strategic plan in business ethics

• Incorporating Ethics into the Organization
• Markkula Center for Applied Ethics
• Focus Areas
• Business Ethics
• Business Ethics Resources

Incorporating Ethics into the Organization's Strategic Plan

Robert Finocchio, former CEO of Informix, offers prescriptions for making ethics part of strategy.

Miriam Schulman is the communications director of the Markkula Center for Applied Ethics.

This article is a summary of a talk by Robert Finocchio on March 22, 2006.

Management guru Peter Drucker was famous for asking his consulting clients the basic strategic question, "What business are we in?"

To integrate ethics into the strategy, businesspeople have to add three more questions, according to Robert Finocchio, Dean's Executive Professor at Santa Clara University:

• What do we stand for?
• What is our purpose?
• What values do we have?

The former president, CEO, and chairman of Informix Corp., Finocchio offered prescriptions for incorporating ethics into the organization's strategic plan and suggestions for implementation at the March 2006 meeting of the Business and Organizational Ethics Partnership , a project of SCU's Markkula Center for Applied Ethics.

As a first principle, Finocchio argued that ethics is not integrated into strategy by proclamation. He also put it more colloquially: "Whenever someone tells me how honest or ethical he or she is, I hold on to my wallet."

While ethics should be part of the company's mission statement, long-term strategic plan, public pronouncements, and codes of conduct, unless it is also a "cornerstone of the organizational culture," it will not be effectively integrated into the business strategy, he said.

To really incorporate ethics, he presented these "prescriptions":

• Don't be in an unethical business in the first place ("In Finocchio's view some people might think tobacco, arms, and pornography may be examples of businesses that fit that description.").
• Obey the law and spirit of the law everywhere you do business.
• Articulate a complete strategy, including purpose.
• Explicitly articulate values as a key component to the strategy. Values must also be real, and must reflect actual behavior, especially among the organization's leaders.
• Don't rely on auditors, ethics officers, compliance officers, cops, regulations, manuals, and audits as the vehicle to insert ethics into the strategy.
• Emphasize principles more than rules. (This is the best way to be more demanding of the organization.)
• Individual ethical responsibility and accountability are never trumped by some corporate or organizational imperative.There is no "my company said it was ok" defense.
• Be totally transparent with your constituents, and make that part of the strategy.
• Have a framework and process for the resolution of ethical issues.
• Have the right organizational structure.
• Have rewards based on the right metrics.
• Make employee development part of strategy and make ethics training part of employee development.
• Encourage all employees to be challenging and demanding in the ethical domain (of everyone in the organization, including the bosses).

Finocchio went on to offer two practical suggestions for implementing his prescriptions: making an ethics performance evaluation part of the organization's standard end-of-year assessment and creating a strategic plan ethics checklist for the coming year.

The ethics performance evaluation would look at how the organization actually behaved, including such issues as transparency and opportunities for celebrating ethical behavior. The company would examine whether its actions over the past year had been consistent with its purpose and values.

In planning for the next year, the company would ask itself a series of questions, including:

• Is our purpose sufficiently well articulated?
• Do we face new legal requirements?
• Do we have new constituents?
• If we acquire another organization, how will it be ethically assimilated?
• Are our rewards structures appropriate?
• Is there any need to change the mechanics (constituent communication, employee training, organizational structure, issue resolution processes)?
• How will we measure our performance?
• Do we have new goals/objectives in the ethical domain?

Finocchio also looked at the issue of corporate social responsibility, acknowledging that some thinkers have argued social responsibility is not an appropriate activity of business. As an example, he quoted economist Milton Friedman: 

In [a free] society, there is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say engages in open and free competition without deception or fraud.

On the other hand, Kenneth Andrews, sometimes called the father of corporate strategy, saw social responsibility as crucial not only for the business itself but for "human betterment." Andrews argued that government alone cannot sufficiently constrain negative individual or corporate behavior. Because they wield such vast power, corporations, he believed, must bring their power to bear on social problems if they are to be solved.

Finocchio also put John Gardner, founder of Common Cause, into the pro social responsibility camp. Gardner was interested in how leaders, including business executives, could mobilize the energy and talents of their followers to promote shared values and improve society. In his book On Leadership, he argued, We must hope leaders keep alive values that are not so easy to be embedded in law-our feeling about individual moral responsibility, about caring for others, about honor and integrity, about tolerance and mutual respect, and about individual fulfillment within a framework of values.

In Finocchio's view, a business can be ethical whether it subscribes to Friedman's or to Andrews' and Gardner's view of social responsibility.

He offered these suggestions for those who agree with Andrews and Gardner:

• Be transparent. Make sure your constituents, especially shareholders, know what you are doing with their money.
• When in doubt, let the shareholders decide to whom and how much "to give."
• Beware of the costs of "social responsibility," especially when it involves economic inefficiency. Be sensitive to the fact that benefits may be concentrated and visible, and costs highly dispersed and invisible.
• Beware of elitism. (Because I am some big deal executive and rich, I know what's good for you.)
• Beware of fads
• There is no virtue in being charitable with other people's money, or using other people's money to promote your cause, stay in some club, or maintain social status.
• Beware of the point when "doing good" becomes self-indulgence.

For those in the Friedman camp, Finocchio advised:

• Be transparent with all your constituents.
• Be responsible with your own personal resources and personal actions.
• Test every action against the criterion.
• Maximize the long-term value of the firm.

Finocchio's presentation was part of a two-day meeting of the Business and Organizational Ethics Partnership. Other speakers at the March Partnership meeting included Dan Sweeney from the Center for Corporate Excellence on "Tone at the Top and Executive Compensation"; Stephan Rothlin, general secretary of the Center for International Business Ethics in Beijing on "Business Ethics in China" ; and Frank Daly, Markkula Center Fellow, Eric Pressler, Apple Computer, and Sam Piazza, Hewlett Packard, on "Rules-Driven and Values-Driven Ethical Approaches: Trade-offs."

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What Are Business Ethics & Why Are They Important?

• 27 Jul 2023

From artificial intelligence to facial recognition technology, organizations face an increasing number of ethical dilemmas. While innovation can aid business growth, it can also create opportunities for potential abuse.

“The long-term impacts of a new technology—both positive and negative—may not become apparent until years after it’s introduced,” says Harvard Business School Professor Nien-hê Hsieh in the online course Leadership, Ethics, and Corporate Accountability . “For example, the impact of social media on children and teenagers didn’t become evident until we watched it play out over time.”

If you’re a current or prospective leader concerned about navigating difficult situations, here's an overview of business ethics, why they're important, and how to ensure ethical behavior in your organization.

Access your free e-book today.

What Are Business Ethics?

Business ethics are principles that guide decision-making . As a leader, you’ll face many challenges in the workplace because of different interpretations of what's ethical. Situations often require navigating the “gray area,” where it’s unclear what’s right and wrong.

When making decisions, your experiences, opinions, and perspectives can influence what you believe to be ethical, making it vital to:

• Be transparent.
• Invite feedback.
• Consider impacts on employees, stakeholders, and society.
• Reflect on past experiences to learn what you could have done better.

“The way to think about ethics, in my view, is: What are the externalities that your business creates, both positive and negative?” says Harvard Business School Professor Vikram Gandhi in Leadership, Ethics, and Corporate Accountability . “And, therefore, how do you actually increase the positive element of externalities? And how do you decrease the negative?”

Related: Why Managers Should Involve Their Team in the Decision-Making Process

Ethical Responsibilities to Society

Promoting ethical conduct can benefit both your company and society long term.

“I'm a strong believer that a long-term focus is what creates long-term value,” Gandhi says in Leadership, Ethics, and Corporate Accountability . “So you should get shareholders in your company that have that same perspective.”

Prioritizing the triple bottom line is an effective way for your business to fulfill its environmental responsibilities and create long-term value. It focuses on three factors:

• Profit: The financial return your company generates for shareholders
• People: How your company affects customers, employees, and stakeholders
• Planet: Your company’s impact on the planet and environment

Check out the video below to learn more about the triple bottom line, and subscribe to our YouTube channel for more explainer content!

Ethical and corporate social responsibility (CSR) considerations can go a long way toward creating value, especially since an increasing number of customers, employees, and investors expect organizations to prioritize CSR. According to the Conscious Consumer Spending Index , 67 percent of customers prefer buying from socially responsible companies.

To prevent costly employee turnover and satisfy customers, strive to fulfill your ethical responsibilities to society.

Ethical Responsibilities to Customers

As a leader, you must ensure you don’t mislead your customers. Doing so can backfire, negatively impacting your organization’s credibility and profits.

Actions to avoid include:

• Greenwashing : Taking advantage of customers’ CSR preferences by claiming your business practices are sustainable when they aren't.
• False advertising : Making unverified or untrue claims in advertisements or promotional material.
• Making false promises : Lying to make a sale.

These unethical practices can result in multi-million dollar lawsuits, as well as highly dissatisfied customers.

Ethical Responsibilities to Employees

You also have ethical responsibilities to your employees—from the beginning to the end of their employment.

One area of business ethics that receives a lot of attention is employee termination. According to Leadership, Ethics, and Corporate Accountability , letting an employee go requires an individualized approach that ensures fairness.

Not only can wrongful termination cost your company upwards of $100,000 in legal expenses , it can also negatively impact other employees’ morale and how they perceive your leadership.

Ethical business practices have additional benefits, such as attracting and retaining talented employees willing to take a pay cut to work for a socially responsible company. Approximately 40 percent of millennials say they would switch jobs to work for a company that emphasizes sustainability.

Ultimately, it's critical to do your best to treat employees fairly.

“Fairness is not only an ethical response to power asymmetries in the work environment,” Hsieh says in the course. “Fairness—and having a successful organizational culture–can benefit the organization economically and legally.”

Why Are Business Ethics Important?

Failure to understand and apply business ethics can result in moral disengagement .

“Moral disengagement refers to ways in which we convince ourselves that what we’re doing is not wrong,” Hsieh says in Leadership, Ethics, and Corporate Accountability . “It can upset the balance of judgment—causing us to prioritize our personal commitments over shared beliefs, rules, and principles—or it can skew our logic to make unethical behaviors appear less harmful or not wrong.”

Moral disengagement can also lead to questionable decisions, such as insider trading .

