The customer had been with us for twelve years. Loyal through three economic downturns. A reference account we’d highlighted in marketing materials. The kind of relationship executives brag about in board meetings.
The customer was also destroying our business.
When I completed the 80/20 analysis in the refrigeration transformation, this account appeared in Quadrant 3—high revenue, negative true profit. After allocating engineering support hours, quality rework, inventory carrying costs, and management attention, we lost money on every shipment. The twelve-year relationship had cost us millions.
The ethical question wasn’t whether to address the situation. Allowing one customer to subsidize another isn’t sustainable, and it’s not fair to the profitable customers effectively paying for someone else’s service levels.
The ethical question was how to address it. And that question revealed something important about business ethics in practice: ethical behavior isn’t about avoiding difficult decisions. It’s about making difficult decisions transparently, honestly, and with genuine respect for everyone affected.
The Anti-Consultant Manifesto as Ethical Foundation
The consulting industry has an ethics problem that nobody talks about.
Consultants are paid to tell clients what they want to hear. Not explicitly—but the incentive structure is unmistakable. Engagements that deliver comfortable conclusions get extended. Engagements that deliver uncomfortable truths get terminated. Consultants who develop reputations for difficult messages get fewer referrals than consultants known for validating client assumptions.
The result is an industry that systematically produces comfortable lies rather than useful truth.
The Anti-Consultant Manifesto rejects this model. It holds that honest assessment—even when uncomfortable—is the only ethical foundation for advisory relationships. Telling a client what they want to hear might preserve the engagement, but it fails the client, their employees, their customers, and their shareholders.
This principle extends beyond consulting to all business relationships. Ethical business practice requires telling suppliers when their performance is unacceptable, telling customers when their demands are unreasonable, telling employees when their work isn’t meeting standards, and telling investors when projections aren’t achievable.
Comfortable dishonesty feels kind in the moment. It’s actually a form of cruelty that delays consequences while making them worse.
Radical Transparency as Ethical Foundation
The Ethics & Compliance Initiative research consistently shows that organizational ethics failures compound. Small deceptions enable larger ones. Hidden information creates space for harmful behavior. Opacity protects the wrong people.
Radical transparency—the commitment to share information openly rather than strategically withhold it—provides structural protection against ethical drift.
Transparency operates at multiple levels:
Operational Transparency
What’s actually happening in the business? Not the curated version prepared for board presentations—the real performance, the real challenges, the real risks.
Organizations that hide operational reality from leadership create conditions for ethical failure. Leaders making decisions based on filtered information make worse decisions. Problems that could be addressed early get hidden until they become crises.
Activity-Based Costing, properly implemented, is a transparency tool. It reveals true profitability that conventional accounting obscures. It makes visible the hidden costs that standard reports ignore. It prevents the comfortable illusion that unprofitable activities are somehow acceptable.
Relational Transparency
What are we actually telling customers, suppliers, and partners? Is the message consistent with internal understanding, or are we presenting a version of reality designed to serve our interests?
The refrigeration customer destroying our profitability had never been told the truth about the economics of our relationship. We’d smiled through contract renewals, accepted unprofitable orders, and complained internally about a customer who had no idea they were a problem.
This wasn’t their failure. It was ours. Ethical business practice would have meant honest conversation years earlier: “Here’s what serving you actually costs. Here’s what would need to change for this relationship to work for both of us.”
Financial Transparency
What do the numbers actually show? Not the numbers that support the conclusion we want—the numbers that reveal actual performance.
Financial manipulation exists on a spectrum. At one end, outright fraud. At the other end, subtle presentation choices that technically accurate but functionally misleading. Showing revenue growth without showing margin compression. Highlighting cost savings without showing displaced costs. Reporting results against forecasts that were designed to be exceeded.
Ethical financial practice requires presenting information in ways that inform rather than manipulate. The goal isn’t compliance with accounting rules—it’s genuine understanding by those relying on the information.
The Ethics of the 80/20 Matrix
The 80/20 Matrix reveals uncomfortable truths. Some customers are valuable. Others destroy value. Some products contribute. Others drain resources. Some activities create returns. Others consume without producing.
