TEOCO Corporation

Successful Ethics in a Small Company

Ethics Resource Center 2005
Allison Pendell-Jones

The first things you see on TEOCO's homepage (

www.teoco.com

) are their core values, flashing one at a time, prominently positioned in the middle of the screen. Even the name -- an acronym for The Employee Owned Company (TEOCO) -- suggests the importance of these core values to everyday operations. Individuals who work there are not just employees; they are employee-owners and are referred to as such. TEOCO shines as an example of a small organization that has found a way to live their core values.

TEOCO has not only enjoyed financial success, but has received accolades from the business ethics community, including winning the 2002 National Capital Business Ethics Award in the small company category. By taking a look at some of the policies that set TEOCO apart, we can identify possible lessons for other small companies.

Undeniably, small organizations face unique challenges when trying to implement an ethics strategy. Limited resources mean budgets often are tight and it can be difficult to justify the expense of time and money to address something that may seem peripheral to the mission and goals of the organization. Unlike larger, publicly traded organizations, most smaller companies are not required to have ethics program elements or reporting procedures, and they are not regulated by any external body regarding these issues.

For TEOCO, the solution to overcoming these challenges was built in from the very creation of the company. From the beginning, Atul Jain, the company's founder and current CEO, set out to "build a successful company without compromising our values." Rather then expecting its employee-owners to be committed solely to building the bottom-line, TEOCO leadership made it clear that an ethical culture is critical to success, thus combating two of the common challenges facing other smaller companies -- lack of buy-in from employees and lack of resources.

TEOCO has taken specific steps that have resulted in a successful ethics program, starting with the initial concept on which TEOCO was founded--"

principled entrepreneurship

." Mr. Jain's goal was not just to create a financially successful company, but to develop a model that others can emulate, based on the concept that you do not need to "sell your soul to the devil in order to succeed." As implemented, this policy supports TEOCO's core value of acting with courage. Employee-owners do not feel bound by the typical constraints of hard nosed business practices, but make decisions that include ethics as part of the process, internally and externally.

As mentioned previously,

all employees are owners of the company

, which is in line with TEOCO's core value of progress through ownership. The success and growth of each individual employee-owner is tied directly to the success and growth of the organization--when TEOCO gains, so do all employee-owners. This concept has lead to amazing growth for this small company, and while it may not be a model that works for every organization, it warrants consideration.

Another unique aspect of TEOCO is the company's Advisory Team. This group of eight employee-owners, including no more than one from leadership, develops and champions TEOCO's positive corporate culture by being the voice of the employee-owners. Volunteer members serve on the committee for one year. The Advisory Team addresses issues that apply to all employee-owners, such as benefits, paid time off, and company policies. In 2000, the Advisory Team created the "TEO-Tots" program under which any employee-owner who either has or adopts a child while employed by TEOCO receives $500 a year for five years deposited into an educational IRA. The Advisory Team supports TEOCO's core value of aligning employees, clients and the community. As Mr. Jain states, "We take care of our employees, they take care of our customers, and that takes care of business."

Core values and ethics also are infused into the culture of the organization through

monthly employee-owner's meetings

, which not only focus on issues related to the business, but also provide an opportunity for leadership to talk about ethics on a regular basis. As ERC research has shown, talking about ethics and making it a visible part of the life of the organization is a critical step in helping employees make the connection between company core values and the work they do.

TEOCO's success also builds a business case for the importance of organizational ethics in a small company. The company has achieved ten consecutive years of revenue growth. In its first five years, its growth was 1,873% and revenues went from $346,000 to $6.8 million. While not solely a result of having employee-focused initiatives and living their core values, this success can be attributed, at least in part, to the hard work of satisfied employees. Of course, other organizations that choose to operate ethically cannot automatically expect financial returns on their investment on par with TEOCO, nor should they expect to benefit from simply copying these specific examples. The lesson for other small companies is to emulate some of the fundamentals, for instance, successfully convincing employees that ethics are important, and to inculcate those beliefs into every aspect of their corporate culture.