“In the U.S., insider trading is defined in common, federal, and state laws regulating the opportunity for insiders to benefit from material, non-public information, or MNPI,” Hsieh explains.

This type of unethical behavior can carry severe legal consequences and negatively impact your company's bottom line.

“If you create a certain amount of harm to a society, your customers, or employees over a period of time, that’s going to have a negative impact on your economic value,” Gandhi says in the course.

This is reflected in over half of the top 10 largest bankruptcies between 1980 and 2013 that resulted from unethical behavior. As a business leader, strive to make ethical decisions and fulfill your responsibilities to stakeholders.

How to Implement Business Ethics

To become a more ethical leader, it's crucial to have a balanced, long-term focus.

“It's very important to balance the fact that, even if you're focused on the long term, you have to perform in the short term as well and have a very clear, articulated strategy around that,” Gandhi says in Leadership, Ethics, and Corporate Accountability .

Making ethical decisions requires reflective leadership.

“Reflecting on complex, gray-area decisions is a key part of what it means to be human, as well as an effective leader,” Hsieh says. “You have agency. You must choose how to act. And with that agency comes responsibility.”

Related: Why Are Ethics Important in Engineering?

Hsieh advises asking the following questions:

• Are you using the “greater good” to justify unethical behavior?
• Are you downplaying your actions to feel better?

“Asking these and similar questions at regular intervals can help you notice when you or others may be approaching the line between making a tough but ethical call and justifying problematic actions,” Hsieh says.

Become a More Ethical Leader

Learning from past successes and mistakes can enable you to improve your ethical decision-making.

“As a leader, when trying to determine what to do, it can be helpful to start by simply asking in any given situation, ‘What can we do?’ and ‘What would be wrong to do?’” Hsieh says.

Many times, the answers come from experience.

Gain insights from others’ ethical decisions, too. One way to do so is by taking an online course, such as Leadership, Ethics, and Corporate Accountability , which includes case studies that immerse you in real-world business situations, as well as a reflective leadership model to inform your decision-making.

Ready to become a better leader? Enroll in Leadership, Ethics, and Corporate Accountability —one of our online leadership and management courses —and download our free e-book on how to be a more effective leader.

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Why Business Integrity Can Be a Strategic Response to Ethical Challenges

To address complex ethical challenges, companies must focus on breaking silos and creating strategic alignment when it comes to governance and risk.

• Boards & Corporate Governance
• Sustainability

Governance — the “G” of ESG — has long been overshadowed by discussions of its counterparts, environment and sustainability, despite being a source of strategic advantage. While many companies view investment in governance simply as a means of staying out of trouble, proper corporate governance can — and should — drive company performance. 1

To turn this idea into reality, a growing number of companies are moving toward a more holistic approach to ethical and responsible business. This involves aligning and coordinating across critical integrity functions, reducing box-ticking, and thinking holistically about ethical behavior, risk management, and value creation. 2 In order to gain a deeper understanding of key challenges and success factors driving this approach, we conducted interviews with leaders from over two dozen large companies and multilateral institutions on the different steps they have taken to invest in business integrity as a strategic response to both risks and opportunities.

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This research has also been informed by our ongoing work with and cross-sectoral best practices from the World Economic Forum’s Global Future Council on Transparency and Anti-Corruption and several Business 20 (B20) task forces on integrity and compliance. We’ve found that independent and autonomous leadership plays an important role in progress, as demonstrated by the emerging role of chief integrity officer as a driver of change. But our research also shows that simply appointing a C-level role is not enough. In order to address today’s complex ethical challenges, companies need to break down internal silos to create strategic alignment and collaboration and build a culture of integrity. In this article, we explore how leading companies are demonstrating this holistic approach.

A More Strategic Approach to Integrity

The common thread in our interviews with executives was that leading companies have been adopting a more strategic approach to ethical business, which makes it easier for them to identify blind spots and avoid hypocrisy. For example, there are increasing demands from institutional investors to align sustainability commitments and political spending. And zero-tolerance anti-corruption programs will not be effective unless they look at the design of incentives, particularly sales and growth targets in emerging markets.

Some organizations have chosen to appoint a single leader in the C-suite, such as the chief integrity officer, to oversee a broader set of functions that go beyond compliance .

About the Authors

Daniel Malan is an assistant professor in business ethics at Trinity College Dublin’s Trinity Business School and is cochair of the B20 Integrity & Compliance Task Force. Alison Taylor is executive director of Ethical Systems and a senior adviser at BSR (Business for Social Responsibility). Anna Tunkel is executive director and head of global strategic initiatives and partnerships at APCO Worldwide. Birgit Kurtz is a fellow of the World Economic Forum’s Partnering Against Corruption Initiative. Malan, Taylor, and Tunkel are former members of the World Economic Forum’s Global Future Council on Transparency and Anti-Corruption (2020 – 2022) and current members of the B20 Integrity & Compliance Task Force.

1. The term “corporate governance” is often defined as “the system by which companies are directed and controlled.” See, for example, A. Cadbury, “ Report of the Committee on the Financial Aspects of Corporate Governance ” (London: Gee, 1992).

2. “ The Rise and Role of the Chief Integrity Officer: Leadership Imperatives in an ESG-Driven World ,” white paper, World Economic Forum, Geneva, December 2021.

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BUS608: Ethical and Strategic Management

Including ethics in strategic planning, promoting ethical behavior through the planning process.

Building ethics into strategic planning is an important consideration for upper management when setting organizational processes and objectives.

Learning Objectives

Recognize and describe the process for building ethics into strategic planning processes

Key Takeaways Key Points

• Building consistent values and ethics into an organizational culture starts with effective strategic planning.
• Stakeholder theory is a strong starting point for ethical considerations, as stakeholders such as customers, suppliers, governments, communities, and shareholders are all impacted by organizational processes.
• A code of ethics and ethics officers are a great structural addition to strategic planning to ensure organizational alignment with values.
• Providing all employees and managers with training, and a confidential system of ethical reporting, are key elements in building a strong ethical culture.
• Code of Ethics : Guidelines adopted by organizations to assist members in understanding the difference between 'right' and 'wrong' and in applying that understanding to their decisions.

Strategy and Ethics

Setting an organizational strategy, vision, and set of values is the starting point of any new venture. Building in a strong sense of ethics, and an alignment with the well-being of all existing stakeholders (and society at large) is an integral aspect of the strategic planning process. The concept of aligning with the needs, ethics, and well-being of all stakeholders is referred to as Stakeholder Theory.

Stakeholder Theory

All organizations have a wide variety of stakeholders. Basically any group, individual, or organization impacted by operations is considered a stakeholder. This includes governmental bodies, customers, suppliers, employees, shareholders, financiers, communities, economies, and the general ecosystem. A board of directors is often elected to oversee the strategy to ensure alignment with values and ethics.

Stakeholders : This chart underlines a few key stakeholder groups.

Ethical Integration

Building ethical considerations into a business strategy via the planning process is an important element of ethics management. Strategy lays the foundation for how an organization carries out its operations. Building ethics into strategic planning is important to ensure that every facet of the organization is aligned with the ethos and values of the broader organization.

There are four elements strategic planners should develop when considering ethical alignment:

• Developing a Code of Ethics: This serves as a central point of reference for everyone in the organization. This code of ethics should take stakeholders concerns into consideration, and evolve organically over time as the organization grows.
• Ethical Training: Investing in training employees and managers in how integrate ethics into their process is a critical aspect of developing a strong ethical culture. Training equips employees and managers with the tools necessary to address ethically complex issues in the workplace.
• Situational Advice (Ethics Officers): Having ethics officers available for consultation is a great way to handle ethical issues as they arise internally. Employees and managers may encounter ethical dilemmas that the Code of Ethics and ethics training don't address. In these situations, going to an ethics officer to determine best practices is a great strategic resource. The ethics officer can also use these situations to improve the organization's ethical strategy.
• Confidential Reporting System: Not all ethical situations are easy to bring up in a professional setting. As a result, organizations should create an infrastructure for anonymous reporting to allow the organization to address problems as they arise without putting anyone on the spot.

To read this content please select one of the options below:

Please note you do not have access to teaching notes, integrating ethics into the strategic management process: doing well by doing good.

Management Decision

ISSN : 0025-1747

Article publication date: 1 June 1998

Using ethical considerations in strategic decision making will result in the development of the most effective long term and short term strategies. Specifically, ethical criteria must be included as part of the strategic process in before‐profit decisions rather than after‐profit decisions in order to maximize corporate profits and improve strategy development and implementation. This paper presents a system of decision making to achieve this integration which uses an “interest assessment” that involves the analysis of the ethical, social and legal obligations of an organization.

• Decision making
• Social responsibility
• Stakeholders
• Strategic management

Key, S. and Popkin, S.J. (1998), "Integrating ethics into the strategic management process: doing well by doing good", Management Decision , Vol. 36 No. 5, pp. 331-338. https://doi.org/10.1108/00251749810220531

Copyright © 1998, MCB UP Limited

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Global Ethical Strategies and Conclusions

By: Lawrence A. Beer

A Strategic and Tactical Approach to Global Business Ethics, Second Edition, is a seven-chapter book published by Business Expert Press in 2015 and written by Lawrence A. Beer, professor emeritus at…

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A Strategic and Tactical Approach to Global Business Ethics, Second Edition, is a seven-chapter book published by Business Expert Press in 2015 and written by Lawrence A. Beer, professor emeritus at the W. P. Carey School of Business at Arizona State University. The second edition expands the discussion of integrating ethics into the planning, administration, and operations of a multi-national business. The author provides an in-depth examination of the issues around the importance of ethical strategy and offers practical guidance on how a company should establish a code of conduct. He includes numerous real-world examples as well as both literary and philosophical references. He ends each chapter with reflections for managers that build upon the concepts presented in the chapter and offer topics for further discussion. In Chapter 7, Global Ethical Strategies and Conclusions (19 pages), the author recommends that a global business determine its strategic position: neutrality, deflection, or proactive change. He offers practical tools to guide ethical decision-making, including a list of questions to identify "deal-breakers," a model to evaluate entry into a potential country, and a process to evaluate potential foreign partners. He further recommends a global ethical-positioning scale in advance of facing an ethical violation. He provides the 4W approach as a series of questions to help a company handle an infraction in the absence of a prior plan. He concludes by revisiting the importance of having an ethical strategy to guide global business.

