The ethical standards of an organization have a major influence on how it conducts its business. Business ethics are defined by the behavior standards of management and personnel, and the way in which business is carried out at both a strategic and operational level. A positive approach to maintaining ethical standards can lead to competitive market advantage and an enhanced reputation. Ethical standards are classified at three levels.
At a macro level, sometimes called the systemic level, ethics are defined and influenced by the wider operating environment in which the company exists. Factors such as political pressures, economic conditions, societal attitudes to certain businesses, and even business regulation can influence a company's operating standards and policies. Business owners and managers must be aware of how these pressures affect operations and relationships, and how they may impact on markets locally, nationally and internationally.
At a company or corporate level, ethical standards are embedded in the policies and procedures of the organization, and form an important foundation on which business strategy is built. These policies derive from the influences felt at macro level and therefore help a business to respond to changing pressures in the most effective way. There can be a gap between the company policy on ethical standards and the conduct of those in charge of running the business, especially if they are not the direct owners, which can present an ethical challenge for some employees.
Since businesses are run by people, the ethical standards of individuals in the business are an important consideration. Individuals may well have a very different set of ethical standards from their employer and this can lead to tensions. Factors such as peer pressure, personal financial position, and socio-economic status all may influence individual ethical standards. Managers and business owners should be aware of this to manage potential conflicts.
Ethical standards flow through the entire structure of a business organization, shaping how it plans its strategy, deals with customers, and manages its workforce. The standards have a reach far beyond day-to-day operations, and should be considered in all aspects of a business, from the boardroom to the shop floor and across all functional areas. Supporting this effort, businesses that genuinely understand the value and importance of ethics have appropriate metrics in place to measure achievement and identify problems before they become major issues.