Acting on these truths raises ethical questions that analytical frameworks don’t automatically answer.
Is it ethical to “fire” customers?
The question contains a misconception. Continuing to serve unprofitable customers isn’t ethical—it’s value transfer from one group (shareholders, employees, other customers) to another (the unprofitable customer). The ethical question isn’t whether to address the situation, but how.
Ethical customer restructuring follows principles:
Transparency first. Before any action, share the analysis. “Here’s what we’ve learned about the economics of our relationship. Here’s what would need to change.”
Options, not ultimatums. Offer paths forward. Different service levels at different price points. Modified specifications that reduce hidden costs. Alternative products better suited to their needs.
Adequate transition time. If the relationship must end, provide time to find alternatives. Abandoning a customer without notice—even an unprofitable one—violates relationship obligations.
Honest explanation. Don’t pretend the decision is something other than what it is. “We’re unable to serve you profitably under current terms” is honest. “We’re strategically repositioning” is evasion.
Is it ethical to eliminate products?
Products have constituencies—employees who make them, sales people who sell them, customers who buy them. Eliminating products affects people.
Ethical product rationalization acknowledges these impacts rather than hiding behind analytical abstraction. The spreadsheet showing negative contribution doesn’t capture the employee who’s built their career around the product or the customer who’s integrated it into their operations.
This acknowledgment doesn’t mean avoiding rationalization decisions. It means making them with full recognition of human consequences and commitment to addressing those consequences responsibly.
The 70% Rule and Ethical Decision-Making
The 70% Rule—deciding when you have 70% of ideal information rather than waiting for certainty—creates ethical tension.
Acting on incomplete information risks being wrong. Being wrong can harm people. Doesn’t ethical decision-making require more certainty before acting?
The question misunderstands both ethics and decision-making.
First, waiting for certainty isn’t actually more ethical—it’s often less ethical. The delay has costs. Markets change. Opportunities close. Problems compound. The people affected by eventual decisions often suffer more from delayed decisions than from faster ones that proved imperfect.
Second, decision quality doesn’t improve linearly with information. Beyond a certain point, additional analysis adds noise without improving outcomes. The “more certain” decision isn’t actually more likely to be correct—the decision-maker is just more confident about a conclusion that isn’t better.
Third, faster decisions generate faster feedback that improves subsequent decisions. The organization that makes ten decisions and learns from five mistakes outperforms the organization that makes two decisions and learns from none.
Ethical decision-making at 70% requires:
Acknowledgment of uncertainty. Don’t pretend certainty you don’t have. Decisions made with incomplete information should be communicated as provisional, subject to revision as new information emerges.
Commitment to learning. Monitor outcomes. Acknowledge when decisions prove wrong. Adjust course. The ethical obligation isn’t to be right—it’s to be honest about what’s known and responsive to what’s learned.
Reversibility consideration. Decisions with irreversible consequences warrant more certainty than decisions that can be adjusted. The 70% threshold isn’t universal—it’s calibrated to decision stakes.
The People Champion Role: Ethical Treatment During Transformation
Transformation changes organizations. People lose roles, change responsibilities, face different expectations. Some people thrive in new structures. Others struggle. Some ultimately leave—voluntarily or otherwise.
The People Champion role exists partly as an ethical safeguard. It ensures that transformation’s human impacts are visible, considered, and addressed with integrity.
Ethical Principles for Transformation:
No surprises. People affected by changes deserve to know as early as practically possible. The organization running “stealth” transformation that employees discover through rumor fails basic ethical obligations.
Honest explanation. When roles change or positions are eliminated, explain why honestly. “Your position was eliminated because the analysis showed this function doesn’t contribute sufficient value” is respectful. “We’re making some changes” is evasion that denies people the dignity of understanding.
Genuine support. When people are displaced, provide real assistance—not just severance checks, but help with job searches, skills development, and transition. The employee who gave years to the organization deserves more than transaction-like termination.