Learning Objectives

Learn tools to facilitate ethical decision making

Learn how to evaluate whether a company should enter a new country

Understand how to address ethical violations

Jan 2, 2015

Discipline:

Business Ethics

Business Expert Press

BEP310-PDF-ENG

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How are Ethical Considerations Incorporated Into Planning & Policy Making in an Organization?

• Small Business
• Business Planning & Strategy
• Making Business Plans
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Importance of Ethical Conduct in a Business

What are some key principles of ethical & moral leadership in business, what are managerial ethics.

• Advantages & Disadvantages of Ethical Compliance in an Organization
• Professionalism Standards

Incorporating ethical considerations means using society’s standards of what constitutes right or wrong behavior as the basis for your business’ plans and policies. Ethics shape the decisions and actions of each individual in a small business, from the owner on down. The owner’s behavior toward customers, employees, the company’s investors, vendors and the community affect the behavior of his employees, who look to him to set the standard. Observing high ethical standards is sound business strategy -- resulting in customer loyalty, higher employee retention and a positive image in the industry and within the community.

Mission Statement

Ethics are a consideration from the very early stages of a company’s development, when the business owner crafts a mission statement in his business plan that describes the kind of company he wants to build. His long-term plan or vision for the company includes a statement of the good he hopes to accomplish through the company. A publisher that specializes in pet care books, for example, could have a mission of using the latest research and information about pet nutrition and health care to enable pets to live longer, healthier lives.

Code of Conduct

A business owner creates a code of conduct to provide specific direction about how his employees should act in situations they encounter on the job. Ethical choices can be difficult because strictly adhering to the highest ethical standards may mean a manager not achieving goals the business owner has set for him. A production manager may be tempted to use lower quality raw materials to keep production costs in line, for example. The code of conduct becomes the set of policies that the owner expects everyone in the company to follow.

Customer Relations Strategy

If a customer believes she was lied to, she may not do business with the company again and could go so far as to post a complaint about the company on Internet forums. The ethical consideration means recognizing that it’s better to lose one sale today then lose many more in the future because the company has a reputation of not being honest. During the planning process, the business owner develops strategies to increase customer satisfaction, which leads to repeat business and customer loyalty. Ethical standards that reinforce these goals include not promising customers something the company cannot deliver and not exaggerating a product’s benefits.

Employee Relations Strategy

The company’s business plan specifies strategies to reduce turnover of personnel and create a more productive organization. Ethical considerations include managers treating employees with respect and co-workers respecting each other. As part of the annual planning process, the business owner assesses whether staff levels are adequate to complete all the tasks he will assign. He is guided by the ethical consideration that imposing unreasonable workloads on employees can lead to poor job performance and high stress levels, both of which can negatively affect the owner’s goal of increasing productivity.

Social Responsibility Strategies

Companies that ignore the community’s needs don’t necessarily face negative consequences, but a small business owner who implements proactive strategies to help members of the community often reaps benefits in terms of favorable publicity and industry recognition. Some companies even include goals in their business plans for recycling, reducing waste, using less energy and contributing to local charities. The ethical consideration involves recognizing that the company and its employees are members of the community and have a responsibility to be positive contributors to the well-being of the community and to protect the environment.

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• Entrepreneur: Ensuring an Ethical Business

Brian Hill is the author of four popular business and finance books: "The Making of a Bestseller," "Inside Secrets to Venture Capital," "Attracting Capital from Angels" and his latest book, published in 2013, "The Pocket Small Business Owner's Guide to Business Plans."

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16 Understanding Business Ethics

• What philosophies and concepts shape personal ethical standards?

Ethics is a set of moral standards for judging whether something is right or wrong. The first step in understanding business ethics is learning to recognize an ethical issue . An ethical issue is a situation where someone must choose between a set of actions that may be ethical or unethical. For example, Martin Shkreli , former CEO of Turing Pharmaceuticals , raised the price of a drug used for newborns and HIV patients by more than 5000 percent, defending the price increase as a “great business decision.”

Few people would call that ethical behavior. But consider the actions of the stranded, hungry people in New Orleans who lost everything in the aftermath of Hurricane Katrina . They broke into flooded stores, taking food and bottled water without paying for them. Was this unethical behavior? Or what about the small Texas plastics manufacturer that employed over 100 people and specialized in the Latin American market? The president was distraught because he knew the firm would be bankrupt by the end of the year if it didn’t receive more contracts. He knew that he was losing business because he refused to pay bribes. Bribes were part of the culture in his major markets. Closing the firm would put many people out of work. Should he start paying bribes in order to stay in business? Would this be unethical? Let’s look at the next section to obtain some guidance on recognizing unethical situations.

Recognizing Unethical Business Activities

Researchers from Brigham Young University tell us that all unethical business activities will fall into one of the following categories:

• Taking things that don’t belong to you. The unauthorized use of someone else’s property or taking property under false pretenses is taking something that does not belong to you. Even the smallest offense, such as using the postage meter at your office for mailing personal letters or exaggerating your travel expenses, belongs in this category of ethical violations.
• Saying things you know are not true. Often, when trying for a promotion and advancement, fellow employees discredit their coworkers. Falsely assigning blame or inaccurately reporting conversations is lying. Although “This is the way the game is played around here” is a common justification, saying things that are untrue is an ethical violation.
• Giving or allowing false impressions. The salesperson who permits a potential customer to believe that cardboard boxes will hold the customer’s tomatoes for long-distance shipping when the salesperson knows the boxes are not strong enough has given a false impression. A car dealer who fails to disclose that a car has been in an accident is misleading potential customers.
• Buying influence or engaging in a conflict of interest. A conflict of interest occurs when the official responsibilities of an employee or government official are influenced by the potential for personal gain. Suppose a company awards a construction contract to a firm owned by the father of the state attorney general while the state attorney general’s office is investigating that company. If this construction award has the potential to shape the outcome of the investigation, a conflict of interest has occurred.
• Hiding or divulging information. Failing to disclose the results of medical studies that indicate your firm’s new drug has significant side effects is the ethical violation of hiding information that the product could be harmful to purchasers. Taking your firm’s product development or trade secrets to a new place of employment constitutes the ethical violation of divulging proprietary information.
• Taking unfair advantage. Many current consumer protection laws were passed because so many businesses took unfair advantage of people who were not educated or were unable to discern the nuances of complex contracts. Credit disclosure requirements, truth-in-lending provisions, and new regulations on auto leasing all resulted because businesses misled consumers who could not easily follow the jargon of long, complex agreements.
• Committing improper personal behavior. Although the ethical aspects of an employee’s right to privacy are still debated, it has become increasingly clear that personal conduct outside the job can influence performance and company reputation. Thus, a company driver must abstain from substance abuse because of safety issues. Even the traditional company holiday party and summer picnic have come under scrutiny due to the possibility that employees at and following these events might harm others through alcohol-related accidents.
• Abusing power and mistreating individuals. Suppose a manager sexually harasses an employee or subjects employees to humiliating corrections or reprimands in the presence of customers. In some cases, laws protect employees. Many situations, however, are simply interpersonal abuse that constitutes an ethical violation.
• Permitting organizational abuse. Many U.S. firms with operations overseas, such as Apple , Nike , and Levi Strauss , have faced issues of organizational abuse. The unfair treatment of workers in international operations appears in the form of child labor, demeaning wages, and excessive work hours. Although a business cannot change the culture of another country, it can perpetuate—or stop—abuse through its operations there.
• Violating rules. Many organizations use rules and processes to maintain internal controls or respect the authority of managers. Although these rules may seem burdensome to employees trying to serve customers, a violation may be considered an unethical act.

After recognizing that a situation is unethical, the next question is what do you do? The action that a person takes is partially based upon his or her ethical philosophy. The environment in which we live and work also plays a role in our behavior. This section describes personal philosophies and legal factors that influence the choices we make when confronting an ethical dilemma.

Justice—The Question of Fairness

Another factor influencing individual business ethics is justice , or what is fair according to prevailing standards of society. We all expect life to be reasonably fair. You expect your exams to be fair, the grading to be fair, and your wages to be fair, based on the type of work being done.

Today we take justice to mean an equitable distribution of the burdens and rewards that society has to offer. The distributive process varies from society to society. Those in a democratic society believe in the “equal pay for equal work” doctrine, in which individuals are rewarded based on the value the free market places on their services. Because the market places different values on different occupations, the rewards, such as wages, are not necessarily equal. Nevertheless, many regard the rewards as just. A politician who argued that a supermarket clerk should receive the same pay as a physician, for example, would not receive many votes from the American people. At the other extreme, communist theorists have argued that justice would be served by a society in which burdens and rewards were distributed to individuals according to their abilities and their needs, respectively.

Utilitarianism—Seeking the Best for the Majority

One of the philosophies that may influence choices between right and wrong is utilitarianism , which focuses on the consequences of an action taken by a person or organization. The notion that people should act so as to generate the greatest good for the greatest number is derived from utilitarianism. When an action affects the majority adversely, it is morally wrong. One problem with this philosophy is that it is nearly impossible to accurately determine how a decision will affect a large number of people.

Another problem is that utilitarianism always involves both winners and losers. If sales are slowing and a manager decides to fire five people rather than putting everyone on a 30-hour workweek, the 20 people who keep their full-time jobs are winners, but the other five are losers.

A final criticism of utilitarianism is that some “costs,” although small relative to the potential good, are so negative that some segments of society find them unacceptable. Reportedly, the backs of animals a year are deliberately broken so that scientists can conduct spinal cord research that could someday lead to a cure for spinal cord injuries. To a number of people, however, the “costs” are simply too horrible for this type of research to continue.

Following Our Obligations and Duties

The philosophy that says people should meet their obligations and duties when analyzing an ethical dilemma is called deontology . This means that a person will follow his or her obligations to another individual or society because upholding one’s duty is what is considered ethically correct. For instance, people who follow this philosophy will always keep their promises to a friend and will follow the law. They will produce very consistent decisions, because they will be based on the individual’s set duties. Note that this theory is not necessarily concerned with the welfare of others. Say, for example, a technician for Orkin Pest Control has decided that it’s his ethical duty (and is very practical) to always be on time to meetings with homeowners. Today he is running late. How is he supposed to drive? Is the technician supposed to speed, breaking his duty to society to uphold the law, or is he supposed to arrive at the client’s home late, breaking his duty to be on time? This scenario of conflicting obligations does not lead us to a clear ethically correct resolution, nor does it protect the welfare of others from the technician’s decision.

