August 2007

Organizational Development
Using a code of ethics to prevent product crises

By Joe Pisciotto
Staff Writer

Imagine this: your company produces its premiere product like it has for years—similar materials, similar processes, many of the same people. It hits the market like it always has. But then the phone calls start coming in: consumer complaints about a major problem begin as a trickle only to burst a day or two later; it’s at this point you realize something major has gone wrong, but you don’t know why.

This scenario is not really that hard to envision. Product recalls are on the rise. Over the past year or so, typically responsible companies have managed to cut a swath into consumer confidence with a seemingly endless line of recalls.

From spinach to eye care products to pet food, many major companies have seen their reputations destroyed and revenues crippled thanks to various internal breakdowns. For example, according to a survey commissioned by the Food Marketing Institute (FMI) in January, only 66% of U.S. shoppers were confident that the food they bought in grocery stores was safe—down 16% from last year.

Consumers haven’t shown such a lack of confidence in the food supply since 1989, according to an FMI press release. The survey also found “safety concerns prompted 38 percent of consumers to stop purchasing certain foods in the past 12 months.”

Food producers aren’t the only companies taking a hit. Two prominent contact lens cleaning solutions have recently been linked to an increased risk of eye infection.

While the number of products that are recalled annually is small compared with the perfectly fine goods out there, product failure can happen to any company that does not have rigorous policies in place.

The fact is that many of the problems that led to these recent recalls could have been prevented if the companies were more careful and consistent in the way they conducted business. One way companies can be better prepared to make smart choices is by establishing a code of ethics.

While ethical lapses may or may not have been the root cause of recent recalls, good businesses always establish a code of ethics based on shared values, laws, and beliefs. Employees and business partners can turn to and rely on this code when making choices and resolving conflict.

In effect, an established ethical system serves as the groundwork for successful and reliable operations.

After company leaders develop a code of ethics based on shared laws, regulations, and values, they need to think about its practical application. A functional system of business ethics should have the three following components.

Consistency. The system should require all individuals involved with a company to abide by its tenets in all applicable situations; in other words, no one exists outside the code of ethics.

Of course, companies with a global presence need to develop their ethical system with cultural differences in mind, but, for instance, bribery is bribery no matter where it takes place, and good companies will demand all their employees and business partners not take part in such potentially damaging activities. Anyone who transgresses the code of ethics must face preestablished consequences.

Decision making tools. Decisions are not always easy to make, even with the help of a solid code of ethics; therefore, company leaders should give their people guidelines for making tough choices. Decision makers should be prepared to ask themselves some key questions:

• What would the people I care about and respect think of the decision I’m about to make?
  Would actions resulting from the decision have a look of impropriety?
  
• Am I trying to deceive anyone?
• How would the decision affect other people’s lives?
• How would I justify this decision to others?

Thoughtful answers to these questions can help clarify a dilemma.

Objectivity. Nearly everyone brings biases with them to the workplace; therefore, company leaders need to make sure that employees and business partners make decisions as objectively as possible.

Good decision makers approach each decision aware of their own biases. They then consider different points of view and experiment with different modes of thinking during their assessment.

Keeping the code of ethics in mind, they realize that they operate within specific corporate, cultural, and personal environments, and they strive to eradicate any presuppositions by considering a situation from a variety of perspectives and configurations.