By David Nuyoma
The Development Bank of Namibia (DBN) incorporated values in its corporate philosophy when it opened in 2004. This conscious decision has enabled the bank to operate with confidence, and avoid many of the pitfalls that have hampered enterprise and industry in the intervening years.
In the 80s, 90s and for a period after the turn of the millennium, large businesses were powers that often operated with impunity in environments with sketchy legislative controls. Decisions were made on the basis of shareholders’ wealth, with little regard to anything else.
At the same time, during these decades, consumers began to demand consideration of their interests in the forms of lobbies and legislated rights. Many businesses adapted to the requirement for equitable treatment of consumers, but some persisted in unethical behaviour.
Unethical behaviour resulted in several key moments that reverberated around the globe. These included the Bhopal disaster, the Exxon Valdez incident, the Enron saga and the revelation that Nike was using child labour.
More recently, the credit crisis and the sovereign debt crisis have led to questioning of the entire global financial industry.
As a result of the breeches of common ethics and the clear need for ethical behaviour, a new movement and train of thought is permeating business: ‘first order values’ as an integral part of corporate philosophy.
First order values are a set of ethical principles that determine how the business behaves. One example of a first order value could be ‘we will treat our customers with respect’. Another could be ‘we will look after the environment’.
As you can see from these examples, they have far reaching consequences for the company, its profitability and its costs.
First order values are important. They ensure that the enterprise ‘does the right thing’, operates with integrity that is good for communities, stakeholders, consumers and the self-respect of the enterprise.
The respect that is vested in the enterprise, internally and externally, and the continuity of purpose are good for long-term business.
The difficulty arises in operational matters: for instance, if an enterprise discovers a short cut that reduces the cost of its product, but also reduces quality, what is it to do? In terms of the old style of doing business, the shortcut is the logical choice.
However if the new first order value is ‘quality for the customer’, no matter how tempting, the shortcut has to be ignored.
There is a logic to the example of the first order value of ‘quality for the customer’. Taking the shortcut will increase immediate profits but may lose the customer as he or she becomes dissatisfied with the low level of quality.
In this example, the profits initially rise but in a while begin to decline. If the first order value is rigorously applied in spite of the temptation, the profits remain steady in the long term, and possibly even increase. The consistent long-term profit far exceeds the short-term profit that soon begins to fall.
As more and more companies incorporate first order values in their philosophies, companies will have to adopt this facet to compete. Repeat and loyal customers will gravitate to those companies that best serve their interests in the long term as well, and these customers are the best customers of all.
There are additional benefits to incorporating first order values in the corporate philosophy that the CEO, executive and manager will find invaluable. During the normal working day of an enterprise, countless decisions are made by various individuals and a large amount of guidance is passed to individuals.
If behaviour at all levels is guided by a set of first order values, the requirement for guidance, as well as pressure on managerial resources is reduced. For example, one of DBN’s first order values is ‘Namibia first’. As all persons employed by DBN know this, all applications can be assessed in light of priorities.
The lending department can assess whether a project proposal contributes to various aspects of Namibia’s development. The credit and risk functions can assess whether or not the proposal will be damaging to the applicant and / or lead to lost opportunity costs. This does not have to be explained and corrected repetitively. Everyone can get on with their jobs, and with confidence.
In order to benefit from first order values, enterprises need to take several steps to incorporate them as managerial principles.
The first step is to ensure that they are driven from all levels, but particularly with the encouragement of the CEO and executive. They are not handed down as orders, but are nurtured for acceptance, so internal communication on the values is important, and it has to be ongoing.
In order to ensure that the values become part of the day-to-day operating culture, they must be included in the appraisal process. In addition to the individual rewards of a degree of autonomy and responsibility, the individual who is appraised will come to value the impact of association with the values on her or his career.
Incorporating association with the values in the recruitment process is also an important consideration. By using the appraisal and recruitment processes in this manner the values become entrenched.
The final facet which is worthy of consideration is evaluation and evolution of values.
A value has to be applicable on a practical basis. A formal opportunity for teams or staff members to make presentations on values can lead to exceptional insights into how values can be used on a day-to-day basis, as well as show how they can evolve or be adapted to satisfy the requirements of the internal and external business environments.
The field of management changes from year to year, with new ideas and theories.
However, given the pressure on enterprises to adopt ethical behaviour in light of the various crises, I am confident that an investment in adopting first order values is a long-term proposition that will yield countless benefits.