Individual Rights

In our society, individuals and groups have certain rights that exist under certain conditions regardless of any external circumstances. These rights serve as guides when making individual ethical decisions. The term human rights implies that certain rights—to life, to freedom, to the pursuit of happiness—are bestowed at birth and cannot be arbitrarily taken away. Denying the rights of an individual or group is considered to be unethical and illegal in most, though not all, parts of the world. Certain rights are guaranteed by the government and its laws, and these are considered legal rights. The U.S. Constitution and its amendments, as well as state and federal statutes, define the rights of American citizens. Those rights can be disregarded only in extreme circumstances, such as during wartime. Legal rights include the freedom of religion, speech, and assembly; protection from improper arrest and searches and seizures; and proper access to counsel, confrontation of witnesses, and cross-examination in criminal prosecutions. Also held to be fundamental is the right to privacy in many matters. Legal rights are to be applied without regard to race, color, creed, gender, or ability.

• How are individual business ethics formed?
• What is utilitarianism?
• How can you recognize unethical activities?

Summary of Learning Outcomes

Ethics is a set of moral standards for judging whether something is right or wrong. A utilitarianism approach to setting personal ethical standards focuses on the consequences of an action taken by a person or organization. According to this approach, people should act so as to generate the greatest good for the greatest number. Every human is entitled to certain rights such as freedom and the pursuit of happiness. Another approach to ethical decision-making is justice, or what is fair according to accepted standards.

© Nov 13, 2018  OpenStax Introduction to Business .  Textbook content produced by OpenStax Introduction to Business is licensed under a  Creative Commons Attribution License 4.0 license.

Download for free at http://cnx.org/contents/[email protected].

Understanding Business Ethics Copyright © by OpenStax is licensed under a Creative Commons Attribution 4.0 International License , except where otherwise noted.

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What You Can Do to Improve Ethics at Your Company

• Christopher McLaverty
• Annie McKee

It starts with emotional intelligence.

Enron. Wells Fargo. Volkswagen. It’s hard for good, ethical people to imagine how these meltdowns could possibly happen. We assume it’s only the Ken Lays and Bernie Madoffs of the world who will cheat people. But what about the ordinary engineers, managers, and employees who designed cars to cheat automotive pollution controls or set up bank accounts without customers’ permission? We tell ourselves that we would never do those things. And, in truth, most of us won’t cook the books, steal from customers, or take that bribe.

• CM Chris topher McLaverty advises companies on their capability architecture and leadership development programs. He holds a Doctorate from the University of Pennsylvania and a Masters in Coaching Consulting and Change from INSEAD. His research focuses on business ethics, organization dynamics, networking and leadership development in cross cultural work environments.
• Annie McKee is a senior fellow at the University of Pennsylvania Graduate School of Education and the director of the PennCLO Executive Doctoral Program . She is the author of How to Be Happy at Work and a coauthor of Primal Leadership , Resonant Leadership, and Becoming a Resonant Leader .

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11.4 Corporate Ethics and Social Responsibility

What is corporate social responsibility.

As introduced early in this chapter , Corporate Social Responsibility (CSR) “is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. By practicing corporate social responsibility, also referred to simply as social responsibility, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental” (Chen, 2020). Philanthropy is the simplest form of CSR, where a firm donates funds to a nonprofit organization such as the local volunteer rescue squad or the American Cancer Society. However, CSR can take many forms, with the end result that society benefits in some way. Environmental efforts in CSR might include reducing the company’s pollution or helping to clean up the plastic that washes up on beaches. Supporting the local literacy volunteers by encouraging employees to participate to help adults learn to read and write provides a social benefit.

The CSR approach is not without controversy. When CSR was introduced, the famous economist Milton Friedman opposed CSR on philosophical grounds. He believed, as some others did, that no profits should be diverted for CSR activities. The logic was that company investors and stockholders took a risk when they invested in the company, and therefore the company’s first obligation is to them. On the other hand, many who practice CSR believe that CSR activities ultimately do benefit the company investors and stockholders. The belief is that having a CSR strategy provides good public relations for the firm and enhances their brand image, creating loyalty and more sales long term. For example, some consumers may specifically shop for TOMS shoes because of the firm’s Buy One, Give One model, where the consumer feels their purchase is providing a positive social impact.

Some examples of CSR efforts are:

• Reducing their carbon footprint—Coca Cola
• Ensuring contract manufacturers pay a living wage—Patagonia
• Improving sustainable manufacturing—BMW
• Matches employees’ donations to nonprofits—Microsoft and Google
• Reducing carbon emissions—United Airlines
• Promoting literacy among children—Twitter
• Eliminating foam cups—Dunkin’
• Donating employees’ hours to children’s tutoring—Salesforce

One criticism of CSR is that it is seen as an “add on” endeavor for firms. Often, CSR is not an ingrained component of the firm’s philosophy and operations. In response to this criticism, a rather new movement emerged in an attempt to remedy this deficiency. Michael Porter and Mark Kramer suggest that instead of CSR, wise corporations are shifting to a Creating Shared Value (CSV) model that argues that firms should address social issues by creating shared value, which is fundamentally focused on expanding the total pool of social and economic resources (Porter & Kramer, 2006; Porter & Kramer, 2011). Porter and Kramer re-frame the business proposition by trying to recognize that “societal needs, not just conventional economic needs, define markets, and social harms can create internal costs for firms” (Porter & Kramer, 2011).

Creating shared value (CSV) is a business strategy that creates a direct link between the success of the firm and the improvement of society. Generally, CSV can be considered to be a particular strategic approach within the more general CSR landscape. A key differentiating detail is the explicit focus of CSV in generating positive economic outcomes through its strategic investments. As a company prospers economically, so do those it impacts. However, CSV and CSR both take a longer-term, rather than a short-term, approach to measuring impact. For example, Whole Foods was one of the most high profile companies to adopt CSV as a guiding strategy. This strategy translated into investing in local schools to ensure a well prepared work force and supporting local agricultural communities so it could reliably source produce from local vendors. While one traditional view of “business as usual” is that when a company prospers, it is at the expense of the consumer and society. CSV and CSR flip this view.

Section Videos

Business Ethics: Corporate Social Responsibility [02:56]

The video for this lesson further explains corporate social responsibility.

You can view this video here: https://youtu.be/xoE8XlcDUI8 .

Insight: Ideas for Change—Michael Porter—Creating Shared Value [14:09]

The video for this lesson focuses on the differences between CSR and CSV.

You can view this video here: https://youtu.be/xuG-1wYHOjY .

Measuring Corporate Social Performance

TOMS Shoes’ commitment to donating a pair of shoes for every pair sold illustrates the concept of social entrepreneurship, in which a business is created with a goal of improving both business and society (Schectman, 2010). Using a CSR model, firms such as TOMS exemplify a desire to improve corporate social performance (CSP) in which a commitment to individuals, communities, and the natural environment is valued alongside the goal of creating economic value. Although determining the level of a firm’s social responsibility is subjective, this challenge has been addressed by other organizations that rate firms on a number of stakeholder-related issues with the goal of measuring CSP. They conduct ongoing research on social, governance, and environmental performance metrics of publicly traded firms and reports such statistics to institutional investors. For example, the KLD database provides ratings on numerous “strengths” and “concerns” for each firm along a number of dimensions associated with corporate social performance (Table 11.6 “Measuring Corporate Social Performance”). The results of their assessment are used to develop the Domini social investments fund, which has performed at levels roughly equivalent to the S&P 500. Some rating firms use an ESG framework for evaluating a firm. ESG stands for Environmental, Social, and Governance, and measures within each of these three dimensions are used to score a company.

Corporate social performance is defined as the degree to which a firm’s actions honor ethical values that respect individuals, communities, and the natural environment. Determining whether a firm is socially responsible is somewhat subjective, but one popular approach has been developed by KLD Research & Analytics. Their work tracks “strengths” and “concerns” for hundreds of firms over time. KLD’s findings are used by investors to screen socially responsible firms and by scholars who are interested in explaining corporate social performance. We illustrate the six key dimensions tracked by KLD below.

Assessing the community dimension of CSP is accomplished by assessing community strengths, such as charitable or innovative giving that supports housing, education, or relations with indigenous peoples, as well as charitable efforts worldwide, such as volunteer efforts or in-kind giving. A firm’s CSP rating is lowered when a firm is involved in tax controversies or other negative actions that affect the community, such as plant closings that can negatively affect property values.

CSP diversity strengths are scored positively when the company is known for promoting women and minorities, especially for board membership and the CEO position. Employment of persons with disabilities and the presence of family benefits such as child or elder care would also result in a positive score by KLD. Diversity concerns include fines or civil penalties in conjunction with an affirmative action or other diversity-related controversy. Lack of representation by women on top management positions—suggesting that a glass ceiling is present at a company—would also negatively impact scoring on this dimension.

The employee relations dimension of CSP gauges potential strengths such as notable union relations, profit sharing and employee stock-option plans, favorable retirement benefits, and positive health and safety programs noted by the US Occupational Health and Safety Administration. Employee relations concerns would be evident in poor union relations, as well as fines paid due to violations of health and safety standards. Substantial workforce reductions as well as concerns about adequate funding of pension plans also warrant concern for this dimension.

The environmental dimension records strengths by examining engagement in recycling, preventing pollution, or using alternative energies. KLD would also score a firm positively if profits derived from environmental products or services were a part of the company’s business. Environmental concerns such as penalties for hazardous waste, air, water, or other violations or actions such as the production of goods or services that could negatively impact the environment would reduce a firm’s CSP score.

Product quality/safety strengths exist when a firm has an established and/or recognized quality program; product quality safety concerns are evident when fines related to product quality and/or safety have been discovered or when a firm has been engaged in questionable marketing practices or paid fines related to antitrust practices or price fixing.

Corporate governance strengths are evident when lower levels of compensation for top management and board members exist, or when the firm owns considerable interest in another company rated favorably by KLD; corporate governance concerns arise when executive compensation is high or when controversies related to accounting, transparency, or political accountability exist.

