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Better Business Bureau: Protecting Consumers & Dealing With Organizational Ethics Challenges Add in library

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Question :

(1) Which is the Better Business Bureau's most important stakeholder, business or consumers ?
(2) Do you believe the BBB can be truly impartial given its financial dependence on business ?
(3) What actions would you take to ensure that an ethical misconduct disaster such as the pay-for-play scheme does not happen again ?

 

 

Answer :

Executive Summary

Better Business Bureau (BBB) is a non – profit organization, established in 1912, with the aim to build and advance the trust in the marketplace for the customers as well as the suppliers. The organization is governed by Council of Better Business Bureau, with its headquarters in Arlington, Virginia. It comprises of 112 independent BBB organizations working on local level, together they form a massive organization, working for the development and advancement of the trust in marketplace between the customers, with effective and unique methodology followed. Better Business Bureau is a pioneer in its own kind with branches performing all over.

BBB is involved in the activity of collecting and providing business reviews to the customers, free of cost. It reviews around 4 million businesses scattered all across USA, and including all types of business categories. This organization does this review process for catering the information request done by more than 123 million customers from all over the country, and this fact sheet is of 2013 (Lewis, 2002). Enormous number of customers requiring information visit BBB’s website and has brought it among the top 300 most visited websites in the entire country. Basic work of BBB is to acts as a bridge between customers and the business groups, by helping to settle the disputes, if any.

BBB gets an average of 7 million business disputes every year, with a count of 885,000 disputes in the year 2013 itself, out of which around 78% of the disputes were successfully solved. Although there is the word ‘Bureau’ involved in the name of BBB, but Better Business Bureau neither report to any government organization nor is a sister concern or a child organization of any government body. The business houses that come and join this organization do it on their own and through industries’ self-regulations. BBB avoids the image of a biased organization, by holding itself back from providing extra interests to some organization by endorsing or advertising the same more than others (Tari, 2011).

 

Introduction

Better Business Bureau is involved in a noble cause of providing unbiased reviews to the customers, free of cost, but there have been incidences which show that BBB is also not truly ethical in its code of conduct. There has been reported incidences where the rating of an organization has been increased just because it paid a membership fees, and the rating of another organization was depreciated as it refused to pay the membership fees (Stern, 2002). We will discuss about the issue in deep in this essay.

Better Business Bureau’s most important stakeholder, businesses or consumers

Before talking about the key stake holders in the business environment, we must first understand who the stake holders are and what their role in an organization is. An individual or a group of persons having some vested interests in the organization are known as stake holders. They can be broadly classified into 5 main categories:

  1. Owners

The one who owns the organization or the one who is the whole sole responsible for all the issues regarding the organization is the owner of it. He has all the interest in the organization and is the major stake holder of the organization, as it is his only (Chircu & Kaufmann, 2000).

  1. Creditors

Person or any organization, acting as the funding agency to the organization for carrying out the organizational activities smoothly is the creditors. They have monetary interests in the organization as it is their money which is on stake, and they will be directly or indirectly affected by the growth or fall of the organization.

  1. Employees

They are the primary building blocks of any organization. Without an efficient and dedicated in addition to skilled and laborious workforce, no organization can carry out functions smoothly or grow big in size (Smith, Drum & Gentile, 2010). They are directly affected by the organization’s performance as their career depends on it.

  1. Suppliers

The person or the organization, supplying raw material to any organization is the supplier (Kalshoven, Hartog & Hoogh, 2011). They are joined with the organization as their payments and further orders depend on the organizations performance.

  1. Customers

Last but the most important link of the chain is the end consumers, or the customers. These are the one who finally buy the product from the market of any company (Tallon & Gurbaxami, 2000). It is their interest which can make a product hit in the market or can make it smell the ground. Customers are not easily understandable, they have different sets of choices, it is the company’s area of research how are they going to attract more and more customers towards their product and make their product hit and their organization grow. So for any organization, the customer is the top most priority, because without them their products and all their efforts are waste of time and money.

As it is clear from the above data that customers are the key stake holders of any organization, as they are the end consumers and without them nothing is possible. If they are unhappy from the product then no organization can even dream to grow big or even stand a chance in market.

