Before Enron and government regulation of public companies, there was the Better Business Bureau, an organization that still does its part to keep business standards high today.
Kip Morse, president of the BBB of Central Ohio, says the national organization recognized the need for business self-regulation years before the business environment turned sour.
“Between inquiries and complaint handling, $5.8 billion in projects is checked through the BBB nationally every year,” Morse says.
In 1994, the BBB created its Integrity Awards. Its board saw the winners had several things in common and compiled a list of characteristics that ethical business leaders share. The BBB offers workshops for small businesses to help them incorporate the characteristics into their businesses.
“Some of the characteristics on the list are integrity, compassion, accountability and respect for others,” says Morse.
The BBB takes its four-part mission — providing reports on businesses, providing information about charitable organizations, resolving consumers’ disputes and promoting ethical business practices — very seriously. Members who do not live up to their promises could be suspended or expelled, or even find themselves in court.
“We have filed suit against them,” Morse says.
But the stringent standards aren’t keeping companies from becoming members.
“We’ve had the biggest increase in memberships in history,” Morse says. “We’ve had a 35 percent increase in the last five years.”
Morse attributes this historical growth to the post-Enron business environment.
“Unethical practices are more visible than ever before,” he says. “Businesses are asking, ‘What can I do to be different, to show we have high standards?’ Being a member is one of the ways.”
Smart Business spoke with Morse about the region’s ethical business practices and the role of the BBB in businesses today.
Have there been more inquiries into businesses since the Enron scandal?
Yes. Enron came at about the time we were incorporating new technology — the Internet — to take in inquiries. Because it became easier to make an inquiry, along with the business environment, inquiries increased substantially.
We’ve seen a total increase of inquiries of more than 100 percent since 1999. Part of that can be attributed to the business climate. The other part is access to reports. Online access became available at a critical time. Complaint handling has been rising steadily at about 7 percent per year. Out of all the inquiries we get, 90 percent are pre-purchase, people checking out the reliability of the company prior to hiring it.
The demand increased at the same time our national Web site launched, and now anybody in the world can put in a company name and the location of the company, and the bureau that handles the report will come up.
How have your methods for promoting ethical business practices changed over the years?
We took the first step along those lines in 1994. Previously, we asked companies to adhere to our codes of behavior. But in 1994, the board looked at our mission of promoting the highest ethical standards and created our business integrity awards.
It became a forum where we could search for companies that were doing it right and highlight them for all to see.
Right around the same time, nationally, it became clear we needed to strengthen ethics. We started looking at ourselves internally. Our staff and board looked at the recipients of the awards and created a definition of what makes the company successful, ethically.
We determined that there are 20 characteristics that make the companies successful and ethical. One thing we noticed is that successful leaders sacrificed themselves for those they lead, to enable the employees to succeed. That was one item that really caught my attention. The employees really enjoyed working for that person and that company because the leader was there for them, as well as the customers.
Now we also have leadership characteristic workshops for small businesses. They give these leaders a venue to talk about integrity and incorporate the characteristics into their businesses. We tell them it is not easy, but it’s crucial for them personally and as a business.
How good are BBB members at self-regulation?
Overall, they are excellent. We provide inquiry and complaint handling services on our member and nonmember companies. So results are skewed a bit.
Our members agree up front to respond differently to complaints than nonmembers. The rest of the 60,000 businesses in our service area are usually excellent to work with during a complaint; it just takes a lot more communication and some education.
We were formed by businesses in 1921 to protect the free enterprise system before the government stepped in to regulate it. We are not a division of a government agency, but it is tough to get consumers to understand that when you have ‘bureau’ in your name. But we get a pretty positive response to complaints.
Most businesses understand that good customer service is important. There is always the chance that the complaint will be taken personally, especially if it is the first one. We have arbitration services. We let members know up front what is expected. But some businesses, no matter what, will not work with us.
Are there particular industries that receive the most inquiries and/or complaints?
We publish the top 10 list of inquiries each year. In 2003, the top industries that received inquiries were roofing/gutter companies, home remodeling companies and mortgage and escrow companies. Business opportunity/work at home type schemes also get a lot of inquiries because there are so many more of them advertised on the Internet.
When it comes to complaints, the last few years credit card companies are receiving the largest number of complaints due to so much direct mail offers. They often come with fine print that people don’t read before making decisions. New car dealers are typically (No.) 2 or 3, and we have always had complaints on collection agencies.
How often does a BBB member lose its membership, and what is the most common cause?
Unfortunately, it does happen. In 2003, 44 companies lost their memberships, out of 4,500 members. We take the standards very seriously. When consumers see our logo, it means the member company meets our standards and the company is pre-committed to our arbitration process.
If a member doesn’t respond to a complaint, we take action. We report expulsions for one year. So far, we’ve had 30 expulsions this year. Companies also have to meet our standards for advertising. In a few instances, we’ve had companies that are not willing to meet the code.
Sometimes we suspend a company for six months or a year to see if it makes changes. In other cases, companies have refused to go to arbitration, even though they signed an agreement to do so when they became members.
Our arbitrators are all volunteers and have more than 25 years of experience. The most common cause of going to arbitration is a company not responding to a customer complaint. In some cases, the company is small and simply does not have the means to respond and so it ignores it.
Sometimes a company took in too much business and didn’t have the structure to take care of it.
How to reach: Better Business Bureau of Central Ohio, (614) 486-6336 or www.centralohiobbb.org.
