Guess which well-known business leader once said this: "Good management --- that is, management with real thought behind it --- does not bother trying to make its way by trickery, for it knows that fundamental honesty is the keystone of the arch of business. It knows that you will fail if you think more of matching competitors than of giving service; that you will fail if you put money or profits ahead of work, and that there is no reason why you should succeed if what you do does not benefit others. This is not idealistic philosophy; it is that hardest kind of common sense..."

Would you believe it was Harvey Firestone? When he founded Firestone Tire and Rubber Company in 1900, it was one of the first manufacturers of automobile tires. Over the next nearly 40 years, Mr. Firestone gained a reputation for valuing common sense, having tight control over every aspect of his company, and serving as its chief salesman, financier, and production manager. By the time of his death in 1938, his company had grown from a start-up in an infant industry to a well-established market force that had survived the Great Depression (even without having to reduce its dividend). Firestone continued to grow, merged with Tokyo-based Bridgestone in 1990, and today is the second largest tire manufacturer in the world.

How unfortunate that the name Firestone is now associated with defective tires, SUV rollovers, denial of the problem, and possible non-disclosure or even cover-up. Many people, not just in the United States but around the world, are now questioning the safety of their tires and the company’s integrity. Because of poor quality product and the controversial way that management is handling the crisis, the great company that Harvey Firestone dreamed of and built and its 100-year-old reputation is now tarnished. How did this happen? It seems that when Firestone’s management first became aware of the tire de-treading, blow-outs and claims, they were more concerned with the financial impact on their company than with safety, quality or potential ethical problems. But the financial impact they were contemplating then probably would look like the deductible to the major medical compared to what the tire recall and their failure to act responsibly will eventually cost them. In the near-term, Bridgestone has said it will take a one-time charge of $350 million for the recall, which caused net earnings for the first half of 2000 to fall nearly 50%, and analysts are predicting a major slowdown in sales in 2001. More
importantly, however, the damage done to Firestone’s reputation for denial and cover-up when families were dying will be burnished in the buying public’s mind for years.

Let’s contrast Firestone to Johnson & Johnson, the makers of Tylenol products, who in 1982 dealt ethically with the problem of product tampering and became the model for ethical behavior and crisis communications. When seven people died after taking cyanide-laden Tylenol, the company immediately alerted consumers across the
nation, via all media, not to consume any type of Tylenol product. Moreover, they told consumers not to resume using the product until the extent of the tampering could be determined. Along with stopping the production and advertising of Tylenol, Johnson& Johnson recalled all Tylenol capsules from the market. They recalled and destroyed approximately 31 million bottles of Tylenol, with a retail value of more than $100 million. Johnson & Johnson stock declined in the weeks after the tampering scare, but soon re-bounded because of the company's proactive ethical behavior and communications.

Why did Johnson & Johnson’s behavior differ from Firestone’s? Robert Wood Johnson, the company leader for 50 years, wrote a credo for his company in the mid-1940s that outlined the corporation's beliefs and responsibilities (the entire credo can be found on their website at www.jnj.com). The executives in charge of the Tylenol recall were working with this credo, which kept at the forefront of their concerns the consumers and medical professionals using its products, its employees, the communities where its people work and live, and its stockholders. According to one author, Johnson believed that if his company stayed true to these beliefs and responsibilities, his business would flourish in the long run. He felt his credo was not only moral, but profitable as
well … he was right!!!

It appears that Firestone may not have had written ethical guidelines to guide management and employees that should have pushed them to make swift decisions and take ethical actions. Rather, it appears that the Firestone executives were a victim of their own Japanese culture and the Japanese art of nemawashi, which is the slow, quiet consensus-building required to reach decisions before taking action. However, in a crisis, there’s not enough time for such cultural correctness. Despite any organization’s best plans, there will always be problems and / or accidents. How it responds to these problems and / or accidents is what defines the character of management and of the organization.

As business advisers, my firm has heard many clients tell stories about their dreams for their businesses. And, people often send us their business plans in the hopes that we can help them find financing.

What’s interesting to me, however, is how corporate value statements or credos are conspicuous by their absence. In many businesses, it seems as though corporate values and ethics are considered just flowery words about honesty and integrity. Or, perhaps many people believe that businesses simply run on the golden rule of "treat others as you would want to be treated". Unfortunately, my experience is that a lot of business people think the golden rule is "he who has the gold makes the rules".

If you don’t have a written corporate values and ethics statement that says in black and white what your standards of behavior are for your organization and what you will hold yourself accountable to, then your organization is just running in random motion making up the rules along the way. Ethics must be one of your fundamental business strategies driven from the top of the organization.

At Manchester, we have a vision, mission, and corporate values statement. Our vision statement describes our purpose, creates a mental image of the future state of our organization, and identifies opportunities for growth. Our mission statement expresses our primary goal, and our corporate values statement lists and describes in detail the corporate values and beliefs that we as a firm share. In general, corporate values and ethics statements should discuss your desired relationship with your customers and other stakeholders, your people, your community, profits, standards for management, and general ethical values.

The most important value we describe in our Manchester statement is our reputation. An organization’s reputation is something that’s earned in inches over a long period of time but, as in Firestone’s example, can be quickly lost in miles. Too often, board members and management focus only on tangible assets, perhaps because they can be measured more easily. Consequently, employees do too, because they follow the leader and because, as the saying goes, what gets measured gets done. In many organizations not enough attention is given to the intangible asset of reputation, which should be regarded as an organization’s most valuable corporate asset.

Another value we talk about is leadership. There is a difference between management and leadership; leaders do the right things while managers just do things right. In all aspects, but especially in the area of ethics, the leader sets the tone and character of the entire organization. What you do speaks so loudly your employees
will hardly hear what you have to say.

We also describe what we mean when we say "highest ethics" --- dealing fairly with others, disclosing and avoiding conflicts of interest, keeping our promises, and encouraging associates to raise ethical issues. Ethics is about behavior; about making choices between right and wrong and understanding that the choice is a black and white decision ... there is no gray zone. Our corporate values and ethics statement says that we will forego business, regardless of the opportunity, that would require a violation of our principles.

At this point, you’re probably wondering if I’ve taken a few too many hits to the helmet while playing football … having written about the necessity of profits one month and now of ethics this month. You’re probably wondering who has the time when you have to figure out how to make this month’s revenue plan? And return that phone call to the bank? And stay ahead of industry trends? And so on?

Well, let me remind you, my dear reader friends, that ethical problems usually don’t occur because someone intentionally did something deviant. They happen because good people made mistakes, lacked appropriate training, or didn’t have enough information. Making sure that training programs address ethical issues, that you
establish and discuss corporate values on a regular basis, and that you demand compliance and confidentiality when employees and managers bring ethical issues to your attention is the key.

You’d better get it clear that this isn’t something you can delegate to "staff" … it’s your responsibility. No one else is going to do it or should do it --- it’s up to you to set the tone and character of your entire organization. Ethics begin at the top of the organization. Or, as Harvey Firestone said, "If anything in the business is wrong, the
fault is squarely with management. If the tires are not made right, if the workmen are unhappy, if the sales are not what they out to be, (and if problems are not dealt with ethically --- my insertion) the fault is not with the man who is actually doing the job, but with the men above him and the men above them, so that, finally, the fault is mine."