Leadership, Ethics and Governance: The Benefits for Your Business

The European (and South African) authorities (refer to governance codes below) opted for a principles-based approach. However, governance cannot be truly effective without the integrity of purpose and actions which drive the ‘tone from the top’ leading to a strong moral compass founded on ethically-based values.

The governance imperative

Corporate Governance has been a topic of ongoing conversation and even legislation since the early 1990’s. However, in spite of a number of outstanding codes and reports (such as the Cadbury Report, the four King Codes and Reports, the Combined Code and many more around the world), together with the various legislative responses (such as Sarbanes Oxley in the USA), business failures continue.

Where were the directors of these failed businesses and what were they looking at and asking of management when considering their approval of the financial statements year after year?

Ethics and moral duties

Each director is a steward of the company and should demonstrate:

  • Conscience – intellectual honesty and independence of mind,
  • Inclusivity – legitimate interests and expectations of stakeholders,
  • Competence – knowledge and skills
  • Commitment – diligence, and
  • Courage – to take the appropriate risks and to act with integrity.

There is evidence that suggests that companies displaying consistent ethical values and behaviours based on solid and sustainable moral values driven throughout the organisation where all are aligned to the ‘tone from the top’ deliver better and more sustainable returns.

The ethical and moral imperative

Key questions:

  • Is it a reasonable presumption that all know and fully understand the meaning and impact of ethical behaviour, moral values and what drives them?
  • Do the directors live out their stated ethical and moral values – the tone from the top?
  • What are the views of management and the workforce of the leadership’s (director’s) ethical and moral values and the example set?
  • Is it reasonable to assume that management knows how to embed these values throughout the organisation?
  • How do directors measure the ethical and moral climate of their organisation?
  • Does the ethical and moral climate of the organisation align with those espoused by the directors?

What is understood by ethics and morals – is there a universal standard, a universal moral compass? 

In the Glossary of terms in the King IV report the term Ethics is defined as follows:

“Considering what is good and right for the self and the other, and can be expressed in terms of the golden rule, namely to treat others as you would like to be treated yourself. In the context of organisations, ethics refers to ethical values applied to decision-making, conduct, and the relationship between the organisation, its stakeholders and the broader society”.

However, what is understood by ethical values, behaviours and integrity? Can one assert that there is a set of Universal Principles? Consider the following:

Universal Principles

Noted anthropologist Donald E Brown found in his research that the moral codes of all cultures include recognition of responsibility, reciprocity, and ability to empathise. Other studies have confirmed his findings. The major world religions preach common values: commitment to something greater than self, responsibility, respect, and caring for others. Genuine behaviour norms in different cultures may distract us from what we have in common with all people – a universal moral compass.  

Stephen Covey suggests more evidence of universal principles: “From my experience in working with different people and cultures, I find that if certain conditions are present when people are challenged to develop a value system; they will identify essentially the same values. Each culture may express those values differently, but the underlying moral sense is always the same.”

What are these universal moral values?

The authors of Moral Intelligence (Doug Lennick and Fred Kiel, Ph. D) suggest the following from their research:

  • Integrity
  • Responsibility
  • Compassion
  • Forgiveness and reconciliation

While the first two seem self-explanatory, what about the last two?

Compassion shown to an employee in distress may lead not only to a swifter recovery and return to full operational ability but also to a substantial gain in loyalty from employees – and not just to the employee concerned.

Forgiveness and reconciliation: Is not business the enterprise of risk?  If employees and management are too fearful of making mistakes, how much business risk are they likely to take?

Finally, an organisation that demonstrates these ‘universal values’ from the top through management in alignment with actual behaviour will achieve, through its workforce, greater returns than might otherwise be the case.

So, these ‘soft’ practices have the potential of leading to hard bottom line results.

Ethics and moral values – are they worth it?

It has been suggested that companies with recognised good governance are valued at a premium over those with poor governance records. The same applies to companies with sound ethical records. Ethical companies attract and retain talent.