Key Takeaway

• Many companies have adopted a Corporate Social Responsibility (CSR) philosophy to make improvements in the communities and society they operate. CSR is evolving to a Creating Shared Value (CSV) model which integrates the profit motive with solving social issues. Firms such as KLD provide objective measures of both positive and negative actions related to corporate social performance.
• How would your college or university fare if rated on the dimensions of CSR? Of CSV?
• Do you believe that executives behave more ethically as a result of legislation such as the Sarbanes-Oxley Act? Why or why not?

Chen, J. (2020, February 22). Corporate Social Responsibility (CSR) . Investopedia. https://www.investopedia.com/terms/c/corp-social-responsibility.asp .

Porter, M. E., & Kramer, M. R. (2006). Strategy and society: The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review , 84(12), 78-92.

Porter, M. E., & Kramer, M. R. (2011). Creating Shared Value. Harvard Business Review .

Schectman, J. (2010). Good Business. Newsweek , 156, 50.

Image Credits

Figure 11.3: Kindred Grey (2020). “Business responsibilities.” CC BY-SA 4.0 . Retrieved from: https://commons.wikimedia.org/wiki/File:Business_responsibilities.png .

Figure 11.4: Chick-fil A. (2020). Photo used under Fair Use. Scholarship winners. Retrieved from https://thechickenwire.chick-fil-a.com/news/chick-fil-a-to-award-17-million-in-team-member-scholarships-in-2020 .

Video Credits

Study.com. (2013, December 31). Business Ethics: Corporate Social Responsibility. Retrieved from https://youtu.be/xoE8XlcDUI8 .

World Economic Forum. (2012, September 6). Insight: Ideas for Change-Michael Porter-Creating Shared Value. Retrieved from https://youtu.be/xuG-1wYHOjY .

Efforts by a firm to be socially accountable by contributing to community and/or societal goals through philanthropic, activist, or charitable activities

A business model whereby society’s needs and challenges are addressed as a firm prospers achieving its mission

Measuring the impact of a firm’s activities in corporate social responsibility

Strategic Management Copyright © 2020 by Reed Kennedy is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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Small Business Management: Creating a Sustainable Competitive Advantage

Student resources, chapter outline.

LO 3.1  Explain the relationship between social responsibility, ethics, and strategic planning.

The social responsibility and ethics of your business are the commitments you make to doing what is right. Strategic planning is the process of deciding where you want your business to go and how it will get there. All three concepts work together to form the foundation on which your entire business rests.

LO 3.2  Describe the impact of social entrepreneurship on small business.

You have an economic responsibility to make your business profitable. Without profit, your business cannot contribute anything to society. Your legal obligation to obey the law describes the minimal behavior expected for your firm to be part of society. Your ethical responsibility covers your obligation to do what is right. Philanthropic goodwill is contributing to others without expecting anything in return.

LO 3.3  Discuss the importance of ethics for your small business.

Business ethics encompasses more than deciding what should and should not be done in a particular situation. It supplies the fundamental basis for the course you want your business to take. A code of ethics offers a way for you to communicate your ethical expectations to everyone involved in your business. The code should represent your ethical ideals, be concise enough to be remembered, be written clearly, and apply to everyone in the organization.

LO 3.4a   Describe each step in the strategic planning process.

LO 3.4b  Explain the importance of competitive advantage.

The strategic planning process includes defining your mission statement, conducting an environmental analysis (internal and external, or SWOT, analysis), analyzing the competition and defining your competitive advantage, identifying strategic alternatives, setting goals, and establishing systems to measure effectiveness. A competitive advantage is the facet of your business that gives your company an edge over the competition. The strategic plan helps you to identify and establish competitive advantage by analyzing the environment and the competitive landscape.

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What Is Business Ethics? Definition, Principles, and Importance

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

What Is Business Ethics?

Business ethics is the moral principles, policies, and values that govern the way companies and individuals engage in business activity. It goes beyond legal requirements to establish a code of conduct that drives employee behavior at all levels and helps build trust between a business and its customers.

Key Takeaways

• Business ethics refers to implementing appropriate business policies and practices with regard to arguably controversial subjects.
• Some issues that come up in a discussion of ethics include corporate governance, insider trading, bribery, discrimination, social responsibility, and fiduciary responsibilities.
• The law usually sets the tone for business ethics, providing a basic guideline that businesses can choose to follow to gain public approval.

Investopedia / Katie Kerpel

Understanding Business Ethics

Business ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses. For example, a portfolio manager must give the same consideration to the portfolios of family members and small individual investors as they do to wealthier clients. These kinds of practices ensure the public receives fair treatment.

The concept of business ethics began in the 1960s as corporations became more aware of a rising consumer-based society that showed concerns regarding the environment, social causes, and corporate responsibility. The increased focus on "social issues" was a hallmark of the decade.

Since that time, the concept of business ethics has evolved. Business ethics goes beyond just a moral code of right and wrong; it attempts to reconcile what companies must do legally vs. maintaining a competitive advantage over other businesses. Firms display business ethics in several ways.

Business ethics ensure a certain level of trust between consumers and corporations, guaranteeing the public fair and equal treatment.

Principles of Business Ethics

It's essential to understand the underlying principles that drive desired ethical behavior and how a lack of these moral principles contributes to the downfall of many otherwise intelligent, talented people and the businesses they represent.

There are generally 12 business ethics principles:

• Leadership : The conscious effort to adopt, integrate, and emulate the other 11 principles to guide decisions and behavior in all aspects of professional and personal life.
• Accountability : Holding yourself and others responsible for their actions. Commitment to following ethical practices and ensuring others follow ethics guidelines.
• Integrity : Incorporates other principles—honesty, trustworthiness, and reliability. Someone with integrity consistently does the right thing and strives to hold themselves to a higher standard.
• Respect for others : To foster ethical behavior and environments in the workplace, respecting others is a critical component. Everyone deserves dignity, privacy, equality, opportunity, compassion, and empathy.
• Honesty : Truth in all matters is key to fostering an ethical climate. Partial truths, omissions, and under or overstating don't help a business improve its performance. Bad news should be communicated and received in the same manner as good news so that solutions can be developed.
• Respect for laws : Ethical leadership should include enforcing all local, state, and federal laws. If there is a legal grey area, leaders should err on the side of legality rather than exploiting a gap.
• Responsibility : Promote ownership within an organization, allow employees to be responsible for their work, and be accountable for yours.
• Transparency : Stakeholders are people with an interest in a business, such as shareholders, employees, the community a firm operates in, and the family members of the employees. Without divulging trade secrets, companies should ensure information about their financials, price changes, hiring and firing practices, wages and salaries, and promotions are available to those interested in the business's success.
• Compassion : Employees, the community surrounding a business, business partners, and customers should all be treated with concern for their well-being.
• Fairness : Everyone should have the same opportunities and be treated the same. If a practice or behavior would make you feel uncomfortable or place personal or corporate benefit in front of equality, common courtesy, and respect, it is likely not fair.
• Loyalty : Leadership should demonstrate confidentially and commitment to their employees and the company. Inspiring loyalty in employees and management ensures that they are committed to best practices.
• Environmental concern : In a world where resources are limited, ecosystems have been damaged by past practices, and the climate is changing, it is of utmost importance to be aware of and concerned about the environmental impacts a business has. All employees should be encouraged to discover and report solutions for practices that can add to damages already done.

Why Is Business Ethics Important?

There are several reasons business ethics are essential for success in modern business. Most importantly, defined ethics programs establish a code of conduct that drives employee behavior—from executives to middle management to the newest and youngest employees. When all employees make ethical decisions, the company establishes a reputation for ethical behavior. Its reputation grows, and it begins to experience the benefits a moral establishment reaps:

• Brand recognition and growth
• Increased ability to negotiate
• Increased trust in products and services
• Customer retention and growth
• Attracts talent
• Attracts investors

When combined, all these factors affect a business' revenues. Those that fail set ethical standards and enforce them are doomed to eventually find themselves alongside Enron, Arthur Andersen, Wells Fargo, Lehman Brothers, Bernie Madoff, and many others.

Types of Business Ethics

There are several theories regarding business ethics, and many different types can be found, but what makes a business stand out are its corporate social responsibility practices, transparency and trustworthiness, fairness, and technological practices.

Corporate Social Responsibility

Corporate social responsibility (CSR) is the concept of meeting the needs of stakeholders while accounting for the impact meeting those needs has on employees, the environment, society, and the community in which the business operates. Of course, finances and profits are important, but they should be secondary to the welfare of society, customers, and employees—because studies have concluded that corporate governance and ethical practices increase financial performance.

Businesses should hold themselves accountable and responsible for their environmental, philanthropic, ethical, and economic impacts.

Transparency and Trustworthiness

It's essential for companies to ensure they are reporting their financial performance in a way that is transparent. This not only applies to required financial reports but all reports in general. For example, many corporations publish annual reports to their shareholders.

Most of these reports outline not only the submitted reports to regulators, but how and why decisions were made, if goals were met, and factors that influenced performance. CEOs write summaries of the company's annual performance and give their outlooks.

Press releases are another way companies can be transparent. Events important to investors and customers should be published, regardless of whether it is good or bad news.

Technological Practices and Ethics

The growing use of technology of all forms in business operations inherently comes with a need for a business to ensure the technology and information it gathers is being used ethically. Additionally, it should ensure that the technology is secured to the utmost of its ability, especially as many businesses store customer information and collect data that those with nefarious intentions can use.

A workplace should be inclusive, diverse, and fair for all employees regardless of race, religion, beliefs, age, or identity. A fair work environment is where everyone can grow, be promoted, and become successful in their own way.

How to Implement Good Business Ethics

Fostering an environment of ethical behavior and decision-making takes time and effort—it always starts at the top. Most companies need to create a code of conduct/ethics, guiding principles, reporting procedures, and training programs to enforce ethical behavior.

Once conduct is defined and programs implemented, continuous communication with employees becomes vital. Leaders should constantly encourage employees to report concern behavior—additionally, there should be assurances that if whistle-blowers will not face adversarial actions.

A pipeline for anonymous reporting can help businesses identify questionable practices and reassure employees that they will not face any consequences for reporting an issue.

Monitoring and Reporting Unethical Behavior

When preventing unethical behavior and repairing its adverse side effects, companies often look to managers and employees to report any incidences they observe or experience. However, barriers within the company culture (such as fear of retaliation for reporting misconduct) can prevent this from happening.

