Is Honesty Necessary For Business Success?

Simple question, but not the answer.

What’s business success?  Loads of short-term profit?  Long-term survival?  Stability?  Innovation?  Constant growth?

In addition, the answer to the above question depends on the type of industry, the size of the organization, and the nature of the business operation.  Logically and naturally, we prefer dealing with honest people in business transactions.  Despite the Supreme Court’s decision, corporations aren’t people.  Otherwise, they couldn’t have continued to lie, cheat, and steal…whenever they can, and get away with it most of the time.

What prompted the above question came from some innocuous email exchanges between a B&B (bed and breakfast) host and me.  The incident provided yet another good illustration of how a true free market works best in a closed community.  In one of my previous posts, I used the example of a diamond market in Brooklyn.  This is a fairly closed system where buyers and wholesalers, often making millions in transactions, are all acquainted and connected.  Anyone harboring malfeasance would not last long in the business; warnings would spread like wildfires.  That’s as close to “perfect” information as one can get, a crucial condition for a free market to work efficiently.

In my own personal experience, this B&B host informed me that the road is closed from their property to the Grand Canyon North Rim.  Since there are not that many roads in that part of the country, one would have to drive north into Utah, head west and wind down south to the North Rim.  A little detour isn’t always going to deter us, but given the typical working American’s limited vacation time, we decided to devote a bloc of vacation to explore the North Rim at another time.

The B&B host wrote that she had to be honest even though it’s not their policy to turn customers away.  I asked, for future reference, how long the closure was likely to last, and she gave me a detailed description.  I concluded that because of her honesty, she’s “won” a traveler’s determination to use her place in the near future.  This, to me, is a win-win strategy, not for short-term but for longer-term.

Speaking of honesty and trust...would you trust this gang?!

Speaking of honesty and trust…would you trust this gang?!

She related a story about a fellow B&B owner’s “greedy” strategy.  Around 9/11/01, this particular B&B owner X, in her area, refused to give deposits back to travelers who couldn’t fly out to this destination, and convinced lodgers already at his place to stay on since they were kind of stuck.  So, the owner X raked in a nice profit on the back on 9/11 tragedy.  The surrounding B&B owners tried to persuade owner X to ease up on the scheme, to no avail.  The owner X closed down his operation within a year.

A simple story, but illuminating.  In a relatively closed community, not just the B&B owners in one area but also the very limited clientele favoring this particular setting, reputation is the biggest asset.  Easy internet access has elevated the importance of reputation for a business’ position, both for owners and customers.  In reading some of the 2013 guide books, domestic as well as foreign travel, many include and highlight TripAdvisor’s comments.  Not all comments are equal, though.  A general rule of thumb is that a 5* based on only two reviewers isn’t as convincing as a 4.7* based on 389 reviewers.  I am struck by the new terrain many businesses have to learn to negotiate these days.  In such cases, competition definitely favors the consumers, and helps overall business quality.

Do you have similar stories to share?

Till next time,

Staying Sane and Charging Ahead.

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