The Proposition

  • Enhanced governance through demonstrated ethical behaviour
    • What are your values and ethics?
    • Does your behaviour reflect them?
    • How do your board colleagues and your first line reports perceive your values, ethics, and integrity?
    • What is your staff’s perception?
    • How do you go about ensuring the values are embedded throughout the organisation to achieve alignment?
  • Starts at the top
  • Safety for those really tough and necessary conversations
  • Ethics led performance
  • Behavioural change and feedback
  • Strong business case
  • Is your top team up for the challenge?

SMME Owners: Your Training and Education Will Boost Your Business

“An investment in knowledge pays the best interest,” (American politician and inventor, Benjamin Franklin)

Most SMMEs (Small, Medium and Micro Enterprises) in South Africa fold in the first two years of doing business. Reports suggest that the lack of education and training are some of the primary reasons for the low level of entrepreneurial activities and the high failure rate of SMMEs. To add salt to the wound, the overall quality of entrepreneurship in South Africa is recorded as lower than average.

Here are some of the visible results of the impact of, and lack of, education and training for SMME managers along with some corrective recommendations:

1. Quality of SA’s entrepreneurial activity below global average

South Africa’s entrepreneurial activity is rated at 5.1%, which is below the Global Economic Monitor (GEM) average of 6.4% and the average of 6.7% for efficiency-driven economies. (In 2019, South Africa ranked 49th out of 54 economies on GEM’s National Entrepreneurship Context Index, ahead of only Croatia, Guatemala, Paraguay, Puerto Rico and Iran. This index provides a single composite number that can express the average state and quality of the entrepreneurial ecosystem in a country and be compared to those of other economies.)

According to existing research on the subject, “This and other figures show a lower than average level of entrepreneurial activity in South Africa and present challenges to all role players (government, the private sector and educators) for getting programmes that encourage entrepreneurship off the ground, so that this gap can be decreased”.

2. Quality education linked to managerial confidence

In 2019, Ahmad Al-Tit, Associate Professor of Business Administration at Qassim University reported aspects such as the “business owner’s age, educational attainment, management skills, training, business size, and general business experience”, as elements impacting the success of a business.

From these factors, the attainment of good quality education, general age, and business experience is believed to result in higher managerial confidence and quickens the procedure of obtaining adequate business finance,” he further stated.

3. Academic recommendation to solving the problem

Considering the importance of SMMEs to the economy, the responsibility to educate entrepreneurs is spread among several stakeholders.

Based on the findings of research published by the University of Fort Hare, the following recommendations are suggested to the stakeholders:

  • Government Agencies: “It is also suggested that government agencies work hand in hand with the banks to ease access to finance (training programmes) by SMMEs”.
  • Government: “It is recommended that the government explore other strategies to compliment entrepreneurship education that will help create independent entrepreneurs instead of educated beggars.”
  • SMME Owners and Managers: “SMME operators need to take advantage of entrepreneurship education programmes that are offered by institutions of higher learning and government agencies if they really want to improve the performance and survival chances of their businesses”.
  • Institutions of Higher Learning: “They need to play a critical role in providing entrepreneurship education, for they have the expertise and resources to do so”.
  • Banks: “It is recommended that banks provide financial resources to SMME operators who show potential for success”.

Consider additional education and training for SMMEs offered by the Institute of Directors South Africa (IoDSA) to improve your understanding of good governance requirements. These will improve your likelihood of success and the attractiveness of your business while reducing the potential of regulatory risk.

Ask your accountant to guide you through the entrepreneurial training and education programmes that could give your business a better chance of succeeding.

Simple Communication Tips to Boost Your Profitability

“Communication is a skill that you can learn. It’s like riding a bicycle or typing. If you’re willing to work at it, you can rapidly improve the quality of every part of your life.” (American business speaker Brian Tracy)

Successful communication can be the difference between a profitable business and a failing one. Leaders who are unable to get across the needs of the company to their employees will very quickly close its doors. Likewise, people who are effectively able to communicate the things they need to be done will find their reward in a harmonious team and profitable enterprise.

This article is for those people who believe themselves to be among the latter. Those who have managed to traverse the minefield of communication and who find themselves surrounded by a largely effective team. In this position, it is possible you may still be making communication errors that are chipping away at your profitability and leading to a team that isn’t as effective as it possibly could be. They are common errors that anyone could make and everyone has seen at some point, but they definitely impact the bottom line. Here is how to cut them out and take your company to a brand-new level.

