Companies have a substantially higher obligation to act ethically to its customers, employees, suppliers, communities, and environments than they currently act.
Milton Friedman, famous economist in the 1970s, said that the sole purpose of a business is to make profit for its shareholders and that corporate social responsibility (CSR) and ethics were not factors. The only governing factor, in his eyes, was the law (Makower, 2006). In other words, he thought that the law should be the governance regarding ethics, and that companies should not strive for any greater common goal or work based on some set of principles. He believed that it is the duty of companies to make a profit using whatever means necessary.
This thinking is evil and corrupt, but it is still the thinking that drives most companies today. Many companies have CSR programs and preach about diversity, sustainability, or community outreach. I believe that companies use CSR programs to look good to possible customers and stakeholders. They do not engage in CSR programs due to any genuine interest in humanity or the environment. They engage in CSR as marketing and good public relations (PR), in order to boost their profit. Thus, even though it looks like companies care, it appears that they are still solely profit motivated. Friedman’s philosophies are deep ingrained.
Dr. William Edwards Deming had a better mindset regarding profit. Although CSR and ethics were not a part of the discussion, Deming believed that an organization needed to be customer focused. If a company focuses on developing products, services, and processes motivated by delivering amazing quality and experience to customers, then profit is an inevitable result. So, while profit is still very important as an outcome, the focus should be on quality management from a customer perspective (Knowles, 2011, p.138). Treating the customer unethically would be against the Deming mindset.
Regarding quality management, the EFQM excellence model builds sustainability, culture, and stakeholders into the model, so it is an application of quality management that includes ethics. The model includes assessment of the company’s impact on society (Knowles, 2011, p.138). This is definitely a step forward as far as a framework, but it does not alter the motives of the company.
When it comes to quality, companies have an ethical obligation to reduce waste (for environmental sake), reduce defects and produce quality customer-focused products (for customers’ sakes), and create safe and positive work environments and work cultures with high-quality processes (for employees sake). Quality and customer-focused innovation should be important to organizations, not only to deliver maximum value, but to create products that are improvements and improve the lives of their customers.
Poor quality has serious social consequences. For instance, the predatory health insurance and healthcare industry is currently maximizing profit in the United States without adding additional value, compared to other countries. The market is profit-oriented, so prices will go up as high as they can. Society is suffering now from having to pay exorbitant prices for health insurance with high deductibles, then having to pay high prices for any medications, procedures, or doctor visits. It is typical to go to the doctor and pay a small copay, only to receive a bill for thousands of dollars in the mail. In this case, there is no outstanding level of quality, only price gouging. The effect is that people are in incredible medical debt.
The quest of quality should come from a sense of responsibility and wanting to drive more value to customers, but instead quality is a method of reducing costs and maximizing profits for shareholders. If quality is improved, it is to minimize returns, minimizing complaints and bad PR, and minimizing costs.
Knowles, G. (2011). Quality Management. London, UK: Ventus Publishing ApS; Bookboon. Retrieved from https://bookboon.com/en/quality-management-ebook
Makower, J. (2006). Milton Friedman and the social responsibility of business. Retrieved from https://www.greenbiz.com/article/milton-friedman-and-social-responsibility-business