es As soon as the actors are being recognised% this comes to the ne/t ste' of identifying the outcomes for each decision) 8evie&ing the 'ossible outcomes % it &ill hel' the consultants to have a better loo( at the insights of the ethical dilemma) Consi#er Dut2here do the duties lie@ ,his refers to the &ay a 'erson behaves% loo(ing at their values% standards and all the actions that ma(e that 'erson #tic($ in different &ays) (erson"l Integrit*t refers first at the character of the community of the consultants and ho& they &ould res'ond to the issues they have to face at that moment% ho& the other consultants &ill interact &ith you if they &ill hear about your decisions% ho& they &ould react and ho& &ill you feel about their reactions) .econdly% it refers to the o&n character% ho& you see yourself &hen ta(ing the decision% &hich decision you &ill ta(e% and at the end do you consider yourself ethical or not) Chec$ the Altern"ti.es 2hat other o'tions are there in res'onse to the issue% it is &orth tal(ing about it &ith the other consultants and &ith the client% &ill it be 'rofitable or not) Concluding% ethics in a business% es'ecially for a consulting com'any% are more then im'ortant% if the com'any is interested in a long=term success) ,his re'resents the foundation u'on &hich the consultant gains res'ect and trust from the clients) *t is very im'ortant to sho&

the client he can trust you% that you have moral vie&s and the com'any has strong ethical codes that everybody follo&s% so that the client can be rela/ed &hen ofering all the information to be analised by the consultant) ,his &ay there &ill not be any ga' of data and the relationshi' bet&een the consultant and client &ill conclude in more then satisfactory results of the 'roject) An ethical consultant &ill al&ays res'ect the highest standards of business% and &ill behave accordingly% &ithout ingaging themselves in conflicts of interest &ith a clientCs direct or indirect com'etitor)

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