Four steps to embedding ethics
27th September 2021 | Mark W Johnston
Sales ethics is essential in the new normal.
Good business strategy
Many companies, even entire industries, struggle to remain open during this ongoing period of challenging economic uncertainty. Business models that were shifting prior to the pandemic, such as the move from instore shopping to e-commerce, have accelerated because of the pandemic. Businesses are adjusting strategies to stay ahead of rapidly changing business models. Supply chains experience significant pressure to maintain production standards.
In this “new normal” business environment sales executives face unprecedented challenges. From changing delivery schedules to price-cut demands, aggressive competitors to unsettled customer relationships, salespeople are experiencing significant pressure to “adjust” their ethical policies and procedures.
So, the question becomes: is sales ethics relevant in the “new normal”? Research consistently shows strong ethical values, policies and practices build a solid ethical reputation in an industry with clients and competitors which, in turn, is a winning business strategy (Johnston and Marshall 2021). However, in the “new normal” can a company “afford” to maintain strong ethical standards when successful business models are shifting, and customer relationships are tested?
There is growing evidence that business ethics and, more specifically, sales ethics are even more important in building and sustaining customer relationships. A recent study of business leaders found that 80% of respondents reported their company’s ethical values and policies were critical in developing strategies used to manage the pandemic as well business models going forward (Dean 2021).
Importance of ethics
There are two primary reasons for this renewed focus on sales ethics. First, as companies adjust their business strategy to compete in the new business environment, they seek established suppliers that can consistently deliver on promises. While certainly a factor prior to the pandemic, companies now place an even higher priority on a vendor’s ethical reputation in evaluating potential strategic relationships.
The pandemic forced many companies to assess their risk profiles in critical areas such as supply-chain management. The disruption to many supply chains for critical parts (for example the recent shortage in semiconductors) has left companies not able to deliver the quantity or quality of products their customers expect.
At the same time, due to the supply-chains issues, some companies have sought to take advantage of the situation by implementing unwarranted price increases. The result, in many cases, has been a greater focus on the quality of the supplier relationship and increased importance on identifying and partnering with companies that have good to excellent ethical reputations.
This has led many consumers (50% of consumers in one recent study) to reconsider their company relationships with a greater focus on trust, health, safety, and less on price.
Second, while trust plays a critical role in the supplier relationship, more than ever consumers want to purchase from companies they can trust with strong ethical practices and policies across a variety of areas (business practices, environmental policies, and employee policies). Trust has been a “casualty” of the pandemic with a significant number of consumers reporting that companies have not met their expectations in terms of service, product quality, and price. This has led many consumers (50% of consumers in one recent study) to reconsider their company relationships with a greater focus on trust, health, safety, and less on price (Björnsjö 2021).
Interestingly, these consumers are concerned not just about the safety of the product and services for themselves but also for the community at large, and even the health and safety of the company’s employees. At the same time, consumers consider not just the ethical policies and values of the manufacturer but also companies inside the supply chain before making a purchase decision. This has led many companies to put additional emphasis on supplier relationships they can trust. So, the increased focus on trust and ethics comes from inside your customers but also externally from their customers.
One outcome from the amplified focus on ethics is the opportunity to build and sustain customer loyalty. The foundation of the increased focus, the linkage between customer loyalty and a robust ethical program, is well established.
All things considered, customers want to do business with companies they can trust. Once that relationship is established, there is a great sense of loyalty and stronger commitment to that supplier. Research consistently reports a strong linkage between loyalty, trust and ethical business practices, particularly in the sales force (Johnston and Marshall 2021).
Making sales ethics essential in the new normal
In a rapidly changing business environment with customer expectations and company strategies changing often, it is easy for sales leaders to lose focus on building a successful ethical environment in the sales force and then maintaining strong ethical standards. However, research suggests there are four recommendations that sales leaders can implement now to deal effectively with emerging ethical challenges:
1. Review company ethical policies and practices – The rapidly changing business environment has led many companies to adjust business strategies and manage changing customer expectations. As a result, sales leaders need to confirm that existing ethical policies are consistent with changes in the business model. For example, the move to a more virtual sales environment creates several potential ethical challenges including misrepresentation or even falsely presenting data to customers.
