Ethical Business Practices Lead to Long Term Success

Back in the mid'90s, I wrote a biweekly column for New Hampshire's statewide business newspaper. Many of the pieces focused on what I believed were unfair and unethical practices taking place in the state's construction industry at the time-both on the part of those who were performing the construction and the owners for whom the work was being done.

While I was often vilified by those whose actions I spotlighted, the feedback I received was overwhelmingly positive and convinced me I was doing a public service. That belief was reinforced by the changes the articles brought about to some of the state's largest construction programs.

After a couple of years of railing about the problems, however, it struck me that my efforts were only a partial solution. Exposing the "bad actors" had the potential to reinforce the already long-standing negative image of contractors, which I knew, having worked in the industry for many years, was thoroughly undeserved. The vast majority of construction professionals are honest, ethical people of integrity.

Thus was born the idea for the New Hampshire Construction Industry Ethics Award. By recognizing an individual or company each year that exemplified a commitment to upholding the highest ethical standards in construction, I hoped to counter the industry's image by honoring the "good guys" who dominate construction and do the right thing day in and day out.

I put together a panel of judges of unquestionable character who were familiar with the industry. (To avoid any conflict of interest questions, because at that time I earned my living as a marketing consultant and had clients who were New Hampshire contractors, I did not, and never have, participated in the actual selection process.) The first award was first presented in 1997 and includes a custom plaque plus a $1,000 donation to the recipient's charity of choice.

Recently, Paul Morin of Tarkka Homes was honored with the thirteenth annual New Hampshire Construction Industry Ethics Award. I'm proud to say that the list of past recipients reads like a who's who of the state's most respected construction professionals and that today the award is regarded among the industry's most prestigious.

Contrary to the title of this series of articles, I do not consider myself an expert on the topic of ethics. I have no formal training in the subject, never even taken a course. I do, however, consider myself an ethical person.

I even question whether ethics can be taught, at least to an adult. I believe the way one is brought up-by parents, family, teachers, etc.-ultimately determines whether someone emerges as an ethical individual. And I think it's mostly a black or white situation; you're either a person of integrity or you're not. Someone who practices "situational ethics" doesn't qualify.

Every individual, be they ethical or not, inherently knows the difference between right and wrong. For some, it's simply a matter of the wrong thing being acceptable.

I've always been guided by two simple rules:

         • Don't do anything you wouldn't want published on the front page of the newspaper.

         • Don't do anything you wouldn't want your mother to know about.

Today's economic conditions are testing people's ethics to the extreme. Bending the rules is a great temptation in individuals' business and personal lives as they struggle financially. All around us we see examples that cause us to question whether ethical behavior is without reward-the Bernie Madoffs and AIG executives, tax evading public figures, hypocritical politicians making phony promises to get elected, individuals employing legal technicalities to avoid the consequences of their actions. Troubling surveys report that the "everybody-does-it-so-it's-okay" attitude is pervasive, especially among young people, who think such behavior as online plagiarism and cheating on tests is acceptable.

So, what is the reward for ethical conduct? In the business world, it's success. In my almost 40-year career, I've found those who run their businesses ethically experience long-term success; those who compromise their principles may prosper in the short run, but ultimately pay a price.

On a personal level, people who do the right thing (remember, it's not what you say, but rather what you do!) are happier, healthier and less stressed.

The true test of whether you're an ethical person? How you behave in a situation when you're sure no one is looking!

QUESTION: You mentioned that you used to comment on what the ethical issues were in construction in the 1990's. Can you comment on what you think the biggest issues are now, especially given the current state of our economy?

ANSWER: The ethical issues in construction during the '90s are much the same as those the industry faces today, and are inherent to the construction process itself. Among them: contractors committing to pricing and schedule they know they can't meet in order to secure the project; bid shopping; delaying or not paying subcontractors and suppliers; promising to place certain supervisory personnel on the job during the selection process, then replacing them with others once the job has been awarded; just to name a few.

Owners, the buyers of construction services, are also not immune to ethical abuses either. While in the '90s, the vast majority of projects were awarded on a "low bid" basis and thus relatively free from potential manipulation, the growth of "quality-based selection" (QBS) methods, which are much more subjective, creates opportunities for favoritism and unethical behavior. Today, most projects are awarded using QBS, including many public projects, which had always traditionally been low bid. (QBS, when employed as intended, provides better quality and value to the owner.)

The current economy is simply putting greater pressure on those involved in construction. Whereas in the past less than ethical practices might have enhanced a company's bottom line, today, for many, survival is at issue, raising the temptation to skirt the rules.

QUESTION: Would you mind sharing an ethical dilemma that you might have faced in a business situation that fell in the grey area and how you came to your decision?

ANSWER: I earn my living producing marketing newsletters for commercial construction firms throughout the U.S. and Canada. While the product we produce is customized for the individual companies, there is also a "canned" portion of the newsletters. In order to provide an exclusivity to clients, we have a policy of serving only one company within a 50-mile radius.

We have no contracts with our clients, operating under the philosophy that neither party should be forced to continue to do business with the other if they are unhappy for any reason. Many of our clients have been with us since we started 15 years ago. We have also had clients choose to leave for a variety of reasons, and we have, at times, "fired" clients who made our lives difficult.

On more than several occasions over the years, we have had inquiries from companies seeking to join our newsletter program but residing in territories where there is already an existing client. Often, the prospective client represents a significantly more profitable opportunity because they will publish more frequently and/or print a much larger quantity of newsletters each issue.

It would be very easy to embrace the prospective client by replacing the existing one; we are under no legal obligation to do otherwise. We do, however, have, in my eyes, a moral obligation to our existing client. If they were acceptable to us prior to the prospective client's arrival on the scene, that should not change simply because we can make more money with someone else. In every instance in which we've faced this situation in the last 14 years, we have turned away the prospective client, offering our 50-mile exclusivity as the reason. (One prospect even offered to pay us a "bonus" if we'd take him on and dump our existing client!)

I believe our actions have earned us the respect of those we were forced to reject (a couple have later become clients when the territory opened up), not to mention the loyalty of our existing clients, who often were aware of the situation. Personally, while it probably would have been without consequences to have gone for the money, it just didn't feel right, and I've learned that trusting my instincts is almost always good business.