Published by the Ethics & Compliance Initiative (ECI), the Global Business Ethics Survey of 2021 surveyed over 14,000 employees in 10 countries about different types of misconduct they observed in the workplace. 49% of the employees surveyed said they had observed misconduct and 22% said they had observed behavior they would categorize as abusive. 86% of employees said they reported the misconduct they observed. When questioned if they had experienced retaliation for reporting, 79% said they had been retaliated against.

Indeed, fear of retaliation is one of the primary reasons employees cite for not reporting unethical behavior in the workplace. ECI says companies should work toward improving their corporate culture by reinforcing the idea that reporting suspected misconduct is beneficial to the company. Additionally, they should acknowledge and reward the employee's courage in making the report.

Business ethics concerns ethical dilemmas or controversial issues faced by a company. Often, business ethics involve a system of practices and procedures that help build trust with the consumer. On one level, some business ethics are embedded in the law, such as minimum wages, insider trading restrictions, and environmental regulations. On another, business ethics can be influenced by management behavior, with wide-ranging effects across the company.

What Are Business Ethics and Example?

Business ethics guide executives, managers, and employees in their daily actions and decision-making. For example, consider a company that has decided to dump chemical waste that it cannot afford to dispose of properly on a vacant lot it has purchased in the local community. This action has legal, environmental, and social repercussions that can damage a company beyond repair.

What Are the 12 Ethical Principles?

Business ethics is an evolving topic. Generally, there are about 12 ethical principles: honesty, fairness, leadership, integrity, compassion, respect, responsibility, loyalty, law-abiding, transparency, and environmental concerns.

The Bottom Line

Business ethics concerns employees, customers, society, the environment, shareholders, and stakeholders. Therefore, every business should develop ethical models and practices that guide employees in their actions and ensure they prioritize the interests and welfare of those the company serves.

Doing so not only increases revenues and profits, it creates a positive work environment and builds trust with consumers and business partners.

New York University Stern Center for Sustainable Business. " ESG and Financial Performance: Uncovering the Relationship By Aggregating Evidence From 1,000 Plus Studies Published Between 2015 – 2020 ."

Ethics & Compliance Initiative (ECI). " The State of Ethics & Compliance in the Workplace ," Pages 16-22.

Ethics & Compliance Initiative (ECI). " 2021 Global Business Ethics Survey Report The State of Ethics & Compliance in the Workplace: A Look at Global Trends ."

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Master of Business Administration (MBA)

Understanding the Principles of Ethics in Business

As chatbots and other AI-driven tools rise to prominence, companies are racing to use them to gain a competitive advantage. This might change the ways people conduct business, but one thing remains the same — the need to adhere to ethical principles in business.

What are business ethics? Investopedia defines this term as “the moral principles, policies and values that govern the way companies and individuals engage in business activity.” Put simply, maximizing revenues shouldn’t preclude doing what’s right.

Business ethics are not necessarily legally binding. Instead, they are self-governed behaviors based on exemplary standards and, in many cases, company policies. Dr. Melanie Zollner, an assistant professor in our Department of Business Administration, contextualized the legal and ethical boundaries using the following axiom:

“Where the law ends, ethics begins.”

What Are Examples of Ethical Principles in Business?

There are numerous ethical principles to learn as you advance in business. That’s why New Mexico Highlands University incorporates ethics throughout the curriculum for our online MBA degree. This emphasis will help you understand the importance of ethics in business and embody them during your career.

Brands face stiff competition in our global economy, and it’s wise to look for opportunities to get ahead. But that doesn’t give license to cut corners with the truth. Instead, businesses must strive for honesty across their operations, such as:

• Providing accurate product descriptions.
• Avoiding misleading statements during customer service interactions.
• Keeping the promises they make in advertising.

In addition to being the right thing to do, honesty helps strengthen connections between customers and companies, which can lead to repeat sales. Conversely, Dr. Zollner cautioned that businesses risk losing customers if they fall short of those standards.

“People can go somewhere else and purchase a different product or service from another company,” she said. “Once an organization loses that trust, it’s very hard to build back.”

The numbers back up that statement, as a Qualtrics survey found that 65% of people have stopped purchasing from brands that failed to meet their promises.

Professionals who treat each other respectfully — with kindness and support for one another’s contributions — create an environment focused on shared success. For instance, a HubSpot post explores how respect in the workplace helps improve productivity, foster innovation and promote collaboration.

Researchers at the Center for Creative Leadership found that workers throughout the world consider respect a “ critical leadership responsibility .” By satisfying this ethical principle, organizations can build admiration with customers and confidence among teammates.

Acting with integrity expands on the ethical principles we have discussed so far. It requires you to bring honesty and respect to every customer interaction, every meeting and every task — every workday.

Not only that, but you cannot expect credit for working with integrity. Diligent , a software company focusing on ESG and compliance, framed integrity as “doing the right thing even when nobody is watching.”

In other words, act properly to the benefit of your customers and stakeholders, not for your personal gain.

Acting with integrity can occur out of sight, but loyalty is an ethical principle to put on display. It means standing by the people in your business life, and it delivers benefits to those who give and receive loyalty. For example, loyalty can:

• Turn consumers into advocates for your company, according to a Forbes Communications Council article.
• Improve worker productivity and retention, two reasons GBS Corporate Training characterized loyalty as a manager’s “ most important resource .”

Loyalty to your supervisor matters, but it shouldn’t usurp other ethical principles. A study in the journal Organizational Behavior and Human Decision Processes highlighted how people are more likely to accept unethical demands from leaders who previously asked for loyalty.

This risk reinforces the value of learning principles of ethics. In addition to providing signposts for proper business behavior, you’ll recognize when someone attempts to lead you astray.

Transparency

Transparent companies build on the principle of honesty, showing they don’t just talk the ethical talk, but walk the ethical walk. A Shopify article noted that brands establish trust with customers when they “pull back the curtain” on the processes behind developing products and filling positions.

Of course, transparency isn’t limited to customer relations. According to Strategic Finance , businesses must also bake transparency into their culture. That means keeping workers informed about everything from short-term performance to long-term strategies.

Dr. Zollner noted that platforms like Facebook and TikTok are powerful tools for spotlighting unethical behavior. “With social media, if an organization behaves unethically, we are all going to know pretty quickly,” she said. So, individuals have the chance to promote transparency even when organizations fall short of that principle.

Opportunities for Strengthening Ethics in Business

Learning business ethics is just one part of your professional journey. As your career advances, it’s important to seek ways to champion principles of ethics at your organization. Here are three opportunities for doing just that:

Be Proactive

Innovative technologies offer new ways to conduct business. But chatbots and other advancements present as many risks as opportunities, raising the need for organizations to update their ethical policies to account for these tools.

“These tools can suffer from hallucinations and also provide information that is not accurate,” Dr. Zollner said. Based on these shortcomings, organizations must be proactive in examining these technologies, understanding how they work and setting policies for using them ethically.

Hold Leaders to High Standards

Dr. Zollner feels that ethical business leaders set the tone for other workers at each organization. “If you want to build a positive relationship with your stakeholders, it’s important to define your values and act on them starting from the top, with accountability for all,” she said.

Ethical leadership sets a positive example for professionals just beginning their careers. After all, entry-level workers see leaders as mentors. When those role models forgo ethical or moral business behavior, others might take that as permission to do the same.

Commit to the Triple Bottom Line

When teaching MBA courses online, Dr. Zollner encourages students to think about more than generating revenue. “Some believe the goal of organizations is just profit and thinking about shareholders. But I like to talk about how organizations should focus on the triple bottom line,” she said.

IBM described the triple bottom line as the “ three Ps : people, planet and profit.” Embracing this mindset means considering more than increasing revenue. As Dr. Zollner said, organizations must also “think about society, the environment and the impact they have economically.”

Achieve Results as an Ethical Business Professional

Dr. Zollner believes it’s important to ensure everyone — from entry-level professionals to business owners — understands and practices ethical principles. Toward that end, New Mexico Highlands University emphasizes ethics throughout our online MBA program .

Of course, learning the principles of ethics is just one aspect of the excellence you’ll experience while completing our ACBSP-accredited MBA. Our expert faculty members emphasize intensive problem-solving during each class, sharing business case studies and simulations that prepare you to hit the ground running in your career after graduation.

Our MBA program appeals to professionals with varying goals, as you can choose from multiple electives and concentrations in Entrepreneurship and Healthcare Administration . As you pursue your master’s degree online, you’ll engage in comprehensive coursework with added flexibility for fitting your education into your schedule. If you want to learn more, request information today.

Melanie C. Zollner, Ed.D., Assistant Professor, Department of Business Administration

Melanie C. Zollner, Ed.D., is an assistant professor in the School of Business, Media, and Technology in the Department of Business Administration at New Mexico Highlands University.

As part of the business department, Dr. Zollner represented the NMHU School of Business in the Ethics Champion Program from 2019 to 2021. The ethics workshop provides Highlands University students with an opportunity to engage with business community members and learn more about what business ethics means in the business world. Dr. Zollner mentored students for the New Mexico Business Ethics Case Competition, where her mentees earned second place in 2017 and first place in 2019, the most recent year the competition was held.

Dr. Zollner enjoys teaching at New Mexico Highlands University and strongly believes students benefit from small class sizes and one-on-one relationships with diverse faculty. She is committed to helping prepare students as competent, ethical and responsible individuals.

• Ed.D. in Educational Leadership, University of New Mexico
• MBA, New Mexico Highlands University

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Ethical considerations in strategic planning

As a board member and senior manager of a nonprofit you are responsible for creating and participating in the development of your organization’s strategic direction and implementing the change associated with delivering upon that strategy.

While there are few ethical absolutes, the key ethical considerations in strategic planning include:

• Stakeholder participation
• Organizational values
• Individual values
• Managing change

Stakeholder Participation

When undertaking the process of strategy development we are often focused on determining the most effective way of developing the plan. This often results in the process consisting of a task force of the Board being given the mandate of developing a plan and submitting it to the Board for review and approval.

It is well documented that any significant change in strategy has a corresponding change in the structure of the organization in order too effective and deliver upon that strategy. As such, we should be comfortable that the selected strategy is the right one for the organization at that particular point in time. But how do you know if you have developed the right strategy? The first thing is to appreciate that there is no one right strategy for any organization at any particular point in time. Having said, that you can improve your chances of getting the “appropriate strategy” by involving stakeholders.