How companies manage crises has always been a significant measurement of overall company performance, but the pandemic has put more pressure on companies to “do the right thing” for their employees, customers, suppliers, and the community at large (Smith and Pepe 2020). As the primary point of customer interface, the sales force should lead the organization in aligning values with policies and action. Customers are paying attention and a code of ethics that reflects the company values that then leads to ethical behavior, particularly considering the pandemic, communicates a great deal about the company’s overall commitment to ethics.
At the same time, it is part of the value proposition: “your company’s ethics drive the company’s decision making” is a strong message to the customer.
2. Develop a sales code of ethics – If not already in place, consider developing a sales code of ethics to reflect the unique challenges faced in sales today. The boundary-spanning role of sales coupled with challenges in the “new normal” business environment mandates salespeople engage in activities not addressed in the organizational code of ethics and potentially make decisions that do not reflect the values of the organization.
80% of respondents reported their company’s ethical values and policies were critical in developing strategies used to manage the pandemic as well business models going forward.
While salespeople may bring their own values and experiences into the organization, the unique nature of the sales subculture should provide frameworks for handling ethical dilemmas daily. Unfortunately, organizational codes of ethics are often not designed to accommodate the unique challenges of the sales environment. As a result, creating a sales code of ethics that reflects real ethical sales challenges in today’s evolving business climate provides salespeople with decision-making tools that can help solve ethical dilemmas.
3. Provide specific training on ethical decision policies and decision making – Many companies have instituted ethics training as part of their overall ethical policies and procedures. However, this training, usually delivered online, focuses most often on compliance with legal or industrial ethical guidelines rather than providing frameworks to help salespeople make better ethical decisions. Dealing with the unique challenges facing salespeople in the current business environment, training can play an essential role in reinforcing established ethical policies and be the best method for delivering new policies and procedures designed to deal with emerging ethical challenges.
4. Measure and reward ethical performance – Many companies speak to the importance of ethical decision making but far fewer measure the ethical performance of their employees, particularly salespeople (DeTienne et al 2019). The adage “what you measure is what you get” is true in ethics. If not already in place, consider developing KPIs around ethical performance (for example, customer complaints, or customer requests for price adjustments).
Measurement is only half the equation, however; the other component is rewarding good performance. Linking rewards (for example, incentive compensation) is essential in “closing the loop” on the importance of ethical behavior in the organization. The key is to connect the company’s ethical policies to salesperson behavior using metrics to assess key performance indicators.
Bringing it all together
One of the persistent questions in business ethics and more specifically, sales ethics, is the age-old conundrum: must I trade short-term quarterly expectations (hitting the immediate sales targets) for long-term strategic benefits (a strong ethical reputation)? Sales leaders wake up every day wanting to be ethical but are faced with the “hard reality” of hitting monthly or quarterly sales targets. They perceive the choice is binary: I can be one or the other, but not both.
In the “new normal” the choice is no longer binary; rather, customers are seeking strategy partnerships with suppliers that possess a strong ethical reputation. Essentially, while a company’s ethical reputation was always part of the RFP evaluation process, the “new normal” has increased the importance of ethics essentially making it a “must have”. Look around your industry: how many competitors are left with poor ethical reputations? The answer is likely none because the reality is that your customers are demanding that suppliers maintain strong ethical standards. The price to maintain existing relationships or build new partnerships is a strong set of ethical policies and procedures.
However, while ethics is now a fundamental component of a company’s value proposition, there is still an opportunity to harness a strong ethical reputation in the marketplace. Many companies still do not fully appreciate the importance of ethics in the customer decision-making process. As a result, salespeople need to understand that ethics and the company’s ethical reputation should be part of the value proposition.
The “new normal” makes ethics an even more important element in the company’s overall business strategy and a critical part of the sales message.
Agneta Björnsjö, (2021), “Life Reimagined”, Accenture Research. Elizabeth Dean, (2021), “2021 Market Research Trends”, Qualtrics.
Kristen Bell DeTienne, Bradley R. Agle, Carrolyn McMurdie Sandis, Alice Aleo, and Alberto Aleo, (2019), Fostering an Ethical Culture on Your Sales Team,” Harvard Business Review, June 20, 2019.
Mark W Johnston and Greg W Marshall, (2021), Sales Force Management, Routledge Publishing.
N Craig Smith and Peirgiorgio Pepe, (2020), “Ethics or Compliance in a Crisis”, MIT Sloan Management Review, September 29, https://sloanreview.mit.edu/article/ethics-or-compliance-in-a-crisis/.