How Putting Profitability Over Ethics Sabotages Your Success

Artificial intelligence is making headlines again today, which shouldn’t surprise anyone. Recently, a PC Gamer article about my industry last month grabbed my attention.

Sam Udotong, the co-founder of Fireflies.ai, a young company with a $1 billion-plus valuation, admitted in a LinkedIn post that their “Talk to Fireflies” AI-generated meeting companion app was initially nothing more than the two co-founders frantically typing notes and hurriedly sending them back to clients at $100 a pop.

Apparently, the young entrepreneurs earned enough to pay their $750 monthly rent before deciding that moving to a fully automated system would increase earnings and profitability. Such a seemingly innocent tactic may appear like an underdog startup story, but like others, I see the story from another perspective with negative ethical implications.

Related: Ethics in Entrepreneurship: Learning from Elizabeth Holmes’ Lies

Which comes first, profitability or ethics?

If a seminar speaker opened their presentation by asking, “Is profitability or ethics more important in business?” and requested a show of hands, I suspect that profitability would clearly win with a 100% tally. However, I’m not convinced that every respondent truly believes this deep down.

What bothers me most about Mr. Udotong’s LinkedIn post is his boasting about selling a service that may have delivered, but not as promised. Am I wrong or just reverting to the “old days” when my mentor lectured me about always being up-front and honest with customers? “Tell’em everything on the front-end,” he would say. “You may lose one or two customers, but you’ll gain more down the road and sleep better when you tell the truth.”

Unfortunately, I can’t resolve the issue of business ethics within this article. However, I believe it’s justified to discuss an issue that affects my industry. Once again, I ask the rhetorical question: “Does profitability outweigh ethics?” I vote for ethics because I believe that an ethical approach will eventually lead to increased revenue.

Are ethical companies more profitable?

The bottom line is usually the bottom line. A key question to consider is whether ethical companies are more profitable. According to a 2023 article from the University of Arkansas Sam M. Walton College of Business, the answer is yes.

Ethisphere, a non-profit organization dedicated to promoting ethical business practices, annually evaluates companies using its proprietary qualitative and quantitative assessment. According to the 2023 survey results, honorees outperformed companies of similar size by over 13 percentage points over a five-year period.

Granted, measuring the ethical and profitability index for small to medium-sized companies, especially startups, remains a monumental challenge. Despite this, companies that take ethics seriously seem to espouse such.

The temptation to make a quick profit is hard to resist. I believe that most entrepreneurs encounter ethical dilemmas while pursuing new business opportunities. Our company could easily cut corners, reduce costs and potentially increase revenue and profitability.

Offering a 99% accuracy rate can be challenging. In most cases, using overseas contractors reduces labor costs. Employing standards that comply with HIPAA and CJIS standards costs money. However, it’s a choice I feel good about for obvious reasons.

Related: The 4 Pillars of Ethical Enterprises

Vendor audits make sense

While it’s impossible to have complete knowledge of every vendor your company uses, I encourage every entrepreneur to closely monitor what vendors promise and, more importantly, how they fulfill those promises.

I believe in conducting audits of the vendors we work with. However, if you’re like me, time can be a significant barrier. After spending 10 to 12 hours each day acquiring new customers, servicing existing ones and managing staff, finding time to investigate vendors can be challenging. Have you considered sending annual questionnaires to each vendor?

Vendor audits can vary in complexity, and I prefer to start with a simple questionnaire unless there are specific concerns to address. Here are some initial questions you might consider asking:

• Describe your company’s code of ethics.

• What attributes are most important when seeking new business?

• How does your company measure customer satisfaction?

• Describe your cybersecurity protocols and how you protect client data.

• What type of quality management systems do you have in place?

• What percentage of your employees or subcontractors are overseas?

• Can I visit your facility or personally meet with company executives/managers?

• What happens if your company cannot meet delivery deadlines?

You may think that some of the above questions don’t directly relate to ethics. Nonetheless, in my opinion, each has ethical implications.

Conduct an internal ethics audit

Demanding high ethical standards from suppliers and vendors is important. However, it’s equally crucial to ask similar questions within your own organization.

There’s nothing wrong with requesting vendors to describe their business and ethical practices. On the other hand, have you ever considered asking them how they perceive your business practices? This can be a challenging question. Will your vendors feel comfortable providing criticism if they think you aren’t giving them enough business or if payments are delayed?

It’s likely that you might receive some unwarranted criticism. However, these tough responses could bring underlying issues to the surface and create an opportunity for necessary adjustments. Gathering insights from managers and employees can also be valuable. Ensuring anonymity can encourage employees to provide honest feedback. I recognize that this is often easier to achieve in larger companies than in smaller companies with fewer employees.

• How do you rate our company’s ethical standards?

• Does senior management set a good ethical standard for all employees?

• How can we improve our ethics within our organization?

• What ethical changes or suggestions would you recommend we consider?

Will AI use help or hinder business ethics?

Employing AI-generated programs can obviously improve business. I believe it can improve ethics, too. We’ve also seen how AI damages business ethics. According to a 2023 PWC survey, over 73% of businesses have implemented AI within their organization.

Ethics is a key factor that may cause some companies to hesitate in adopting AI technologies. Since algorithms drive AI, they can amplify certain types of information. If these algorithms are designed to promote unethical practices, they can lead to various issues. This dilemma highlights the necessity of human involvement in the process.

Moreover, there is the concern of algorithmic bias. Unequal access to resources and information can create an uneven playing field and contribute to workplace bias.

Speaking of unethical business practices, the rise of phishing, malware and ransomware techniques is alarming. Companies are reporting an 85% increase in cybersecurity attacks. Unless effective measures are implemented to combat these illegal strategies, businesses of all sizes will likely continue to be vulnerable.

Ethical concerns surrounding AI and privacy are significant issues for every business. Collecting and storing employee and customer data is the responsibility of each organization. However, every time digital techniques are employed, the ethical implications increase.

Related: Why Doing the Right Thing Leads to Long-Term Success

My AI optimism remains high

Despite these challenges, I remain optimistic that AI, when used appropriately, can help businesses enhance their ethical decision-making. The example of Fireflies, which we discussed earlier, illustrates this potential.

For starters, businesses should avoid using tactics or strategies that customers have not agreed to or that they are unaware of. Customers expected that an AI program would generate business notes. Two guys in their pajamas munching on pizza and furiously taking hand-written notes doesn’t qualify, regardless of the intent.

Historically, there have been ethical missteps in business, such as Fred Smith, the founder of FedEx, who forged signatures on financial documents. This act was not only unethical but also illegal, and it likely taught him valuable lessons about integrity.

Understanding who or what is behind the technology will help you and your team make better, more ethical decisions. Remember that making ethical choices is a decision that can enhance profitability. Regardless of the outcome, it will lead to greater peace of mind. I know it does for me and my company.

Artificial intelligence is making headlines again today, which shouldn’t surprise anyone. Recently, a PC Gamer article about my industry last month grabbed my attention.

Sam Udotong, the co-founder of Fireflies.ai, a young company with a $1 billion-plus valuation, admitted in a LinkedIn post that their “Talk to Fireflies” AI-generated meeting companion app was initially nothing more than the two co-founders frantically typing notes and hurriedly sending them back to clients at $100 a pop.