Stakeholder involvement challenges your existing paradigms, allows differing perspectives and enhances support. All of these help improve the chance that your organization’s strategy is developed with the information necessary to make decisions. Stakeholder participation is the first acid test.

Organizational Values

One of the key advantages most nonprofits have over their corporate counterparts is their development of a set of organizational values. Organizational values are those key statements that help guide the way an organization pursues its objectives and delivers upon its mission.

If your organization doesn’t have a set of organizational values you should at least determine them as a part of your next strategy development session, if not before. For those organizations that have their values determined, it is important that as part of your next strategic planning process that you subject your strategy to those values. If there are any issues or concerns regarding how your strategy fits within those values then you need to reassess your strategy.

Your organizational strategy should be consistent and support your organization’s values. Organizational values are the second acid test.

Individual Values

As senior managers within your organization and board members you each carry a set of personal values. To be able to say that you support the strategic direction of the organization it is important that you can also say that the strategy is consistent with your personal values. Individual values are the third acid test.

Managing Change

As mentioned earlier, any significant change in strategy has a corresponding change in organizational structure. Managing this change can be done in many ways. Ensuring that the change is managed in a way that is consistent with the organization’s values and your personal values is important. Additional questions that should be asked include:

• Who will actually gain from this change?
• Who won’t gain from this change?
• Is the change worth the risk?
• How will we work with those affected by the change in order to assist them in making the transition?
• How will we work with those that can’t make the transition?

Ron Robinson is the president of ABARIS Consulting Inc. He can be reached at (519) 472-9788 or [email protected] . This article is provided free of charge, for information purposes only and is not intended, represented or to be inferred as providing advice. ABARIS Consulting Inc. makes no warranty, express or implied, or assumes any legal liability for accuracy, completeness, or usefulness of any information provided in whole or in part within this article.

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Ethics and Social Responsibility in Strategic Planning

Introduction.

Organizations use strategic planning to focus on significant issues that they wish to accomplish in the future. These could be short-term or long-term. Good management is essential for the perfect implementation of strategic plans. Failure to do this leads to clashes with consumers and regulatory watchdogs in the industry. There is also negative publicity from other stakeholders. It is therefore important for businesses to develop strategic planning and implement it in the desired manner (Dale, 2003, p. 157). Business ethics entails determining business moves that are right or wrong and freely choosing to opt for the right one(s).

This normally presents a challenge since business decisions are normally not a clear white or black situation like, ‘should people steal?’ Decisions sometimes involve unclear circumstances that are not quite defined (Patricia, 2004, p.77). Implementation of the strategic plans entails several employees in the organization if not all. Individuals, therefore, have to fill parts of the puzzle allocated to them so that the entire strategy can hold. Social responsibility is a necessity in this case to succeed. Although there are several challenges faced in the implementation of strategic planning, it is best to ethically pick the right option.

Role of ethics and social responsibility in developing strategic plans

The process of strategic planning normally leads to group planning through envisioning the bigger picture of what the plan is set to achieve. Aspects of strategic planning entail action planning, analysis, and setting up of strategies in stages. The boardroom agendas that formulate these strategies should be transformed into staff performance. A detailed description of the strategic plan should include the actual activities that need to be carried out, how wide the plan should cover, the resources needed to successfully implement it, and the time frame for each stage of the plan. Individual, responsibilities should be specified and evaluation methods clearly stated (Patricia, 2004, p. 84).

Once all the above are laid down, then the ethical implications of the strategic plan are critically assessed before embarking on its implementation. Components of ethics that are checked include rights and obligations of the stakeholders involved, fairness of the whole strategy, relationships that develop from it, and issues of integrity. On some occasions, there may be the need for rewriting of the strategy after the ethical assessment. Checking up the above is essential not only for the people who participate in carrying out the plan but also for the wider community that it may affect as a whole.

According to Werther, and Chandler (2006), ethics and social responsibility are mandatory moral obligations that must be included in good corporate strategic planning. The principal argument is that ethics embedded in strategic planning builds trust on the firm’s stakeholders’ part. This then generates commitment to the firm. Commitment leads to effort on the employee’s part to be cooperative which enhances innovation during the implementation of the strategy. This is a good catalyst for the success of a strategic plan a move that is fundamental to competitive advantage in the current globalized market. Ethics should therefore be core in the general management of any business situation and not only in strategic planning.

The principle above takes the effort of stakeholders which is generated through trust and commitment to be imperative for an organization’s success in a competitive market environment. It allocates several benefits to the organization that can only be archived through ethical operations.

To begin with, strategic planning in any economic organization in a competitive market has its advantages and counter benefits to stakeholders. For instance, an organization may strategically plan to automate most of the services that were previously manually done. Benefits may include faster service delivery and more revenue accumulation in addition to being competitive in the existing market environment if that is the trend in the market. Overall, the business is likely to be successful after full adoption of the strategy. On the contrary, some employees lose their jobs to the machines that have been incorporated into the organization.

How this unavoidable issue is dealt with is of significance to all concerns as it cannot be ignored either. Ethical standards should be applied in solving the challenge amicably in a morally acceptable manner. An example would be to follow the laws governing termination of contracts in that specific environment. This may involve monetary compensation of the employees depending on the duration that they have served the organization among others.

The responsibility of dealing with challenges as those aforementioned lies with the top management of institutions. They also formulate strategic policies. Decisions should be carefully and thoughtfully weighed out before implementation in such circumstances. Social responsibility is a factor that becomes a determinant of the outcome for those that remain for the company’s sake and those who have been dropped in the process of implementing the strategy. Ethical principles offer a basis from which analysis of the situation can be made. This is because they recognize the interests of each group and enhance comparison with known principles.

A trade-off should therefore be reached to maximize the satisfaction of all the stakeholders. An example in the above case would be to give priority to the lump sum payments for those relieved of their duties before considering those who have been retained.

When stakeholders believe that the benefits have been fairly distributed and related harms accordingly shared, then the elements of trust, commitment, and effort come into play. Effective handling of a retrenchment situation motivates the remaining workers whose output is crucial in the implementation of the strategic plan. Each of them needs to do their part of the responsibility in the plan for success to be achieved. It is also the social responsibility of the management to cater to the interest of all parties concerned. Once the stakeholders develop trust in the firm, they get committed to their responsibilities.

Cooperation and innovation triggered by the enhanced effort of employees is a consequence of the developed trust and promotes social responsibility. This gives a competitive edge in the market and hence economic success for the business.

Market practices however put firms first in any strategic planning. It is common to find corporations focussing attention on themselves at the expense of other interest groups. This could be in disregard of existing protection strategies such as laws that protect employees from exploitation by employers. When this is done, there is normally a bone of contention as stakeholders are unsatisfied. The result may be the failure to attain the initial goals of strategic planning.

It is acceptable for corporations to fight for their survival, success, and protect themselves. Leveraging of the available resources and selection of posture are inadequate in the globalized economy. The element of effort, derived from commitment and trust is a necessity. In a nutshell, good strategic planning involves critical analysis of issues, social responsibility, and must be ethical. Simply put everyone should be appropriately taken care of.

Reference List

Dale, N. (2003). Managing corporate reputation and risk: developing a strategic approach to corporate integrity using knowledge management . Burlington, MA: Butterworth-Heinemann.

Patricia, J. P. (2004). Ethics in public relations: a guide to best practice . London: Kogan Page.

Werther, B. W. &, Chandler, D. (2006). Strategic corporate social responsibility: stakeholders in a global environment . London: Sage.

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• What is strategic planning? A 5-step gu ...

What is strategic planning? A 5-step guide

Strategic planning is a process through which business leaders map out their vision for their organization’s growth and how they’re going to get there. In this article, we'll guide you through the strategic planning process, including why it's important, the benefits and best practices, and five steps to get you from beginning to end.

Strategic planning is a process through which business leaders map out their vision for their organization’s growth and how they’re going to get there. The strategic planning process informs your organization’s decisions, growth, and goals.

Strategic planning helps you clearly define your company’s long-term objectives—and maps how your short-term goals and work will help you achieve them. This, in turn, gives you a clear sense of where your organization is going and allows you to ensure your teams are working on projects that make the most impact. Think of it this way—if your goals and objectives are your destination on a map, your strategic plan is your navigation system.

In this article, we walk you through the 5-step strategic planning process and show you how to get started developing your own strategic plan.

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What is strategic planning?

Strategic planning is a business process that helps you define and share the direction your company will take in the next three to five years. During the strategic planning process, stakeholders review and define the organization’s mission and goals, conduct competitive assessments, and identify company goals and objectives. The product of the planning cycle is a strategic plan, which is shared throughout the company.

What is a strategic plan?

A strategic plan is the end result of the strategic planning process. At its most basic, it’s a tool used to define your organization’s goals and what actions you’ll take to achieve them.

Typically, your strategic plan should include: 

Your company’s mission statement

Your organizational goals, including your long-term goals and short-term, yearly objectives

Any plan of action, tactics, or approaches you plan to take to meet those goals

What are the benefits of strategic planning?

Strategic planning can help with goal setting and decision-making by allowing you to map out how your company will move toward your organization’s vision and mission statements in the next three to five years. Let’s circle back to our map metaphor. If you think of your company trajectory as a line on a map, a strategic plan can help you better quantify how you’ll get from point A (where you are now) to point B (where you want to be in a few years).

When you create and share a clear strategic plan with your team, you can:

Build a strong organizational culture by clearly defining and aligning on your organization’s mission, vision, and goals.

Align everyone around a shared purpose and ensure all departments and teams are working toward a common objective.

Proactively set objectives to help you get where you want to go and achieve desired outcomes.

Promote a long-term vision for your company rather than focusing primarily on short-term gains.

Ensure resources are allocated around the most high-impact priorities.

Define long-term goals and set shorter-term goals to support them.

Assess your current situation and identify any opportunities—or threats—allowing your organization to mitigate potential risks.

Create a proactive business culture that enables your organization to respond more swiftly to emerging market changes and opportunities.

What are the 5 steps in strategic planning?

The strategic planning process involves a structured methodology that guides the organization from vision to implementation. The strategic planning process starts with assembling a small, dedicated team of key strategic planners—typically five to 10 members—who will form the strategic planning, or management, committee. This team is responsible for gathering crucial information, guiding the development of the plan, and overseeing strategy execution.

