1 changing notions of ethics in smes irena jindrichovska, university of economics and management...

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Changing Notions of Ethics in

SMEs

Irena Jindrichovska, University of Economics and Management

Gabriele Meissner, Anglo-American University

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Business Ethics in

Czech SMEs• Dytrt Study (2011) - Survey 2500 SMEs / 18%

response rate

• Key problems:

• not enough knowledge on benefits

• management practices rooted in the past



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EU / German Studies:Matching Experience

1.EU Project: Mittelstand (Germany/France/Poland)

• same problems as in CZ / Dytrt study

• training / workshops / teaching material etc. had a considerable impact on the participating SMEs

2.Leuphania University, Lüneburg, Germany:

• study with large German companies 2006 - 2010

• rising awareness in firms concerning CSR

• willingness to use strategic tools and methods to implement CSR projects



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Global Corruption in 2010:Percentage of People Reporting that the last bribe paid was to...



Source: Transparency International 2010 Global Corruption Barometer

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Two sets of Interrelated Behaviors

1. Individual

2.Organizational



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Ethical Decision Making Processes:

Rational or Emotional?

• Very often driven by assumptions, unconscious belief systems (Kahneman 2010, Ariely 2011)

• „What-the-Hell-Effect“ (Ariely, 2012)

• ROI for CSR often generic and not transparent

• Innovation resistance (We have always done it like that / We have never done it like that)

•Unable to deal with conflict-of-interest



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Dramatic Increases in Certain Misconduct Posing

RiskTYPE OF MISCONDUCT 2009 2011 INCREASE

Sexual harassment 7% 11% 4ppts

Substance abuse 7% 11% 4ppts

Insider trading 1% 4% 3ppts

Illegal political contributions 1% 4% 3ppts

Stealing 9% 12% 3ppts

Environmental violations 4% 7% 3ppts

Improper contracts 3% 6% 3ppts

Contract violations 3% 6% 3ppts

Improper use of competitor’s information 2% 5% 3ppts

Health or safety violations 11% 13% 2ppts

Anti-competitive practices 2% 4% 2ppts

Source: Ethics Resource Center, 2011 National Business Ethics Survey



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Record Number of Employees Choosing to Report Observed

Misconduct



Source: ECR, 2011 National Business Ethics Survey

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The Impact of Business Ethics in SMEs

• Paradigm shift in management practices:

• Redefining / developing a distinct competitive strategy

• Development of a strategic CSR/CSI agenda

•Making CSR/ethics part of business strategy

•Unique value proposition

•Contributing to a reliable and transparent business environment in the whole economy

•Accountability in business practices

•Making CSR approach integral part of firm’s competitive strategy



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CSR as Intangible Asset for Value

Creation

• Establishing and retaining long-term profitable customer relationships

• Avoiding blackmail traps

• Reliability and accountability in business practice enable all market participants to compete on an equal and fair basis

• EU will further push efforts to impose corporate governance codes of conduct also on SMEs

• Unethical - and especially illegal - behavior affects the whole economy negativelyIrena Jindrichovska, University of Economics and

ManagementGabriele Meissner, Anglo-American University

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Creating a Corporate Social Agenda

Source: M.E.Porter, M.R. Kramer, HBR, May 2009



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Creating a Social Dimension to the Value Proposition:

From CSR to CSI - Corporate Social Integration

•Strategic CSR unlocks shared value by investing in social aspects of context that strengthen company competitiveness.

•At the heart of any strategy is a unique value proposition: a set of needs a company can meet for its chosen customers that others cannot.

• Strategy is always about making choices, and success in corporate social responsibility is no different. It is about choosing which social issues to focus on.

(Porter and Kramer, 2009)



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Balanced Scorecards as a Powerful Planning Tool in

SMEs• Align the organization and the

individual and organizational behavior in the firm with its strategic goals

• Developing explicit competitive strategies also in SMEs

• Make planning a conscious process linked to business performance

• Create transparency for relevant stakeholders, especially employees, customers and partners

R.S. Kaplan, D.S. Norton, How to Implement a New Strategy without Disrupting your Organization, May 2009Irena Jindrichovska, University of Economics and

ManagementGabriele Meissner, Anglo-American University

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The Importance and Impact of Key

Performance Indicators

• Conscious accountable planning process

• Setting clear goals and objectives

• Creation of unique value proposition

• Improved market positioning

• Development of a distinct competitive strategy

• Controlled strategy implementation

• Creation of a value system which is in accordance with the overall performance goals



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Source: Kaplan, Norton, Strategy Maps, 2004

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Put Strategy Maps in Perspective



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Conclusion•A reliable and accountable business environment is

important to ensure equal opportunities for all market participants

•A distinct corporate and business strategy helps SMEs to develop sustainable competitive advantage and longterm business success

•CSR/CSI in Czech SMEs makes a difference also in the positioning of companies in the EU and the overall value proposition

•Ethical organizational behavior helps finding the right talents

•Strategy Maps, Balanced Scorecards and the definition of Key Performance Indicators help SMEs to implement their competitive strategies

BUT:

•It takes a paradigm shift for business owners, business leaders and managers!



1 changing notions of ethics in smes irena jindrichovska, university of economics and management...

Documents

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misconduct irena jindrichovska

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ppts health