Consistency. The rules that apply to one level should apply to all levels. If poor performance drives termination for frontline workers, poor performance should drive termination for executives. Ethical transformation doesn’t protect those with power while exposing those without.
The People Champion monitors these principles in practice. When transformation pressure creates temptation to cut ethical corners—to delay difficult conversations, to hide behind euphemism, to apply rules inconsistently—the People Champion names what’s happening and advocates for better.
Activity-Based Costing as Financial Transparency
Activity-Based Costing isn’t just an analytical methodology. It’s an ethical commitment to truth in financial reporting.
Standard cost accounting allocates overhead using simple formulas—typically based on direct labor or revenue. These allocations are easy to calculate and systematically misleading. They spread costs in ways that hide true profitability, creating illusions that drive bad decisions.
The customer appearing “profitable” under standard costing may be destroying value when true costs are allocated. The product showing “healthy margins” may be underwater when support costs are included. The business unit “meeting targets” may be subsidized by others carrying more than their share.
These illusions aren’t neutral. They direct resources toward value destruction and away from value creation. They reward managers for results they didn’t generate and punish managers for costs they didn’t cause. They enable comfortable fictions that delay necessary decisions.
ABC cuts through the illusions. It traces costs to activities, and activities to the customers and products that consume them. The result is accurate profitability that supports good decisions.
RC Reports and other financial guidance sources emphasize that transparent financial practices reduce audit risk precisely because they reduce the hidden discrepancies that create audit findings. But risk reduction is secondary benefit. The primary benefit is better information driving better decisions—which is an ethical goal in itself.
Accurate Reporting and Organizational Trust
Harvard Business Review research on organizational behavior demonstrates that ethical failures compound because they erode trust—and trust is the foundation for organizational effectiveness.
When financial reports obscure rather than reveal, people stop trusting them. Managers develop shadow systems tracking what the official reports don’t show. Executives make decisions based on information they gather informally because formal reports are unreliable. The organization operates with multiple versions of truth, none authoritative.
When communications sugarcoat rather than inform, people stop believing them. Announcements of “exciting changes” get decoded as “layoffs coming.” Assurances that “everything is fine” get interpreted as “crisis is imminent.” The organization loses the ability to communicate authentically even when authentic communication is intended.
When commitments aren’t honored, people stop relying on them. Promised investments don’t materialize. Agreed timelines slip without acknowledgment. Stated priorities shift without explanation. The organization loses the coordination capacity that commitment enables.
MIT Sloan research on ethical organizational culture finds that trust—once lost—rebuilds slowly and remains fragile. Organizations that compromise trust for short-term benefit create long-term deficits that constrain performance for years.
Transparent decision-making builds trust by demonstrating that the organization’s words match its actions, that reported information reflects actual reality, and that commitments made will be honored or explicitly renegotiated.
Case Study: Transparency Accelerating Refrigeration Turnaround
The refrigeration transformation required difficult decisions—product eliminations, customer restructurings, organizational changes. These decisions affected real people: employees who lost jobs, customers who lost relationships, suppliers who lost contracts.
What made the transformation ethical wasn’t avoiding these impacts—they were necessary for the business to survive. What made it ethical was how decisions were made and communicated.
From day one, we committed to transparency:
The situation was honestly described. Not “we’re making strategic adjustments” but “we’re losing $175 million annually and will cease to exist without fundamental change.” Employees deserved to understand the stakes.
The analysis was shared. The 80/20 findings weren’t secret executive information—they were shared with managers who needed to understand why changes were happening. Customers received Q3 restructuring conversations that explained our economics openly.
The timeline was realistic. Not promises of quick painless change, but honest assessment of what transformation would require and how long it would take.
The impacts were acknowledged. When positions were eliminated, leaders spoke directly to affected employees rather than hiding behind HR processes. When customer relationships ended, account managers had honest conversations rather than form letters.
The results were transparently reported. Progress against goals—and shortfalls against goals—were visible to everyone with stake in outcomes.
The result wasn’t just ethical compliance. It was organizational trust that enabled transformation speed. Employees who understood the situation contributed ideas rather than resistance. Customers who received honest explanations remained engaged through restructuring. Managers who trusted information made better decisions faster.
