Unethical Acts Bring Only Short-Term Gains

THE NEW REPORT from FMI on ethical practices in the construction industry states that “a breakdown in trust and integrity is bad for business.” No kidding.

Yet, maybe that statement isn’t so obvious to those in the construction industry who are seeing too many trees and not much of the forest. The report goes on to say that a person who commits an unethical act does so because he thinks it would be good for his particular company.

What the report doesn’t say is that this same unethical act probably is helping the individual who commits it in some way — either because it’s the most expedient thing to do at the time or it will make him more money. Regardless, the good of the entire industry is not in the forefront of this person’s mind.

These short-term gains come at a heavy cost. The survey on which FMI based its report shows that 61% of respondents believe that unethical behavior affects the public’s perception of the industry; 74% say it affects the level of trust between owners and contractors; and 60% think it colors the relationship between contractors and design professionals.

We agree with FMI that the 84% of respondents who say they’ve seen an unethical act committed in the construction industry in the past year is an alarming statistic. Contractors, engineers, owners and architects can take little comfort in the probability that incidence of unethical behavior is just as high in other industries these days.

The question the construction industry has to answer is, what are we going to do about it. Of the four solutions that FMI offers, stiffer penalties for those caught in unethical or illegal acts is the least likely to succeed. After all, most of practices discussed in the report — such as bid shopping, reverse auctions and over-pricing — are not illegal. In fact, many respondents who say they see unethical practices are just as sure that they do not see actual crimes committed.

A second solution would be to develop an industry-wide code of ethics. FMI suggests that trade associations could take the lead in crafting and enforcing accepted standards of ethical behavior, and we believe this idea has merit. We encourage trade associations to help their members learn how they can support ethical practices.

A less formal but corollary solution would hit closer to home. Companies should place more emphasis on social responsibility in their dealings with other firms. This approach is easier said than done, of course, although a few respondents in the survey say they have walked away from projects or companies and suffered short-term consequences as a result. They did not indicate, however, that they regretted their decisions in the long term.

Training in ethical conduct is the fourth solution, and it’s the one that holds the most promise as long as it is coupled with commitment to these practices from the top ranks of any construction company. The FMI report states that unethical acts can signal a failure of management “to know how to get the job done the right way.”

That idea may not be so surprising, because only 30% of respondents have formal ethical programs that were known to everyone in the company and enforced by top management; 40% have no ethics program at all.

Responsibility to ethical practices clearly starts at home, if ethics are important to you. We believe they should be. Almost two years ago in this space, we said that you could find a direct link between trust from your customers and profitability. Trust translates into repeat business from loyal customers, and at a lower cost than trying to find new customers.

FMI’s report agrees with this position, as indicated by the quote that we used at the outset and by another assertion that firms that act ethically often are rewarded with repeat business and good reputations.

If you read FMI’s survey results, you may get caught up in statistics and charts, but don’t overlook perhaps the most eloquent statement in the report regarding the construction industry: “We build many things in life besides structures, but most significantly, we build character and earn reputations.”