Same is the case applied to Better Business Bureau. An organization that is working for the betterment of the customers only can never put anyone else on the top most priority for him. BBB also puts customer as the key stake holder in the market and works according to the needs and benefits of customers only (Sims & Sims, 1991). Working in the interest of customers, BBB brings them with free of cost reviews and analysis about millions of business organizations working in America in all the parts of it. They provide a detailed insight to the customers about the organization, and in addition to it BBB also provides them with a ranking scale for the businesses. This scale helps the customers to compare between various organizations in the marketplace.

 

Better Business Bureau acts as an intermediary between the customer and business and helps in building trust between them in the market place by doing extensive research on the organizations and then scaling and rating them on tough industrial and other criteria’s, and then bringing forward the results in front the customers in form of reviews as on request by them. BBB although not an organization designed to settle disputes between the two also tries to maintain harmony and peace between the two parties, and has a high success rate too in such issues (Kohli & Jaworshki, 1990).

Thus, it could be definitely inferred out from the above provided facts that Better Business Bureau keeps the customer as the Key Stake Holder in their area of work and work according to the needs and benefits of the customers only.

BBB – Is it truly impartial because of its financial dependence on businesses

Better Business Bureau is non-profit organizations in the business which insure that a market place always insure its integrity. BBB should continuously assess its effectiveness in achieving its mission. In this part we ensure that BBB has defined, measurable goals and objectives in place and a defined process in place to evaluate the success and impact of its program(s) in fulfilling the goals and objectives of the organization and that also identifies ways to address any deficiencies (Bazerman & Tenbrunsel, 2011).

How can the financial outcome is carried out is explain in the above diagram. At first check out the business opportunity with the benefit of increase, patient, experience and quality business. The desired behavior of business with respect to the quality is greater value per involvements. At the financial outcome state each involvement in business receives the greater priority with higher profit.

Whenever we are searching for the answer, BBB is truly impartial or not then the answer is no. There must be a reason for companies to invest in the BBB. If the position of non-members were the same as members, then the company will give little reason to invest (Churchill, 1982). What are the reasons that force us to believe that BBB is impartial for financial dependency on business are as follows.

  • Ethical decision making and ethical climate
  • In any organization there are different types of benefits. BBB not only focus on financial benefits
  • Measurements of financial benefits is purely depend upon the subjective or qualitative benefits
  • Commitment and benefit delivery by BBB show the impartial financial dependency on business
  • BBB equally linked the IT and the business changes for the financial dependency. This ensures a consideration of how the business case will be realized (Elango, Paul, Kundu & Paudel, 2010). And also capture the priorities for the funds and resources.
  • Before start the any business process at first understand the implementation of process redesign and training
  • Transparency with customer interaction
  • Responsible Act
  • Provide quality product and better services
 

BBB always uses an effective plan for its financial dependency. BBB policies are Track record, market research about business, what and why strategy, re-establishment capacity, sufficient amount and budget of financial benefit. The research reports of the various organizations depend upon the benefit type, and achieve target value (Tari, 2011). Senior manager of any organization are always interested in the subjective benefit. Quality concern may be a second option for this. The survey report of BBB give the quality result and subjective benefits both without any biasing.

 

The benefits range over the graph is defining the target value in 2015. How can the business work out and what will be its next outcome are totally unbiased. Above graph chart is focus on the any organizations financial growth.

The research in business technology’s considered the capabilities and configurations have not changed significantly over the last few decades (Ross & Weill, 2002).

                                                                      The financial growth report by BBB with respect to any IT industries

From our research and work with management teams in a wide range of organizations in both the private and public sectors, BBB have developed a six-step approach to building more rigorous and robust business cases.

  • Objectives consideration with benefit of business Drivers and Investment
  • Identify Benefits, Measures and Owner
  • Define the benefit mode
  • Always update the Organizational Changes enabling Benefits
  • Determine the clear Value of each Benefit
  • Identify Costs and Risks

 

 

Why BBB is Impartial for its financial dependency

  • Long duration of business.
  • BBB continuously checks licensing and government actions before a business is accredited by BBB (Boddy, 2011).
  • Impartial because of advertisement issues
  • of complain issued.

The grading system of BBB is as follows.

