Companies Put Ethics before Profit

It’s no secret that a good many companies doing business today are in it strictly for the money and craft operational policy with the intent of maximizing profit. …

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It’s no secret that a good many companies doing business today are in it strictly for the money and craft operational policy with the intent of maximizing profit. The Ethisphere Institute identifies businesses among this field of profiteers that have chosen an ethical business model and translate that choice into actions and lists them in its annual list of ethical companies. Although size is of no consequence in making a list that includes powerhouses like Starbuck’s and Amazon, there are some small businesses that also stack up. Highlights from 2011 include Chick-fil-A, Headsets.com, Christian Brothers Automotive and Greyston Bakery. For more on this continue reading the following article from TheStreet.

The term "ethical company" can seem like an oxymoron since a financial crisis that revealed some of the dirtiest secrets in the mortgage and housing industries.

But not every company has grown so large and so greedy that the only thing its executives can think of is how high and fast they can boost their share price. In fact, there are a host of companies that see it as their mission to be more than profit generators.

More than 100 companies made the 2011 world’s most ethical companies list maintained by the Ethisphere Institute.

Each year the Institute seeks to identify companies that "truly go beyond making statements about doing business ‘ethically’ and translate those words into action," according an institute statement. Companies submit applications on their ethics and compliance programs to a panel of experts, which select winners based on seven categories: corporate citizenship and responsibility; corporate governance; innovation that contributes to public well-being; industry leadership; executive leadership and tone from the top; legal, regulatory and reputation track record; and internal systems and ethics and compliance programs.

Winners included Starbucks(SBUX), American Express(AXP) and Target(TGT), along with even a few smaller — relatively speaking — companies, such as Whole Foods(WFM), Amazon’s(AMZN) Zappos.com and Salesforce.com(CRM).

Mary Gentile, a senior research scholar at Babson College, says there could be many reasons why some companies choose to be more ethical than others.

"Some of the companies and their owners/managers take this kind of action because they are community-based and want to establish themselves as good citizens, building customer loyalty in the community. Sometimes a company owner/manager will take such actions because they are consistent with his or her own personal or religious values," Gentile says.

"There is also some research that suggests that when a firm is a good citizen, its employees feel more pride and loyalty and commitment to the firm," she adds.

Here are five small companies taking their mission beyond just profit-making: 

1. Chick-fil-A
Quick-service restaurant chain Chick-fil-A has always had a policy of closing its restaurants on Sundays because founder Truett Cathy sees the day as the "Lord’s day" — a day for church and family.

The Atlanta-based company has been following the policy for more than 40 years — it was implemented in Cathy’s first restaurant, the Dwarf Grill. Today, with more than 1,500 stores, the question is, how could a successful chain such as Chick-fil-A, known for its original Chick-fil-A fried chicken sandwich, afford to close on a Sunday, a busy day for food sales?

The company’s Web site boasts that it’s one of the "best decisions" Cathy ever made because it says two important things to customers: "that there must be something special about the way Chick-fil-A people view their spiritual life and, two, that there must be something special about how Chick-fil-A feels about its people."

As of 2010, the latest year for which figures are posted by the company, sales reached $3.6 billion, and it was the 43rd consecutive year of sales gains — every year since it opened in 1967 — with same-store sales increasing 5.6% over 2009.

The decision to close Sundays also attracts quality employees and franchisees, the company says. Indeed, they must be happy. Fewer than 5% of franchisees leave in any given year and most remain with the company for more than 20 years, the company says.

"The closed-on-Sunday policy may seem to be a costly business decision. But, as company sales figures have consistently proven, Chick-fil-A restaurants often generate more business per square foot in six days than many other quick-service restaurants produce in seven," the company says. 

2. Headsets.com
Online retailer Headsets.com, which sells wireless headsets for office use, has a policy in which three-year employees get a free week of vacation added to a week of paid time off. After five years of service (and every five after that) employees get a one-month paid sabbatical — provided that their job responsibilities are covered while they are out.

CEO Mike Faith says the perk was something he believed in right from the start of the 15-year-old company. He got the idea while working for a small computer-supplies company in the U.K. years ago. There employees were required to take two weeks of vacation consecutively.

"We encourage people to take the time off to either refresh and come back, or find a new job if they want," he says. "I always bought into the theory that to have a real rest is really important."

Say what? The company actually encourages its employees to use the time to look for another job?

It’s true. The exercise offers unhappy workers the chance to find an appropriate workplace fit and allows Headsets.com to weed out less-loyal and possibly unproductive employees, Faith explains

"People can get stuck in jobs forever without that chance to break out and look for something new. We believe that giving people the choice is the right thing," he says.

In terms of hard costs, Faith says that the sabbatical in effect cost the company about 2% of the employee’s total cost to the company. The pros outweigh the cons, he says.

The perk is a "big morale booster" and a good marketing tool for the company, Faith adds — especially the job-seeking nudge. "People tend to talk about it," he says. "It generally works out well for us and if someone really thinks they’re better somewhere else, it’s best to go and do it. It keeps us on our toes as well."

So far about 15 people have taken at least one paid sabbatical. Of that group, two employees have been at Headsets.com long enough to take two paid sabbaticals and two others have left the company after using the time to find a new job, he says. 