The transformation from -$175 million to +$48 million happened faster than anyone expected. Transparency was a significant accelerant—not because it was easier, but because it created the trust that enabled difficult decisions to be made and implemented.
Building Ethical Decision-Making Culture
Business ethics can’t be reduced to compliance programs and policy documents. It must be embedded in decision-making culture—the norms and habits that shape how people behave when no one is watching.
The Business Roundtable’s statement on corporate purpose recognized that stakeholder value and ethical practice aren’t constraints on business success—they’re foundations for it. Organizations that treat ethics as overhead to be minimized eventually face the consequences: regulatory action, reputational damage, employee disengagement, customer defection.
Building ethical culture requires:
Leadership Modeling
What leaders do matters more than what they say. Leaders who demand transparency while operating opaquely, who espouse honesty while shading truth, who claim stakeholder commitment while prioritizing only shareholders—these leaders create cynicism that corrupts culture.
Ethical culture requires leaders who make decisions transparently, acknowledge uncertainty and mistakes, treat all stakeholders with respect, and hold themselves to the standards they demand of others.
Structural Support
Culture operates through structure. Incentive systems that reward hitting numbers regardless of how create pressure toward ethical shortcuts. Reporting relationships that isolate functions prevent the cross-checking that catches problems. Decision processes that exclude affected stakeholders eliminate voices that should be heard.
Ethical structure means incentives aligned with long-term stakeholder value, reporting that enables oversight without bureaucratic paralysis, and decision processes that include relevant perspectives.
Psychological Safety
People won’t raise ethical concerns if raising concerns is punished. The employee who identifies financial irregularities, the manager who challenges questionable decisions, the executive who asks uncomfortable questions—these people need protection.
Psychological safety means genuine welcome for dissent, protection for whistleblowers, and visible commitment to hearing difficult truths rather than just comfortable ones.
Continuous Examination
Ethical drift happens gradually. Practices that seem acceptable become normalized even as they cross lines. The organization that doesn’t continuously examine its own behavior eventually discovers it’s become something it didn’t intend.
Regular ethical review—examining decisions, practices, and outcomes against stated principles—catches drift before it becomes crisis.
The Courage to Be Honest
Business ethics ultimately requires courage—the willingness to have difficult conversations, make unpopular decisions, and tell truths people don’t want to hear.
The courage to tell a twelve-year customer that the relationship isn’t working as currently structured. The courage to tell employees that positions will be eliminated. The courage to tell investors that projections weren’t met. The courage to tell leadership that proposed actions are problematic.
This courage isn’t comfortable. It creates conflict, surfaces disagreement, and forces confrontation with realities that comfortable illusion would prefer to avoid.
But courage is what ethical practice requires. The alternative—comfortable dishonesty that delays consequences while making them worse—isn’t kindness. It’s cowardice dressed as consideration.
The organizations that build ethical culture develop this courage institutionally. They create norms where difficult truths are expected, where honest conversation is valued, where transparency is default rather than exception.
These organizations don’t just avoid ethical failures. They outperform, because ethical practice creates the trust that enables speed, the transparency that enables good decisions, and the stakeholder commitment that enables sustainable success.
The refrigeration transformation succeeded not despite ethical commitment but because of it. Transparency accelerated change. Honest conversation enabled difficult decisions. Trust created organizational capacity that opacity would have destroyed.
Ethics and performance aren’t trade-offs. They’re complements. The organizations that understand this build something that works—not just financially, but in ways that justify the human effort invested in creating them.
Todd Hagopian is the founder of https://stagnationassassins.com, author of The Unfair Advantage: Weaponizing the Hypomanic Toolbox, and founder of the Stagnation Intelligence Agency. He has transformed businesses at Berkshire Hathaway, Illinois Tool Works, and Whirlpool Corporation, generating over $2 billion in shareholder value. His methodologies have been published on SSRN and featured in Forbes, Fox Business, The Washington Post, and NPR. Connect with Todd on LinkedIn or Twitter.