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ALLIANCE ETHICS TO GAIN SURVIVAL AND COMPETITIVE ADVANTAGE: ELIMINATING THE OLD ECONOMY, ACHIEVING THE NEW!
Carolyn Dickie & Laurie Dickie,
Curtin Business School Curtin University of Technology
Globalisation has brought benefits and material comforts to millions of people across the world; however, across the nations there is evidence of disruptive patterns of work, increasing levels of stress at work and high levels of absenteeism. At the same time, credit uncertainties, falling property prices and lower investment rates suggest the industry model has collapsed. Similarly, corporate thefts, scandals and mismanagement have led to the collapse of major global corporations. Thus, as the gloom darkens over many business systems that previously have sustained the global economy, a frenzied sell-off on the world's sharemarkets has spread to currency markets with a concomitant slump in investor confidence and a world-wide slowing of domestic economies.
In the current domestic and international economic climate, the ability of a company to achieve its goals
and objectives, to build a commanding position in industry, to meet the demands placed on it by shareholders and stakeholders, and go beyond surviving current crises suggest a need to establish, maintain and develop new aspects of competitive advantage. Especially, this is the case with relatively young companies and fast-growing gazelles. Also, the company is expected to exercise ethical practices and exhibit socially responsible behaviours. The consequences of unethical behaviour and social irresponsibility damage a company's reputation, reduce its ability to earn profits, result in a loss of competitive advantage and, in the current international business climate, can accelerate pressures leading to corporate failure.
In the current paper, business ethics is examined from a strategic management view as an enabling process to allow employees to examine the scope of beneficial ethical practices that need to be addressed in order for a company to eliminate negative aspects of the old economy and sustain and improve its position in a new society. 'Alliance ethics' is suggested as a staple corporate tool to ensure survival and gain competitive advantage in both internal and external environments.
'Pulling It All Together', the theme for a 2006 Ethics and Compliance Conference in La Jolla, California, suggests that industry wants/needs more help in creating and sustaining effective ethics programmes simply because having an ethics programme, even a comprehensive one, may not be enough. In Western countries where promotion by educators of the concept of 'individual differences' tends to be understood and learned by students as providing a 'licence' for exercising individual beliefs and behaviours, it can be difficult to achieve consensus of thought and action. Thus, the social trend to accept individualism in persons and idiosyncratic actions is evident in the business world in the wide-spread emphasis on the values of 'diversity'. Diversity management can play a positive role in gaining competitive advantage, but is a weakness when there is a lack of
consensus about, and commitment to, company goals, values and ethical behaviours.
Similarly, Brady (2003:533) emphasised that, where issues are broad and complex, it "should be clear that no single ethical perspective is adequate and no perspective should be neglected". He referred to Harris (1986:13) who suggested "society is like a pot of soup: it needs different, and contrasting, ingredients to give it body and flavour and lasting nourishment. It is compound, not simple ... a blend to satisfy the most divergent palates". Nevertheless, just as a soup requires a competent chef, an organisation requires a creative and competent person to bring together diverse employees with different talents in a unique business dish whose character is more than the sum of its parts.
McNerney (2006: 3), Chairman, President and Chief Executive Officer of Boeing Company has described ethical lapses as "not part of a systemic problem, but [of] weaknesses in our structure and in our culture". Consequently, Boeing chose to make three changes; it wanted employees to
• Get committed and get aligned,
• Open up the culture, and
• Drive ethics leadership throughout everyday activities.
The intention was to have every worker committed to recognising that ethical practice is fundamental to the company in establishing a competitive edge, alignment of personal and professional behaviours is a positive force in opening up the organisation's culture and that every worker is a leader who influences others in moving the company successfully into the future. Understanding the connection between ethics and competitive advantage leads to caring, motivated people who really make a difference!
The Concept of Alliance Ethics:
Alliance performance has attracted a great deal of research attention in the past decade (Das & Teng 2003; Ireland, Hitt & Vaidyanath 2002). Furthermore, Suseno & Ratten (2007 4-5) note that incentives for companies to use alliances have been promoted for a number of reasons; viz., because alliances
• capture cross-business synergies in delivering customer value (Kale, Singh & Permutter 2000);
• attain scale economies and increase productivity through use of varied resources and skills (Chung, Singh & Lee 2000);
• enhance company reputation (Varadarajan & Cunningham 1995);
• access distinct capabilities (Baum, Calabrese & Silverman 2000);
• produce innovative products and services (Deeds & Hill 1996; Powell, Koput & Smith-Doerr 1996); and
• share external risks and uncertainties (Cravens, Piercy & Cravens 2000).
Similar reasons can be advanced for using alliances among individuals, groups of employees and across organisations to develop competitive advantages for a company. The argument, then, can be extended to propose that the implementation of appropriate ethical attitudes and behaviours in a company can be implemented by employees sharing knowledge, learning from each other and creating an ethical climate that enhances the development of their own core competencies to achieve the company objectives. 'Alliance ethics' illustrates a model of collaboration whereby employees' understandings and behaviours are able to inject ethics into what has been called 'the DNA of business' (Moffat in Green 2007).
Figure 1 illustrates the conceptual framework of 'alliance ethics' which is comprised of six fundamental aspects; viz., context, commonalities, commitment, compliance, confirmation and consequences. The alliance factor may be regarded as connections among these six aspects of formal ethical principles, augmented by a substantial level of 'communication' which may be viewed as providing essential feedback to employees. More-
over, the alliance of people within a company, and the company's alliance with its broader community, can be assessed in terms of social, environmental and financial responsibilities that bring advantages to the company and its markets to effect successful outcomes illustrated in an array of complementary 'bottom lines'.
