Sunday, 01 June 2008

Come on, be honest

Anyone starting up an enterprise wants it to be around for the long term - and that demands straight dealing. Integrity is the best policy because it builds confidence among customers and, internally, it fosters creativity among employees. Besides, lying is hard work. John Morrish reports.

The secret of life is honesty and fair dealing. If you can fake that, you've got it made. Groucho Marx was a funny man, but his business advice stinks. Honesty is not something you can fake. It's a positive quality that can permeate all your dealings with customers, staff, suppliers and the world in general. Indeed, it is a necessity.

'I'll tell you how I approach it,' says Keith Sharp, UK and Europe marketing director for Tata Consultancy Services, part of India's Tata Group. 'As far as I'm concerned, just from a business sustainability point of view, it is not sustainable for us to come out with anything or project anything that doesn't have a basis in truth and therefore honesty about it.

'We're increasingly seeing that our prospects and customers want to be dealing with, and seen to be dealing with, a company that is trustworthy, reliable, ethical and honest. It is important in recruiting these days, and that's good to see: firms that have a justified reputation for ethics and honesty are more likely to be able to recruit good people and keep them.'

It helps if that reputation is rooted in a company's history and culture. Tata was founded nearly 140 years ago by Jamsetji Tata, a Zoroastrian who committed himself to building an ethical business that would never resort to bribes or other dishonesty. Every chairman since - and there have been just five - has followed that lead. The group has a detailed code of conduct, developed over the firm's history, that every employee is obliged to adopt. Honesty is, says Sharp, 'deep in the fabric of Tata'.

Honesty leads to trust, which is at the root of good business relationships. But is the honesty we exercise in business the same as we practise in the rest of our lives? In the past, there was a widespread idea that business is a game like poker, in which the standards of honesty are different. The classic statement of this position came in the Harvard Business Review of January 1968. In 'Is Business Bluffing Ethical?', Albert Carr argued that a degree of deception was not dishonest but standard practice.

'Executives from time to time are almost compelled, in the interest of their companies or themselves,' he wrote, 'to practice some sort of deception when in negotiation with customers, dealers, labor unions, government officials or even other departments of their companies. By conscious misstatements, concealment of pertinent facts, or exaggeration - in short, by bluffing - they seek to persuade others to agree with them.' Those who did not engage in these practices would place themselves at 'a heavy disadvantage' in their business dealings.

The article gives a number of examples of when such deceptions would be appropriate - and some would raise eyebrows today. For instance, he tells of a manager of 58 who dyes his hair black and adjusts his CV to make out that he is 45. 'This was a lie,' wrote Carr, 'yet within the accepted rules of the business game, no moral culpability attaches to it.'

The world has moved on. Business schools explicitly teach honesty, while agreeing that there need to be limits to voluntary disclosure of information. 'Never tell a lie,' says Paul Burns, dean of the business school at the University of Buckingham, 'but you don't have to tell all of the truth.' In negotiation, you are under no obligation to tell your customers the details of your pricing structure, nor to volunteer any shortcomings in your products. These things are nobody else's business.

Motivational speaker Larry Johnson is co-author, with Bob Phillips, of a management book called Absolute Honesty (Amacom, 2003). But despite his title, Johnson admits there are times when 'the whole truth' is not appropriate. He would not tell his daughter he didn't like her dress when she was on her way to the prom: 'I would look her straight in the eye and lie through my teeth. I'm not stupid.'

White lies, he says, are useful in business too: the important thing is to establish your criteria for when they are appropriate and when they're not. 'Because, if you are not crystal-clear, it's easy to slip over the edge and to tell lies to avoid pain when you should be telling the truth.

'It is usually better to be straight. You don't impeach your credibility; you build credibility with others, people trust you, and you don't have to remember what you lied about.'

Tata's Sharp agrees. 'I think honesty is a habit. It's like when you're driving a car: you need to be in the habit of putting the indicators on when you are turning left. You need to do it always and not just when you are in heavy traffic. I just don't think honesty is something you switch on and switch off. You do it, and it has to be a part of how you go about everything. I can't imagine trying to assess what's coming up today and thinking: "When do I have to be honest and when don't I need to be?"'

Rupert Howell is managing director of brand and commercial matters at ITV, a company that learned a hard lesson about honesty earlier this year when Ofcom fined it a record £5.67m for cheating its viewers in phone-in competitions. Appointed in September 2007, many months after the events in question, Howell brought with him very different attitudes. As one of the founders of the advertising agency HHCL, which began with five people in 1987 and grew over a decade to employ more than 240, he is a fervent believer in telling hard truths - even when you don't have to.

'I remember a really silly incident early in the life of HHCL. A complicated press ad that we'd done for Thames Television had a spelling mistake in it. We spotted it after it had run. I rang up the client and said: "Look, I've got an admission to make. There was a typo in it and I'm really sorry about it." And he said: "I'm really pleased you told me - no worries, just be a bit more careful next time." If he'd discovered it, he'd have had every right to be cross.'