3. Christian Brothers Automotive
Like Chick-fil-A, auto repair franchise Christian Brothers Automotive considers itself "faith-based" with a priority on making sure employees, franchise owners and customers are as happy as possible.

Christian Brothers’ locations are unlike typical auto repair stores. Service staff wear slacks and pressed shirts. Customers are greeted warmly when they enter a repair shop. And waiting areas look more like doctors’ offices — quite the opposite from the stereotypical oil-soaked, grungy waiting areas for car repair and inspection.

"At the heart of our company as a faith-based organization is to glorify God through our work," says Josh Wall, vice president of franchise and strategic development for Christian Brothers Automotive. "It doesn’t mean we’re outwardly prophesying to our customers or vendors, but just by giving us an opportunity to serve them they’re able to see how it’s not just about building a profitable company … It’s about taking care of [customers] like we want to be taken care of."

Franchisees at the Houston-based company also have annual salary packages of at least $60,000, including comprehensive family health insurance and a 50% share of in-store profits, which is unusually high for franchise agreements.

"We’re only making a royalty if that business is profitable. It puts the onus on us in coaching them or consulting with them toward success," Wall says. (Christian Brother’s franchisees have a zero default rate with the SBA. The company is experiencing 20% average unit growth over the past three years.)

Most importantly though, the company closes its 100 stores — a milestone it says will be hit next month — on weekends to ensure employees get rest and family time. (The exception is a new franchise. Stores stay open on weekends while they building a customer base, but after about six months can start closing on weekends.)

Wall acknowledges when the company implemented the policy, revenue dropped, since there is a certain type of customer that makes time for auto service only on weekends. But Wall says it only took about six weeks to get revenue back on track even with the lost sales.

"The short answer is yes, it’s one of those things that is challenging for us. We understand that there are certain customers that only want to do business on Saturdays," he says. "We had to make a decision: What’s really the best thing for our organization and for our teams. We feel like it’s something that’s been honored [by customers] as well. In many of our markets that are more mature, we’re next to larger-named automotive repair companies and they’re open six days a week, sometimes seven days a week, and our stores have opportunity to do more in revenue than those stores."

More importantly though, employees are happier — a great recruiting tool for top-level technicians, Wall adds.

"When they’re getting rest and time to spend with their families, they’re happier and working harder Monday through Friday to press out that work by Friday night," Wall says. "It’s rare that [franchisees] are not open maybe a little earlier or staying later" during the week. 

4. Conspire!
The Conspire! franchise does drug-testing and background checks for companies and organizations, but also feels a responsibility to foster drug and substance abuse programs.

At first the notion seems contradictory, but Conspire! founder and CEO Lynette Crow assures that there is plenty of business for her growing franchise given the multitude of federal and local mandates for drug-testing employees and new hires as well as small and large companies wanting to do background checks these days. This is especially true as companies re-engage after the recession and start to hire again, she says.

The world of drug screens and background checks has "just exploded," Crow says.

Yet Crow, who was once a trauma and cardiac nurse, is passionate about drug and substance abuse prevention. "Not that we don’t love doing what we do, but we still need to do something about it and still need to do our part of community outreach," she says.

All three of her franchises are expected to endorse its "Intention Prevention Town Hall" meetings, which are given four times a year at local schools. The forum educates students and their parents about the risks of adolescent drug use and offers resources to engage communication, coping strategies and overcoming addiction, the company says.

The company says that in the Colorado Springs area, where one franchise is located, the program’s success has led to community partnerships and similar events sponsored by local and statewide programs focusing on prevention initiatives.

For the most part, Crow says, kids don’t understand the consequences of taking drugs and that if caught taking them they could lose their license, ability to get college funding, even the right to vote, she says.

The business is for-profit, "but we still felt we need to do more in our communities," she says. "It’s not just about the money; it’s about the outreach program." 

5. Greyston Bakery
Greyston Bakery got its roots in providing locally baked goods to some of New York City’s top restaurants, but the business soon extended itself to become a socially responsible business with a "double bottom line" prioritizing "profits and social contributions," it says.

Based in Yonkers, N.Y., the bakery strives to be "a model for inner-city business development," including hiring and training people who have struggled to find employment, its Web site says.

The bakery’s profits fund the Greyston Foundation’s community development initiatives in low-income housing, child care, health services and technology education, it says.

"We don’t hire people to bake brownies, we bake brownies to hire people. That really sums up the underlying mission of the bakery," according to Greyston Foundation’s vice president, Jonathan Greengrass.

To do that, though, "you have to have a successful, sustainable business. We’re a nonprofit that is run very much like a business," Greengrass says.

One example of its success is in wholesale merchandise. It’s brownie maker to Unilever’s(ULVR) Ben & Jerry’s Ice Cream.

Greyston is getting ready this spring to announce its next social enterprise business, Greengrass adds. He declined to discuss the details.

"The goals for the next three to four years are in fact to significantly diversify and expand the number of products that we make, and most of that will be done by co-packing for other companies," Greengrass says. The company is soliciting partners.

This article was republished with permission from TheStreet.

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