Figure 1: 6Cs Model of Alliance Ethics
CONTEXT:
Ethics - Orientation, Codes, Policies, Training, Practices
COMMONALITIES (Shared Values) Honesty Equity Fairness Trust Responsibility Advocacy Integrity Loyalty
COMMITMENT (Personal, Professional, Contractual)
Openness Inclusiveness Protocols Organisational Standards Principles
COMPLIANCE (Preventing Ethical Lapses) Governance Management
Disclosure (Reporting) Legality Stewardship
CONFIRMATION
Internal Social External Social Knowledge
Capital Capital Development
CONSEQUENCES (Competitive Advantage Outcomes)
Context:
Understanding the context of alliance ethics in a business inevitably has consequences related to the development of ethical codes and policies which, in turn, result in specific employee training and performance management. Brady (2003:526) suggests a schema of orientations that generate a matrix that preserves a claim to completeness and maps different ethical features (Figure 2).
Figure 2: Schema of Orientations in Ethics
Deontology Teleology Axiology
(Duty) (Purpose) (Value)
Universals Principles Ideals Shared Values
Particulars Responsibility Personal Destiny Relationships
Brady's (2003) opinion is that the schema is complete in covering the range of ethical perspectives, simple and accessible to all and useful in avoiding a variety of common ethical traps. At least, it can be used to develop an understanding of what should be done in a certain case, even though different employees may have widely different reasons for coming to similar conclusions.
Commonalities:
The list of values shared within an organisation will vary according to a number of environmental factors, but what cannot vary is that the leader of the organisation is responsible for instituting standards of ethical conduct and moral values that guide the behaviour of employees. Grojean et al. (2004:233) posit that "leaders impact the climate regarding ethics of their organization".
Spekman et al. (1996) found unequivocal support for the importance and centrality of the alliance manager. An 'alliance ethics' manager (AEM) may be a person charged with carrying the 6C Model of Alliance Ethics forward at each stage in its life cycle; i.e., a strategic sponsor and advocate who carries the dream and rallies the employees throughout the organisation by being a networker, facilitator, trainer, mediator, manager, counsellor etc as transitions are made to the new ethics model. The primary task for the AEM is to "build ethics into a personal and shared ambition statement" (Rampsad 2006:454) and practises that develop positive feelings about ethics in employees and their workplace.
Commitment:
Dowdy (2006) suggests that "an alternative ethical model is that of partnership, which actively involves all partners during ethical reviews and aims to secure partners' best interests through compromise"; i.e., ethical obligations are to provide positive benefits to society. The 'alliance ethics' model allows the partnership model to be harmonised with the regulatory model through explicit consideration of power structures.
Research has demonstrated that corporate ethical commitment can create and enhance an organisation's competitive advantage by attracting and retaining the highest calibre of employees (Verschoor 1999; Stanwick & Stanwick 2006). An 'ethics-friendly' environment is one in which personal, professional and contractual ethical issues can be promulgated; an obvious goal for the work of the proposed AEM.
Compliance:
"Cultural elements such as the unfavorable notion of greed, group commitment, shame, sin, accountability, responsibility, and religion that may be critical decision-making factors in other societies have less importance in shaping the U.S.A. view of ethical business conduct" (Berenbeim 2002:551). Consequently, the issue of preventing ethical lapses needs to be well understood if employees are to assist the AEM achieve the goals of corporate ethics programs.
The 6C Model advantage is that it provides a common language and approach which integrates legal and ethical mechanisms to build corporate image and reputation, gain loyalty and trust from consumers and heighten commitment from employees.
Confirmation:
This stage of the 6C Model suggests an opportunity for organisational strategists to confirm that mutual goals and expectations of the alliance ethics programme are being met. It is based on the work of Suseno and Ratten (2007) who have investigated critical performance roles associated with trust, social capital and knowledge development.
The crux of confirmation is that it supports mutual influences that broaden the repertoire of ethical behaviours, resources and joint activities, thereby facilitating intra- and inter-organisational learning and knowledge transfer.
Consequences:
Whereas the confirmation stage of the 6C Model is concerned with the people/process side of business, the consequences stage is directed to an examination of competitive advantage outcomes. It is acknowledged that "an operational definition of competitiveness may not exist" (ITC 2006: ii); however, an organisation with strong ethical responsibility often will be more successful in generating economic value added. Generally, it is argued that prosperity is determined by the productivity of an economy measured in terms of human, capital and natural resources.
In effect, all organisations establish expectations about their level of prosperity; expectations that can be related to the international Business Competitiveness Index (Porter et al. 2007). The consequences of an 'alliance ethics' programme can be assessed in the light of those expectations, and the findings related to the context aspects of the 6C Model. Thus, the circular nature of the 6C Model has the potential to ensure continuous improvement in the capability of the organisation.
Conclusion:
Ethical alliances create two major types of competitive advantage; the first results from collaboration of employees and the integration of organisational human resources to increase value, and the second creates value by leveraging organisational resources through external alliances. Therefore, determining the scope of an alliance ethics programme is a critical strategic management skill. 'Alliance ethics', based on the shared belief that enlightened corporate compliance and ethics standards can eliminate failures of the old economy, can provide unprecedented support for the survival and competitive advantage of corporations in meeting the demands of the new economy!
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