But how far should openness go with staff? Burns is wary of giving too much information, particularly when things are going wrong. 'They don't like uncertainty,' he says, 'and any business is a lot about uncertainty. They like a certainty that the business will succeed and that there's a vision for how it will grow. That doesn't mean the vision is untrue; it's there and it's enduring for the long term. It's just that you might be going through a bad patch.'

Howell has a different approach. At HHCL there was a policy of full disclosure: 'We had a weekly all-staff get-together with a few beers where we'd tell everybody what was going on. We'd tell them what money we were making, we'd tell them what we needed to do ... We told them everything, and it never got out.'

This applied even in bad times. 'We had a lean patch a few years in, as every business does, and we'd say to people: "Here are the numbers. We're all going to have to pull harder, and you're not going to get pay rises until we get these numbers moving." And, guess what? - they all responded brilliantly.'

Howell believes that staff can be trusted to keep business secrets, so long as the reasons for secrecy are explained. 'We were scrupulously honest with our clients and with our staff, and they repaid us in spades with trust and, ultimately, respect, and that led us to be successful and profitable.'

Being honest is the starting point for running an honest organisation. 'The worst truth always beats the best lie,' says Johnson. Telling the truth, he believes, is not always as painful as you think it will be, and once it's done, you can put the issue behind you. It also enables you to keep things simple; lying is hard work.

But honesty works both ways. If you are honest with your staff, you need them to be straight with you. And for that to happen, they have to feel safe in telling the truth. Not only will this make people happier, it can also create, in Johnson's words, 'an environment where creativity can occur more rapidly, because people aren't afraid to say what's on their mind'.

In his book, and in his speeches and workshops, Johnson sets out a number of steps for creating an honest culture in a business and using it as a positive force for business development. You need to get into the habit of confronting and resolving problems through 'constructive confrontation', rather than using white lies to paper over the cracks. You need to establish 'arenas of openness', meetings in which anything can be raised by anyone. And, painful as it may seem, you must welcome honesty, even to the extent of rewarding messengers who bring bad news. 'If you do that, the odds go up that people will be straight with you, whereas if you kill a few messengers, people are not going to be straight with you.

'An environment where I feel comfortable in saying what's on my mind is one where, if I see something going on that shouldn't be going on, I feel it's safe to say something about it - even if it's my boss that's doing it.'

It's not only about culture, it's about structures. Tata Consultancy supports whistle-blowers through a network of 'ethics counsellors' independent of HR: there are 20 in the UK alone. Cadbury is another company whose emphasis on values goes back to the religious convictions of its founders. Honesty is one of the business principles to which everyone has to sign up annually. There's also online training in ethics, including case studies dealing with such topics as conflicts of interest.

'I'm not saying no-one ever lies, cheats or steals at Cadbury,' says Alex Cole, corporate affairs director. 'It would be beyond our capability to prevent those things from happening.' So it has a 'speaking-up helpline', a confidential process through which people can report dishonesty as well as ordinary HR grievances.

'Every one of those calls is investigated,' adds Cole. 'It might be anything from fiddling their expenses claims through to theft. If we weren't finding issues, I'd be worried that the helpline wasn't doing anything.'

Despite the manifold benefits of honesty, some will continue to disregard it, and yet, in the short term, survive. 'Life is full of temptations,' says Burns. 'You can probably get away with the odd lie now and again, as long as you are not found out. But they tend to catch up with you. You can only say "the cheque is in the post" so many times.'

FARZANA BADUEL - THE POWER OF CANDID FEEDBACK

Farzana Baduel left university after two years to start her first business. Today, she owns and manages an eight-strong accountancy firm, taxClaim, which specialises in small-business accounts. She also runs a small commercial property business.

Baduel learnt the importance of honesty in dealing with staff. Being 'polite and diplomatic' by nature, she found it hard to tell them when they were failing. The problem reached a head when she had to dismiss someone for poor work and found the culprit had no idea she was in trouble.

To avoid such nasty surprises, she has introduced a system in which all staff, including herself, are anonymously appraised by each other. 'It's very painful,' she says, 'but it's brilliant.' If three or four people come up with similar comments about a member of staff, it suggests there's room for improvement - perhaps through training. The key, she says, is for people to be 'as honest as possible with each other without fearing any sort of repercussions'.

This is especially important when things go wrong. 'I love hearing about complaints,' she says. 'It's the only way I know how to improve.' Staff who have made mistakes are expected to own up, but she tries to set an example. 'I'm very open myself about making mistakes. I think making mistakes is the best way to learn. I never get angry with people making mistakes - unless they lose enormous amounts. It's tempting to get the gun out and shoot the messenger, but you have to refrain. It's a constant challenge.'

Good client relationships also demand honesty. She will not make unrealistic promises about deadlines, which means she loses some potential clients to less scrupulous competitors. She also reminds clients that the firm is obliged to report to the authorities any irregularities it may find in accounts. Honesty is a two-way street. 'Clients who have something to hide end up being very unprofitable,' she says. 'We don't like clients who are dishonest, because it's bad business.'

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