When do you say 'No'?

 

 

I've just been watching the BBC programme, Dragons' Den on catch-up TV. During the show, an artisan is pitching for investment in his company, which sells high-price hanging garden seats. Towards the end of his (unsuccessful) pitch, one of the 'dragons', Hilary Devey, tells the artist that he could be sourcing manufacture of his product in Morocco, for a tenth of the price he pays in the UK. The artist replies, 'But we do have to keep some work here in the UK. It's not just about outsourcing everything, surely?' Hilary Devey replies, 'Business is about making money and about profitability. It's about the bottom line.'

She's right, of course. But herein lies a conundrum. How do we balance that all-important profitability with our own personal and business values? We all look upon China, for instance, and ponder their meteoric rise. We know that that rise is as a direct result of businesses in the Western world buying from China because the manufacturing there is so cheap. Part of the reason that their manufacturing is so cheap is because their workers are not paid as well as our workers. The end result is that China has grown massively richer because many business owners across the world have decided to focus on profit above all else. They are willing to overlook the conditions faced by Chinese workers to drive down their own costs.

 

A test of my own values

A few years ago, I had to make a similar decision. We were in the middle of production of a previous edition of our Essential Business Guide, the third edition. Our then partners suggested that we should print the book abroad so as to drive down production costs. I said I wasn't prepared to do that. When questioned about my wisdom as a business owner in refusing to go for cheaper manufacturing, I replied, "You won't be affected by this decision. I'm willing to take a lower profit in return for supporting the print industry which has given me a career. The British print industry is under enormous pressure and I'm not willing to add to that pressure." Whilst that may sound a bit 'holier than thou' it's something I feel really strongly about. Many of my printer friends are struggling to find business in an industry where costs are rising and revenue plummeting... and I just didn't want to add to that.

What would you have said? Do you think I'm a naive idiot, or do you understand my decision? Of course, it doesn't really matter either way, because for each of us the answer to questions such as these will be different.

In business, we must take the time to consider where we will draw the line. In other words, exactly what are our business ethics... our values? These questions are inherent in a social enterprise, but they are also important in for-profit enterprises, too. If we are to sleep at night. If we are to feel proud of what we've built.

 

What do you stand for?

In our Start Your Business Step by Step workbook, we urge people who are starting out in business to ask themselves three questions:

• What will I always do?
• What will I sometimes do?
• What will I never do?

They are not easy questions to answer. The pressure to make maximum profit is enormous, particularly if you have an investor on board. But if you're in business, you have to decide where you will draw your own particular line. And it's a good idea to ask those questions in advance, before you are tempted to cross that line. It's wise, in my mind, to decide in advance exactly what your business values and ethics are. Then, when your 'this far and no further' position is tested, you'll know exactly where to draw the line.

So this week, I'm asking you: When do you say 'No'?

...

Please take a moment to comment. I'm really interested to hear what you think about this thorny question of business ethics... I don't know if I'm right or wrong. I just know it's important to me.

Comments

[Racheal - Green Mop]

Great blog article Julie. I agree with the importance you place on doing business in an ethical way. I wouldn't want to do business any other way. It sometimes makes it tough as commercial cleaning is a competitive market. However I believe there is added value in having a fairly paid, motivated team instead of workers on minimum wage.

[Julie Stanford]

Thanks Racheal... and thanks for taking the time to comment, too. I feel very strongly about this but as you say, it does makes things harder. Particularly when the message coming from certain media is that you're a business wimp if you don't just push for profit!

[Marianne Whitfield]

Hilary's right that business is about making money and being profitable but, unless you are beholden to the wants of your investors, you should be in a position to decide the level of profitability you feel is right for your business.

Maybe it's time for the programme makers to come up with a more 'ethical' version of Dragon's Den ...

[Julie Stanford]

Good point, Marianne. And that's the joy of running our own businesses. We get to decide what's right for us. I actually added a footnote on the blog saying that it's great to be working with 4th edition partners whose ethics more closely match our own, but I thought you'd blush!

[Andrew Nash]

Hi Julie,

That's an interesting subject you've raised, which while I think the Dragon's response is somewhat blunt, we can not become so insular as to not engage in global trade.

It would be "unethical" not to trade with other countries, support local economies and provide people around the world with jobs.

The importance of being ethical, is not so much about looking after our own, as looking after the global workforce, particularly in developing countries such as India and China, where the challenge is ensuring a fair local wage, living conditions, hours worked, health & safety, education etc.

Every situation is of course different and needs evaluating on its own merits, the fact you support the local British Print Industry and maybe make a smaller profit is commendable, but the print industry must realise it is in a global market. It must find it's comeptitive edge on service, quality, lead time etc.. Your choice might be "support British" but I'm sure the decision is also supported by great customer service and flexible lead times, which actually help you make the decision to pay a little more.

My industry sources much through India & China, our focus is to use well established suppliers, with people on the ground and who sign up to our Ethical Charter.

What will I always do? In Business - The very best I can for my customer.

What will I never do? Meet the needs of my customer at the expense of another i.e. member of my staff or employee within the supply chain.

[Claire Boyles]

it's an interesting discussion, and as I was reading I was agreeing with your view point, except I was thinking what about those entrepreneurs starting off, the ones that just can't afford to reduce their profit because they're still establishing themselves, still, in some cases struggling to pay the household bills because they've invested everything into their business.

It reminds me also of Neil Crofts book- Authentic Business, which I loved & highly recommend to anyone starting out. You can get it on Amazon her: http://amzn.to/rdRnuw

[Claire Boyles]

I love Hilary's idea of an "ethical"/Green Dragons Den, although not sure that would be quite as good Tv for the ratings.

I've loved watching Dragon's Den over the years, it has certainly taught me a thing or two about business and pitching for investment!

[Julie Stanford]

Andrew and Claire, thanks for taking the time to comment. I'm thinking that I've perhaps mixed up two elements in this blog: the 'buy local' question and one's own business ethics. Both aspects just happen to be included, because it was Hilary's comment that made me think about this.

I'm not suggesting in the blog that we should only source locally, I think it was more about the importance of taking everything into consideration when making your business decisions. In my case, I reached my own 'this far and no further' place. But you're right, Andrew, competition is part of business. However, it's difficult to compete if the playing field isn't level, as in the case of cheap wages/poor living conditions making it possible for some manufacturers to charge lower prices.

Claire, you're spot on about Neil Crofts' book (and his blog); he's been an expert in our Essential Business Guide since our 2nd edition, because of that very book.

[Andrew Nash]

Regarding Claire's comment on those new entrepreneurs starting out...

If needs be they CAN make less profit on a job as they will have far less overhead than established business... I started in a back bedroom on my own, I now pay rent, rates, 7 staff etc.. before I get to think about my mortgage!

Further to anyone starting out, what really helps get a business off the ground is networking - leading to help, advice, friendships, leads & opportunities.

Being new & small the typical USP is great service through flexibility....

All that all comes from working with suppliers from the local business community, and not using the cheapest in some far off land.

The new entrepreneur needs to focus on sales & customer service, an awful lot of time, goodwill and cash flow can be lost searching for the best prices, globally, via the internet.