Is Honesty Always The Best Policy?

Written on September 29, 2010 – 2:09 am | by Michael Harris

While we are told that honesty is always the best policy and that we should never tell a lie, we learn early on that a little porky here and there can keep us out of trouble. Experience teaches us that to twist, omit, manipulate or ignore the truth can smooth our path through life and, after all, what harm can come from telling mum that you didn’t steal the missing biscuit or convincing your teacher you lost your homework on the way to school?

Often, people become so accustomed to telling little fibs that, unless checked, they can grow into adulthood oblivious to the potential disasters that can ensue from a little exaggeration or a bit of spin. If you were to tell others that you were fine when you weren’t, swear that your car broke down when you really didn’t want to see friends, and don’t miss a beat when you tell your boss that the trains were delayed at Kings Cross yet again when you were late for work, is there really anything wrong in that? But what about fudging the numbers during a funding pitch to a group of business Angels or leading those same business Angels to believe little, or big, untruths that could make them more likely to invest in your venture? Surely that’s just business, isn’t it?

When discussing a potential partnership or pitching an investment opportunity to any number of business Angels, it can be tempting to tell them what you think they want to hear, or make your great idea sound even better, particularly when you have a personal stake in the outcome. If you are looking for funding from business Angels, you might be willing to do just about anything to convince them to invest in your endeavour. In the moment, it is easy to believe that a little lie will never be found out and that there couldn’t possibly be any harm in simply tweaking the data just a bit to impress your potential business Angels enough to invest in you.

The trouble is that one lie often leads to another, and telling little untruths usually sets the stage for having to tell bigger ones later on. Aside from getting trapped in a never-ending cycle of dishonesty, you will spend half your life trying to remember what you said to whom and keeping your lies straight. And the problems don’t stop there. An equity finance deal is not complete when you shake hands before parting ways; the due diligence process can take quite some time, so there is plenty of opportunity for your embellishments or blatant dishonesties to be uncovered before the dealings are finalised.

Even if you leave the initial pitch with your integrity intact and the business Angels loving you and your company, a word of warning to anyone considering bending the facts is that the statute of limitations for raising a dispute on a contractual agreement is six years. That is a very long time to try to maintain a false front and is plenty of time for savvy business Angels to realise the truth and take legal action.

If you still aren’t convinced that honesty is always the best policy in business, take a look at the energy companies currently under scrutiny for alleged dishonesty in their sales tactics. If found to be in breach of regulations protecting consumers, companies like npower, EDF Energy and Scottish Power could each be fined up to 10% of their turnover. In 2008, Ofgem fined npower to the tune of £1.8m for violating mis-selling rules, which goes to show just how expensive those little porkies can be.

While npower might be large enough to absorb that blow and move on, could your small business survive if your dishonesty resulted in losing the funding you gained from your business Angels or facing fines for misconduct?

If you are honest with your business Angels and potential partners, you do run the risk of not obtaining the support you were after, but you can be confident that when you do find someone keen to invest their time and money with your organisation that they are doing it for the right reasons.

So what’s your opinion on honesty in business? Do you believe that a modicum of dishonesty is something that’s necessary to get what you want in life, or are you of the opinion that relationships forged on the back of honesty and integrity are stronger and more financially rewarding in the long run? Tell us your thoughts.

Perfect Business!