Once you’ve established your management committee, you can get to work on the planning process. 

Step 1: Assess your current business strategy and business environment

Before you can define where you’re going, you first need to define where you are. Understanding the external environment, including market trends and competitive landscape, is crucial in the initial assessment phase of strategic planning.

To do this, your management committee should collect a variety of information from additional stakeholders, like employees and customers. In particular, plan to gather:

Relevant industry and market data to inform any market opportunities, as well as any potential upcoming threats in the near future.

Customer insights to understand what your customers want from your company—like product improvements or additional services.

Employee feedback that needs to be addressed—whether about the product, business practices, or the day-to-day company culture.

Consider different types of strategic planning tools and analytical techniques to gather this information, such as:

A balanced scorecard to help you evaluate four major elements of a business: learning and growth, business processes, customer satisfaction, and financial performance.

A SWOT analysis to help you assess both current and future potential for the business (you’ll return to this analysis periodically during the strategic planning process). 

To fill out each letter in the SWOT acronym, your management committee will answer a series of questions:

What does your organization currently do well?

What separates you from your competitors?

What are your most valuable internal resources?

What tangible assets do you have?

What is your biggest strength? 

Weaknesses:

What does your organization do poorly?

What do you currently lack (whether that’s a product, resource, or process)?

What do your competitors do better than you?

What, if any, limitations are holding your organization back?

What processes or products need improvement? 

Opportunities:

What opportunities does your organization have?

How can you leverage your unique company strengths?

Are there any trends that you can take advantage of?

How can you capitalize on marketing or press opportunities?

Is there an emerging need for your product or service? 

What emerging competitors should you keep an eye on?

Are there any weaknesses that expose your organization to risk?

Have you or could you experience negative press that could reduce market share?

Is there a chance of changing customer attitudes towards your company? 

Step 2: Identify your company’s goals and objectives

To begin strategy development, take into account your current position, which is where you are now. Then, draw inspiration from your vision, mission, and current position to identify and define your goals—these are your final destination. 

To develop your strategy, you’re essentially pulling out your compass and asking, “Where are we going next?” “What’s the ideal future state of this company?” This can help you figure out which path you need to take to get there.

During this phase of the planning process, take inspiration from important company documents, such as:

Your mission statement, to understand how you can continue moving towards your organization’s core purpose.

Your vision statement, to clarify how your strategic plan fits into your long-term vision.

Your company values, to guide you towards what matters most towards your company.

Your competitive advantages, to understand what unique benefit you offer to the market.

Your long-term goals, to track where you want to be in five or 10 years.

Your financial forecast and projection, to understand where you expect your financials to be in the next three years, what your expected cash flow is, and what new opportunities you will likely be able to invest in.

Step 3: Develop your strategic plan and determine performance metrics

Now that you understand where you are and where you want to go, it’s time to put pen to paper. Take your current business position and strategy into account, as well as your organization’s goals and objectives, and build out a strategic plan for the next three to five years. Keep in mind that even though you’re creating a long-term plan, parts of your plan should be created or revisited as the quarters and years go on.

As you build your strategic plan, you should define:

Company priorities for the next three to five years, based on your SWOT analysis and strategy.

Yearly objectives for the first year. You don’t need to define your objectives for every year of the strategic plan. As the years go on, create new yearly objectives that connect back to your overall strategic goals . 

Related key results and KPIs. Some of these should be set by the management committee, and some should be set by specific teams that are closer to the work. Make sure your key results and KPIs are measurable and actionable. These KPIs will help you track progress and ensure you’re moving in the right direction.

Budget for the next year or few years. This should be based on your financial forecast as well as your direction. Do you need to spend aggressively to develop your product? Build your team? Make a dent with marketing? Clarify your most important initiatives and how you’ll budget for those.

A high-level project roadmap . A project roadmap is a tool in project management that helps you visualize the timeline of a complex initiative, but you can also create a very high-level project roadmap for your strategic plan. Outline what you expect to be working on in certain quarters or years to make the plan more actionable and understandable.

Step 4: Implement and share your plan

Now it’s time to put your plan into action. Strategy implementation involves clear communication across your entire organization to make sure everyone knows their responsibilities and how to measure the plan’s success. 

Make sure your team (especially senior leadership) has access to the strategic plan, so they can understand how their work contributes to company priorities and the overall strategy map. We recommend sharing your plan in the same tool you use to manage and track work, so you can more easily connect high-level objectives to daily work. If you don’t already, consider using a work management platform .  

A few tips to make sure your plan will be executed without a hitch: 

Communicate clearly to your entire organization throughout the implementation process, to ensure all team members understand the strategic plan and how to implement it effectively. 

Define what “success” looks like by mapping your strategic plan to key performance indicators.

Ensure that the actions outlined in the strategic plan are integrated into the daily operations of the organization, so that every team member's daily activities are aligned with the broader strategic objectives.

Utilize tools and software—like a work management platform—that can aid in implementing and tracking the progress of your plan.

Regularly monitor and share the progress of the strategic plan with the entire organization, to keep everyone informed and reinforce the importance of the plan.

Establish regular check-ins to monitor the progress of your strategic plan and make adjustments as needed. 

Step 5: Revise and restructure as needed

Once you’ve created and implemented your new strategic framework, the final step of the planning process is to monitor and manage your plan.

Remember, your strategic plan isn’t set in stone. You’ll need to revisit and update the plan if your company changes directions or makes new investments. As new market opportunities and threats come up, you’ll likely want to tweak your strategic plan. Make sure to review your plan regularly—meaning quarterly and annually—to ensure it’s still aligned with your organization’s vision and goals.

Keep in mind that your plan won’t last forever, even if you do update it frequently. A successful strategic plan evolves with your company’s long-term goals. When you’ve achieved most of your strategic goals, or if your strategy has evolved significantly since you first made your plan, it might be time to create a new one.

Build a smarter strategic plan with a work management platform

To turn your company strategy into a plan—and ultimately, impact—make sure you’re proactively connecting company objectives to daily work. When you can clarify this connection, you’re giving your team members the context they need to get their best work done. 

A work management platform plays a pivotal role in this process. It acts as a central hub for your strategic plan, ensuring that every task and project is directly tied to your broader company goals. This alignment is crucial for visibility and coordination, allowing team members to see how their individual efforts contribute to the company’s success. 

By leveraging such a platform, you not only streamline workflow and enhance team productivity but also align every action with your strategic objectives—allowing teams to drive greater impact and helping your company move toward goals more effectively. 

Strategic planning FAQs

Still have questions about strategic planning? We have answers.

Why do I need a strategic plan?

A strategic plan is one of many tools you can use to plan and hit your goals. It helps map out strategic objectives and growth metrics that will help your company be successful.

When should I create a strategic plan?

You should aim to create a strategic plan every three to five years, depending on your organization’s growth speed.

Since the point of a strategic plan is to map out your long-term goals and how you’ll get there, you should create a strategic plan when you’ve met most or all of them. You should also create a strategic plan any time you’re going to make a large pivot in your organization’s mission or enter new markets. 

What is a strategic planning template?

A strategic planning template is a tool organizations can use to map out their strategic plan and track progress. Typically, a strategic planning template houses all the components needed to build out a strategic plan, including your company’s vision and mission statements, information from any competitive analyses or SWOT assessments, and relevant KPIs.

What’s the difference between a strategic plan vs. business plan?

A business plan can help you document your strategy as you’re getting started so every team member is on the same page about your core business priorities and goals. This tool can help you document and share your strategy with key investors or stakeholders as you get your business up and running.

You should create a business plan when you’re: 

Just starting your business

Significantly restructuring your business

If your business is already established, you should create a strategic plan instead of a business plan. Even if you’re working at a relatively young company, your strategic plan can build on your business plan to help you move in the right direction. During the strategic planning process, you’ll draw from a lot of the fundamental business elements you built early on to establish your strategy for the next three to five years.

What’s the difference between a strategic plan vs. mission and vision statements?

Your strategic plan, mission statement, and vision statements are all closely connected. In fact, during the strategic planning process, you will take inspiration from your mission and vision statements in order to build out your strategic plan.

Simply put: 

A mission statement summarizes your company’s purpose.

A vision statement broadly explains how you’ll reach your company’s purpose.

A strategic plan pulls in inspiration from your mission and vision statements and outlines what actions you’re going to take to move in the right direction. 

For example, if your company produces pet safety equipment, here’s how your mission statement, vision statement, and strategic plan might shake out:

Mission statement: “To ensure the safety of the world’s animals.” 

Vision statement: “To create pet safety and tracking products that are effortless to use.” 

Your strategic plan would outline the steps you’re going to take in the next few years to bring your company closer to your mission and vision. For example, you develop a new pet tracking smart collar or improve the microchipping experience for pet owners. 

What’s the difference between a strategic plan vs. company objectives?

Company objectives are broad goals. You should set these on a yearly or quarterly basis (if your organization moves quickly). These objectives give your team a clear sense of what you intend to accomplish for a set period of time. 

Your strategic plan is more forward-thinking than your company goals, and it should cover more than one year of work. Think of it this way: your company objectives will move the needle towards your overall strategy—but your strategic plan should be bigger than company objectives because it spans multiple years.

What’s the difference between a strategic plan vs. a business case?

A business case is a document to help you pitch a significant investment or initiative for your company. When you create a business case, you’re outlining why this investment is a good idea, and how this large-scale project will positively impact the business. 

You might end up building business cases for things on your strategic plan’s roadmap—but your strategic plan should be bigger than that. This tool should encompass multiple years of your roadmap, across your entire company—not just one initiative.

What’s the difference between a strategic plan vs. a project plan?

A strategic plan is a company-wide, multi-year plan of what you want to accomplish in the next three to five years and how you plan to accomplish that. A project plan, on the other hand, outlines how you’re going to accomplish a specific project. This project could be one of many initiatives that contribute to a specific company objective which, in turn, is one of many objectives that contribute to your strategic plan. 

What’s the difference between strategic management vs. strategic planning?

A strategic plan is a tool to define where your organization wants to go and what actions you need to take to achieve those goals. Strategic planning is the process of creating a plan in order to hit your strategic objectives.

Strategic management includes the strategic planning process, but also goes beyond it. In addition to planning how you will achieve your big-picture goals, strategic management also helps you organize your resources and figure out the best action plans for success. 

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