Global Ethics 101
A few months ago, I spent some time with students at Dartmouth College's Tuck School of Business. Instead of simply asking questions about managing people and hitting numbers, the students asked what it meant to build a responsible and ethical corporation in the 21st century, in an increasingly globalized world. I suppose I shouldn't have been surprised by their interest in business ethics. Several recent studies, including those conducted by Stanford University and Goldman Sachs (GS), suggest that a majority of B-school graduates and other students are willing to forgo financial benefits to work for companies with better reputations for corporate social responsibility and ethics. These studies suggest that solid ethics and high standards of conduct really matter to more and more of tomorrow's business leaders, and I take a lot of comfort in that, particularly as I prepare to leave the workforce.
Although I am from an older generation—one perhaps not as prepared or well equipped for the rapid globalization of today—I've witnessed this trend develop over the span of my career. And while business leaders of any generation, in any locale, face the same basic moral hurdles, I can offer insight into the role of ethics in an increasingly globalized world.
Following are a handful of my most notable experiences and the important ethical lessons they taught me. These are things I wish I had known at the beginning, instead of the end, of my three-decade career.
• Grow responsibly, particularly in emerging markets. Emerging markets—places like China, India and Russia—present great opportunities for business, but they also can be fraught with risk that must be managed well. In Brazil, for example, it's tempting to just sit back and let growth happen—to say yes to every opportunity that comes your way. And believe me, as a results-driven businessman, I've been tempted. But a company must pace its growth with its infrastructure's ability to absorb that growth, particularly in regard to ethics.
I've found that the biggest challenge in emerging markets isn't hiring quality employees or finding new business. It's the management of growth itself. Making sure that internal systems are in place is crucial to maintaining a company's high ethical standards. To do it right in places like Brazil means that sometimes a business must slow down, cover its bases, and make sure it's ready to operate properly in a country or region before it begins focusing on more business. It is incredibly hard to turn down a deal, but companies must be dedicated to equipping their employees with the right ethical tools and training before they're faced with tough decisions.
• Manage ethics within your entire sphere of influence. As the world's biggest technology company by revenue, Hewlett-Packard (HPQ) operates one of the industry's largest supply chains. By holding our suppliers to the same standards to which we hold ourselves, we can lead by example and make a sizable impact on the way our suppliers do business, while also mitigating our risk. Large companies have a responsibility to wield their influence for the better.
HP recently released a list of its largest suppliers, representing more than 95% of our company's procurement expenditures for materials, manufacturing, and assembly of products worldwide. The group includes Cisco Systems (CSCO), 3M (MMM), Flextronics (FLEX), and Hon Hai Precision Industry. As the first tech company to release this kind of information, HP has opened itself to criticism. But the benefits far outweigh the risks; HP hopes other companies will follow suit, thereby raising supply-chain standards throughout the sector.
• Create and maintain a strong company culture. It starts at the top. In my career, I've run into very few truly "bad" people, but I have run into plenty of bad situations. That's why ethics—particularly among a company's leadership—is not simply a box you check during annual training. Ethical missteps have serious consequences, and it is a company's responsibility to make sure that the ethical bar is set high for each of its employees.
HP moves swiftly to deal with employees who breach the code of ethics, whether that requires termination or other disciplinary action. While the number of people involved may represent a small fraction of our workforce, it only takes one person to damage a company's reputation. As a leader, one of my most important jobs was to make sure all of my people were equipped with the training and the tools to help them navigate through the gray areas properly.
And nothing does more to create gray areas than acquisitions, which are a way of life at a large, global company. In the past three years alone, HP has acquired 22 companies and 22 different cultures. I remember working with new colleagues from a particular software company we acquired years ago. The company had been run by hard-charging go-getters—people who operated under a "Win! Win! Win!" mentality. They were exciting, they were bold, and they brought a new energy to my division that I appreciated as a manager.
But their win-at-all-costs mentality didn't fit in at HP. I was dealing with a clash of cultures. And while I valued the expertise and passion that these colleagues brought into our workplace, I was forced to have more than one tough conversation with them about the way HP does things. As a leader in my division, that was one of my biggest responsibilities—to retrain and refocus this acquired workforce and immerse them in our ethical culture, while maintaining the best parts of theirs. I made it perfectly clear: Not only were some of their specific actions not right, but they could—and would—lose their jobs if the actions continued.
• Winning isn't everything. At HP, any employee will tell you that numbers and the bottom line are important. But I'm proud to say that in more than 30 years, I was never afraid to walk away from business when, for any ethical reason, it wasn't right.
I had a sales rep once who was frustrated with the prices we were quoting a potential client because, like any competitive professional, he wanted to win. He forwarded to the sales team a competitor's quote (slightly lower than ours) that the prospect had shared with him. That's precisely where he went wrong. His intentions weren't bad; he just wanted to help HP win. But once that confidential information had been forwarded to the group, we took ourselves out of the running for that piece of business because it put us at a distinct, unfair, and illegal advantage. And while we didn't win that piece of business, we maintained our ethical principles so that we could win another day.
I can rattle off not only people—but entire companies—that just aren't around anymore because they didn't play the game ethically. Whether it's growing responsibly in emerging markets, operating a conscientious supply chain, maintaining a strong company culture, or not being afraid to walk away from a deal—good corporate behavior always pays off in the end. Quite simply, good people want to buy from good companies, and that's always good for business.
Over the past few months, I've reflected on what I did say, didn't say, and should have said to the students at Dartmouth. To be sure, globalization is changing the way we do business, but the core concepts of ethical behavior remain unchanged. Early on, I learned that numbers determine a company's financial health—its sales, its profits, its stock price, and its shareholder dividends. But at the end of my career, I know that it's a company's behavior that determines its value.