Does it financially benefit or harm customer service-oriented companies to also prioritize ethical practices?
Do customer-oriented organizations that support ethical workplace climates benefit financially from being ethical? Or, could top leaders’ focus on ethics-related policies, practices, and procedures come at a financial cost to firms that also stress customer service? In a recent study published in the Journal of Applied Psychology, Adam Myer (Manager of Organizational Analytics at Johnson and Johnson), Susan Mohammed (Professor of Psychology at Penn State University), and myself analyzed data from 16,862 medical sales representatives spread across 77 subsidiary companies of a large, multinational corporation in order to shed light on these questions.
On one hand, it might be argued that when senior leaders emphasize the importance of ethical
conduct, their simultaneous focus on customer service is viewed by employees as genuine, rather than solely intended to promote the company’s bottom-line interests. That is, a focus on ethics may cultivate a view of the company and its leaders as consistent in words and actions and genuinely committed to customers’ best interests. This may increase employees’ identification with the company’s service-oriented mission and increase their motivation to pursue its customer-focused objectives, in turn promoting the firm’s bottom line.
On the other hand, when organizations convey the need to do whatever it takes to maximize customer satisfaction and the firm’s financial performance, strict ethical guidelines may place constraints on service behavior and, in turn, send conflicting messages to employees over whether to prioritize ethical codes or customer satisfaction. For example, within the hypercompetitive medical product industry, sales representatives face strong pressure to satisfy their customers (i.e., doctors) to increase revenue, while also adhering to rigid internal ethics codes and industry standards for ethical service interactions. Sales reps must, for instance, refrain from inviting physicians to social (e.g., golf outings, “happy hours”) or entertainment events (e.g., sports games), treating clients to even modest meals outside of the hospital, providing non-educational gift (e.g., pens carrying the product’s name), and recommending products for “off label” uses. These codes are meant to preserve physicians’ ability to make patient-centered decisions, rather than feeling obliged to buy products based on their service relationships with sales reps. However, these service activities provide important opportunities for sales reps to show a strong customer focus and to establish the bonds necessary for an ongoing, profitable service relationship. Physicians may also hold permissive views on personalized service activities or expect gift giving, thereby contributing to this dilemma. As such, sales reps may perceive “mixed messages” from the company when service and ethics are stressed, experience role conflict, and become frustrated, thereby detracting from their service encounters and in turn the firm’s financial profitability.
So, what did we find? Results of the study suggest that it is more profitable for service-oriented firms to also stress ethics. That is, subsidiary companies that emphasized customer service and ethical guidelines were more profitable than those that stressed service without a corresponding focus on ethics. Although many organizations regard service and ethical practices to be a source of competitive advantage, our results reveal that leveraging their financial benefits involves considering their interactions rather than simply their direct effects on the bottom line. In particular, results of this study suggest leaders and human resource professionals who work in service-oriented firms should not view service and ethical climates as separate considerations. Employees may interpret leaders’ efforts to encourage customer service as sincere or manipulative depending on whether they place a concurrent focus on ethics. The potential role of such attributions in fostering or hindering service-oriented behavior has implications for how leaders and HR professionals think about the broader organizational context in which their service messages are interpreted. Rather than assuming that customer service initiatives are interpreted in a vacuum, it should be carefully considered whether an ethical environment has been established that validates, reinforces, and creates trust in the customer-oriented messages that the company wishes to send to employees. Simply put, organizations should be aware of the different signals they may send regarding customer service based on the company’s ethical climate, signals that may have consequences for the organization’s bottom line.
Christian Thoroughgood, PhD is an Assistant Professor in the Graduate HRD program at Villanova University. Learn more about him here!