Avoid these communication errors

  1. Not answering the questionNo matter how well you explain things, being a leader sometimes requires you to answer follow-up questions from your team. While most of the time these questions are simple enough to answer, there may be occasions in which a manager may not be able to answer the question. Perhaps they don’t know the answer or simply didn’t take time to understand the question or misunderstood the question.

    When it comes to the effectiveness of your employee who is asking the question though, purposefully avoiding a response is as bad as mistakenly answering it incorrectly or ambiguously.

    For example, imagine your employee has sent you an email asking, “Did you say you wanted that report today, or next week?”

    A distracted communicator may see the first half of the message and rush to reply “Absolutely” or “Yes.” This ambiguous reply now wastes time and further confuses the employee. Does this mean the deadline has been pushed out or that it’s still due today? The employee may then be forced to follow up, or worse, assume an extension has been granted when it has not. Either situation wastes that employee’s time and can even lose a client.

    Avoid this simple error by ensuring you automatically read the full email and understand it before responding. Then make sure you make it clear which answer is to which question. Don’t assume the employee will be able to infer what is meant each step of the way.

  2. Too much informationThere is a very clear difference between providing your employee with the context and information they need to do their jobs and live up to expectations and giving them too much information. Giving an order with the right amount of information and the proper context will save time and make that employee better at their job.

    This error creeps in due to the manager’s assumption either that the employee needs more information than they do, or that extra information will help them to contextualize and make their own decisions. In the worst-case scenarios, it comes from the manager themselves not being sure what information the employee needs and simply giving them everything in the hope that this may cover it.

    The problem here is that having too much information can lead to time-wasting and analysis paralysis.

    For example, why share all the product information with your sales rep, when at the end of the day there are only three key points that separate your product from the competition and help to make the sale? Sending your sales reps a manual and expecting them to work out for themselves what aspects of your product will help them sell it to clients is as unhelpful as giving them no information at all. The time they waste reading the manual could rather be spent perfecting their sales techniques or working on their pitch documents.

    This also extends to bombarding your employees with opinions or reasoning that they may not need. Sometimes, in order to err on the side of caution, or to seem smarter than they need to be, managers can lean towards being verbose. As a manager you should avoid sending long paragraphs or speeches packed with thoughts, reasoning and explanations when a simple email explaining what needs to be done will remove wasted time and confusion.

    At the end of the day, conciseness is the key to good communication. Managers who impart all the necessary information and no more will find their teams perform more effectively and more profitably.

  3. Too little contextJust as bad as too much information is when managers share information assuming the context is known by everyone in the organisation. Context gives meaning to orders and conversation in general, and not including it puts the person at the receiving end of the communication at a disadvantage. Without the proper context, they may think they have been left out of the loop or have forgotten something important and may never bring it up, instead choosing to muddle through and therefore doing a worse job.

    To avoid all this, communication should give a quick background to the new information, a short description of the client and what they like and how they like it to be done and an explanation for why any deadlines have been set. Once people understand why they are doing something and how it should be done and by when, they are much more likely to deliver on the task itself in the way you want it to be done.

  4. Emotional communicationsThere are few places where emotional emails or other communications (WhatsApp or Teams messages and the like) are wanted, and the workplace is not one. Corporate culture places a lot of constraints on human behaviour and as such an emotional communication is definitely going to be not only career limiting, but also cause a lot of discomfort to all who are unlucky enough to be tagged in.

    The problem with emotional communications is that they cause so much discomfort that the issues they are discussing can often become more difficult to deal with. The delays in resolving these issues will lead to poor performance and an uncomfortable work environment.

    These kinds of constraints can also lead to the other kind of bad communication – passive-aggressive emails and communiques. In many cases these cause hurt feelings and divide teams without resolving issues because they claim not to be calling attention to any issue to begin with.

    This issue is fixed by encouraging an open and honest communication policy in your business. Allowing people to speak their minds respectfully and then genuinely listening allows people who have noticed problems to bring them to your attention and for those problems to be resolved. Do not let them linger in the shadow of hurt feelings.