From the above grading system we can analysis that BBB is impartial. We take in BBB a complaint that's not resolved easily. Complaining about the BBB can result in your business losing accreditation with the BBB. The fact is that BBB’s existence is largely as a platform for lodging complaints with any organization. And not give truly impartial for its financial dependency on business (Crotty, 2009).

Better Business Bureau got an impartial image after the setback taken by the episode of ‘Pay to Play’ in which the organization was alleged of taking money for awarding the A+ grade in the report sheet. This was due to the internal rewarding system of the organization which appreciated the employees by a 45% commission on every first year membership sale, due to this there occurred a race condition where everyone was busy in making money and they sold the membership to non-worthy organizations too for the return of a better rating (Ethics Resource Center, 2009). The case came to light when it was reported that two dummy companies got an A+ rating after the payment of membership fees. After the issue got highlighted, serious measures were taken to improve the lost image of BBB and gain back the old prestige. As a result an internal enquiry was imposed finding the then CEO guilty of this leading to his resignation. The new ethical policies were brought in effect, also changing the internal reward system which caused this damage to happen. The new policy was very much transparent to both the customers as well as to the companies participating (Peppard, Ward & Daniel, 2007).

Action taken to ensure that an ethical misconduct disaster such as pay-for-play scheme does not happen again

Many of the organizations have complained about the grading policy of the Better Business Bureau to be money centred, and good for only those who pay the fees for their membership. In 2010, in a report published by ABC’s 20/20, BBB has been accused of the irregularities in its grading system. The report contained the story of a man who started two dummy organizations, and those dummy received an A+ rating as soon as he paid the membership fees for getting accredited from BBB (Enron code of ethics, 2000). The report also threw light on the saying by BBB’s officials, that the only way to get a better rating is to take the membership by paying their fees. This was due to the organizations internal reward system that asked its employees to sell a membership for a better internal reward point.

After all these accusations and allegations, and unravelling of many truths and facts about the organization, the mother organization of BBB, i.e. The Council for Better Business Bureau dropped their internal reward system and also announced that the policy of providing an edge to the BBB accredited businesses in the grading process will be shed off completely, leading to a better grading system which is free from such flaws (Lazere, 1997). This statement came at the time when the organization was suffering from the damage caused by the devastating ‘Pay for Play’ episode.

 

Pay for Play is a term used to mark a situation where money has been used as a tool to get in the game or to get benefit from something unethically or unlawfully. It is mostly associated in the sports context where a player pays the money to get in the team. But the same applies in other fields too like that of business, where it happened, that the money was used a ladder to gain the extra points in the BBB rating and get a better or say best rating, although being non deserving candidate for that grade (Chandler & Wallace, 2001). The main issue in this scandal was the internal rewarding system of BBB, which awarded a 45% commission to those who sold the first year membership to the businesses coming to them for review and accreditation. This type of reward system created a race condition within the company and everyone ran to grab the opportunity of earning more money. It was the time when BBB had to change its current rewarding system that was sales based to a pitch based rewarding system, where an employee was to be judged on the efforts he put and not on the sale he made.

It is truly said that the ethical conduct is very much dependent on the stake holders of the organization (Chandler, 2005). This happened in the case of BBB, when the customers, its key stake holders came to know about such a fraudulent activity in BBB they lost the trust in the organization and BBB started to lose its meaning. Due to this the organizations the then CEO had to resign due to an internal enquiry, where he was found guilty of supporting the practice of ‘Pay to Play’. After his resignation, the organization performed a major workout on its policies and grading system, and made it very much transparent to the companies as well as for the customers (LeClair, Ferrell & Fraedrich, 1998).

The grading system of BBB included a variety of criteria, that needed to be fulfilled in order to get rated from it. BBB awarded grades from A+ being the highest to F being the lowest. Business those are marked as N.R is due to the reasons that insufficient information is available about it or there is an ongoing review/update of the business' file.

BBB grades are based on the following factors:

The grades provided by BBB are not a guarantee to the company’s loyalty; they are based on the above mentioned criteria for evaluation purpose. It is always advised by BBB that the customers should also use their own knowledge and wisdom to judge an organization regardless of the rating given to them (Gottlich & Sanzgiri, 1996).

