Ethics in business refers to standards of right or wrong behavior when dealing with the company’s various stakeholders including customers, employees and vendors. A small business owner establishes ethical principles he expects everyone who works for him to follow -- often called a code of conduct. His own conduct is important in setting a high standard for his employees. After a code of conduct is implemented, the business owner measures how well the company meets these ethical standards.

Customer Complaints

Tracking and analyzing customer complaints reveals whether the company is meeting its ethical performance standards. If a significant number of customers complain that a product’s features or benefits were not what the company said they would be, the business owner should find out what information his sales staff is telling customers that is incorrect or exaggerated.

Workplace Ethical Performance

Workplace safety can be measured by keeping track of the number of workdays lost each year due to injuries or accidents. A small business owner should survey employees regarding how supervisors and co-workers treat them. Asking employees how often they have observed behavior that doesn’t meet the ethical standards set by the business owner can reveal problem areas that must be addressed, such as incidents of staff members being abrupt or rude when answering questions from customers. Rewarding observed ethical behavior by employees encourages other employees to raise their own standards of conduct.

Contributions to the Community

Businesses of all sizes recognize that they have an ethical responsibility to the cities and towns in which their company operations are located. Ethical performance could be measured by how many hours of volunteer work employees contributed or by the dollar contributions made by the company to local charities. These efforts are not only the right thing to do from an ethical standpoint, but they can improve the company’s image.

Environmental Protection Measures

Reducing waste, cutting energy usage and using sustainable materials are goals shared by large and small businesses. A restaurant for example could use recyclable materials for the bags and boxes it uses for its takeout service. A golf facility could cut its water consumption by replacing a portion of turf grass with low water-usage plants. The restaurant’s effort would be measured as a positive action taken. The golf course could measure the actual reduction in water usage.

Set Goals and Evaluate Performance

After ethical performance measures are in place, the business owner sets goals for improving the company’s ethical performance. Communicating the current performance levels and goals for the upcoming year shows employees that the owner takes these ethical standards seriously and builds company pride. The Hershey Company, famous for its chocolate products, creates a comprehensive annual Corporate Social Responsibility Report that they publish on the company website.

Benefits and Difficulty

Having ways of measuring ethical performance focuses team members’ attention on the importance of behaving in an ethical manner and can lead to overall improvement in ethical performance. The difficulty of maintaining the highest ethical standards is the conflict between ethics and the need for short-term financial success. For example, a company that is facing pressure on its margins due to price cutting by competitors may be tempted to use lower quality and lower cost materials in its manufacturing processes to reduce production costs.