Changing Notions of Ethics in SMEs Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Business Ethics in Czech SMEs Dytrt Study (2011) - Survey 2500 SMEs / 18% response rate Key problems: not enough knowledge on benefits management practices rooted in the past Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

EU / German Studies: Matching Experience EU Project: Mittelstand (Germany/France/Poland) same problems as in CZ / Dytrt study training / workshops / teaching material etc. had a considerable impact on the participating SMEs Leuphania University, Lüneburg, Germany: study with large German companies 2006 - 2010 rising awareness in firms concerning CSR willingness to use strategic tools and methods to implement CSR projects Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Global Corruption in 2010: Percentage of People Reporting that the last bribe paid was to... Source: Transparency International 2010 Global Corruption Barometer Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Two sets of Interrelated Behaviors Individual Organizational Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Ethical Decision Making Processes: Rational or Emotional? Very often driven by assumptions, unconscious belief systems (Kahneman 2010, Ariely 2011) „What-the-Hell-Effect“ (Ariely, 2012) ROI for CSR often generic and not transparent Innovation resistance (We have always done it like that / We have never done it like that) Unable to deal with conflict-of-interest Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Dramatic Increases in Certain Misconduct Posing Risk TYPE OF MISCONDUCT 2009 2011 INCREASE Sexual harassment 7% 11% 4ppts Substance abuse Insider trading 1% 4% 3ppts Illegal political contributions Stealing 9% 12% Environmental violations Improper contracts 3% 6% Contract violations Improper use of competitor’s information 2% 5% Health or safety violations 13% 2ppts Anti-competitive practices Source: Ethics Resource Center, 2011 National Business Ethics Survey Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Record Number of Employees Choosing to Report Observed Misconduct Source: ECR, 2011 National Business Ethics Survey Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

The Impact of Business Ethics in SMEs Paradigm shift in management practices: Redefining / developing a distinct competitive strategy Development of a strategic CSR/CSI agenda Making CSR/ethics part of business strategy Unique value proposition Contributing to a reliable and transparent business environment in the whole economy Accountability in business practices Making CSR approach integral part of firm’s competitive strategy Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

CSR as Intangible Asset for Value Creation Establishing and retaining long-term profitable customer relationships Avoiding blackmail traps Reliability and accountability in business practice enable all market participants to compete on an equal and fair basis EU will further push efforts to impose corporate governance codes of conduct also on SMEs Unethical - and especially illegal - behavior affects the whole economy negatively Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Creating a Corporate Social Agenda Source: M.E.Porter, M.R. Kramer, HBR, May 2009 Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Creating a Social Dimension to the Value Proposition: From CSR to CSI - Corporate Social Integration Strategic CSR unlocks shared value by investing in social aspects of context that strengthen company competitiveness. At the heart of any strategy is a unique value proposition: a set of needs a company can meet for its chosen customers that others cannot. Strategy is always about making choices, and success in corporate social responsibility is no different. It is about choosing which social issues to focus on. (Porter and Kramer, 2009) Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Balanced Scorecards as a Powerful Planning Tool in SMEs Align the organization and the individual and organizational behavior in the firm with its strategic goals Developing explicit competitive strategies also in SMEs Make planning a conscious process linked to business performance Create transparency for relevant stakeholders, especially employees, customers and partners R.S. Kaplan, D.S. Norton, How to Implement a New Strategy without Disrupting your Organization, May 2009 Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

The Importance and Impact of Key Performance Indicators Conscious accountable planning process Setting clear goals and objectives Creation of unique value proposition Improved market positioning Development of a distinct competitive strategy Controlled strategy implementation Creation of a value system which is in accordance with the overall performance goals Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Source: Kaplan, Norton, Strategy Maps, 2004 Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Put Strategy Maps in Perspective Porter on Strategy: Kaplan, Norton on Strategy Maps: A unique combination of activities that deliver a different value proposition than competitors or the same value proposition better Framework that allows companies to identify and link together the critical internal processes and human, information, and organization capital that deliver the value proposition differently or better Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University

Conclusion A reliable and accountable business environment is important to ensure equal opportunities for all market participants A distinct corporate and business strategy helps SMEs to develop sustainable competitive advantage and longterm business success CSR/CSI in Czech SMEs makes a difference also in the positioning of companies in the EU and the overall value proposition Ethical organizational behavior helps finding the right talents Strategy Maps, Balanced Scorecards and the definition of Key Performance Indicators help SMEs to implement their competitive strategies BUT: It takes a paradigm shift for business owners, business leaders and managers! Irena Jindrichovska, University of Economics and Management Gabriele Meissner, Anglo-American University