The new code of ethics developed by BBB includes:

  1. Education
  2. Truthfulness
  3. Honesty
  4. Integrity
  5. Courtesy
  6. Stability

Ethical misconduct needs to be strongly dealt with, as it happened in the case of BBB, when the organization took a setback after the ‘Pay to Play’ episode, the key stake holders lost the faith in BBB (Ibid, 1999). The organization then rapidly organized an internal enquiry to check for the claims being made against BBB, and found that the CEO was aware of this and was guilty of it, hence had to resign from the post. Such rapid and strict action to maintain the quality won the trust back and also demonstrated how such a condition is to be dealt with.

Conclusion

In order to establish its credibility again, BBB is making a lot of changes in itself right from implementing more number of procedures so as to do better investigation in complaints, to adding a new process wherein even a third party can help them while reviewing. The BBB may even make their own bureau members more apt, through their own ethics as well as compliance related programs, so that they can easily help in recognizing certain misconduct as well as help in creating organizational cultures which can help in promoting certain ethical conduct (Chandler, 2000). They may even start to monitor as well as eliminate chapters. Although, a complete elimination of misconduct is very difficult, yet with proper changes, a lot of risk related to ethical disasters can be reduced by BBB. 

 

References

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The moral compass: Corporations aren’t moral agents, creating interesting dilemmas for business leaders. Info World 24(10). 54. Sims, R. R., & Sims, S. J. (1991, March 3).
Increasing applied business ethics courses in business school curricula. Journal of Business Ethics, 10(3), 211–219. Smith, N. C., Drum wright, M. E., & Gentile, M. C. (2010).
The new marketing myopia. Journal of Public Policy & Marketing, 29(1), 4–11. Stern, L. (2002). Is your boss honest? 73. Tarí, J. J. (2011).
Research into quality management and social responsibility.Journal of Business Ethics. 102(4). 623–638. Lovallo, D. Kahneman (2003).
Delusions of success: how optimism undermines executives’ decisions’. Harvard Business Review. 56-63. Tallon, K. Kraemer & Gurbaxani, V. (2000).
Executive’s perceptions of the business value of information technology. Journal of Management Information Systems. 16/4: 145-173. Bazerman, M. H., & Tenbrunsel, A. E. (2011). Blind spots. Princeton, NJ: Princeton University Press. Boddy, C. R. (2011).
Corporate psychopaths, bullying and unfair supervision in the workplace. Journal of Business Ethics. 100(3). 367–379. Churchill, L. R. (1982). The teaching of ethics and moral values in teaching: Some contemporary confusion. The Journal of Higher Education. 53(3). 296–306. Crotty, J. (2009).
Structural causes of the global financial crisis: A critical assessment of the new financial architecture. Cambridge Journal of Economics. 33(4). 563–580. Elango, B., Paul, K., Kundu, S. K., & Paudel, S. K. (2010).
Organizational ethics, individual ethics, and ethical intentions in international decision making. Journal of Business Ethics. 97. 543–561. Ethics Resource (2009). National Business Ethics Survey: Ethics in the recession. Retrieved from www.ethics.org/nbes/files/nbes-final.pdf Tarí, J. J. (2011).
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Six IT decisions your IT people should not make. Harvard Business Review. 80/11: 84-91. Ross, J. & Beath, C. (2002).
Beyond the business case: new approaches to IT investment. MIT Sloan Management Review. 43/2: 51-59. LeClair, D. T., Ferrell, O. C., and Fraedrich, J. P. (1998) Integrity Management: A Guide to Managing Legal and Ethical Issues in the Workplace, University of Tampa Press.
Enron Code of Ethics, Enron Corporation, 2000: 2. Gottlich, J. A. and Sanzgiri, J. (1996) “Towards an Ethical Dimension of Decision Making in Organizations,”Journal of Business Ethics.15 (12): 1275-1285. Taub, S. (n.d.) “Crisis of Ethics: Ethics Officers Predict a New Wave of Corporate Scandals,” COM. [online] Available at: https://www.cfo.com/article.cfm/3005220?f=search. [Accessed: 12th Jan, 2015] Lazere, C. (1997)“Ethically Challenged:Teaching Ethics Is Required But Schools Have Wide Latitude in How They Do It, “CFO Magazine.
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