Integrity as Business Strategy

Adan E. Sierra
4 min readJun 18, 2020

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[this article was originally published in Forbes MX. Click here for source link]

Sometime in our professional career, or while in university, we may come across the “4Ps” of Marketing (Price, Product, Place, and Promotion), the traditional framework for marketing strategy.

We may learn about break-even analysis in order to balance out fixed and variable costs with revenues. We could also learn about corporate strategy, fiscal planning, or production line efficiencies, to mention a few. All these tools are very valuable and help us untap efficiencies in our incomes, costs, and expenses. These are widely published, proven tactics/tools that help us track frequently and visualize how our bottomline is impacted.

There is a strategy — not necessarily novel — , that is cliché to many, hard to measure, but likely one that is most fruitful in the long term: conducting oneself with integrity. Integrity is the cornerstone of reputation. Operating with integrity means being committed — selflessly — to doing the right thing at all times, every time.

Companies characterized by their ethics and integrity will benefit from solid reputation, which certainly is a source of profits. The easiest way to visualize this relationship between reputation and profit is to illustrate opposites. What is the cost for a business or a professional of being identified as corrupt, dishonest, or advantageous?

Here are some basic examples:

1. Less access to financing. A business owner had the opportunity to sell a machine to two different clients (A, and B). Client A is distinguished for operating with integrity. Client B has a bad reputation and known for taking advantage. The business owner sold the same machine to client A for $50 thousand dollars with a standard deposit of 30% and the remaining 70% financed over 10 months. The same machine was sold to Client B at the same price; however, he was required to pay everything in advance. Client A benefited from $35 thousand dollars (that is the price of the machine of $50K minus the deposit of $15K) and was able to cover payroll on time, acquire new products, focus on growth, etc… Client B had to compromise a bigger cash flow.

2. Higher Operating Costs. Employing procurement executives that do not fear being bribed to favor certain suppliers, likely means your company is overpaying for products that your competitors access more cheaply. Choose your employees wisely and compensate them generously. Consider implementing different trainings to mitigate the risk of bribery, but above all, align incentives so everyone can perform with integrity and think long-term.

3. Reputational Damage. Surviving corruption scandals will probably require PR experts and most definitely lawyers. Beyond paying retainer fees, the opportunity cost of losing clients that do not wish to be associated with scandal is high. Odebrecht is a good example of a former giant now bankrupt.

4. Strategic focus. Operating without ethics hinders our ability to enjoy a good night’s sleep and misallocates precious time that is now needed to think/anticipate if their misconduct will become a bigger problem. It is hard to quantify this, but it clearly requires time and absorbs the creativity of those involved in malpractice, time that could bevery well deposited in growing the business.

For better or worse, there is no gray area when it comes to integrity. It is black or white. That is exactly why the benefits of operating with integrity are inversely proportional to not doing so. Being characterized as ethical and reputable facilitates the conditions to achieve prosperity. Some examples are:

1. Decreased costs of client acquisition and retention. A better reputation will likely result in word-of-mouth publicity which would naturally reduce the need to invest in marketing or advertising.

2. Higher morale. It will not come as a surprise to the reader that most people prefer to operate in ethical environments, considering no one enjoys justifying a company’s bad habits. Having a set of principles and values and clearly articulating those to your different stakeholders allows for integrity, openness and a sense of community to flourish in your firm.

3. Implied insurance policy. It is simply much cheaper having rules and frameworks installed within firms, than having to acquire insurance against lawsuits, malpractice or corporate breaches.

4. Access to financing. As mentioned previously, you will likely enjoy better financing conditions. People like to do business with good people. Similarly, investors are more likely to be attracted knowing that their money is in good (reputable) hands.

Many of us have worked tirelessly in building our own personal brand or that of the company. It may take us our whole life to build our reputation and, as cliché as it sounds, it could be lost in a minute. It may seem counterintuitive, but it is easier to live our lives and run our businesses with integrity. By doing it, we also ensure better results in the medium and long term.

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Adan E. Sierra

Mergers and acquisitions specialist. Passionate about entrepreneurship, leadership, missionary work and community.