In developing the Rumbo Pymes program, Transparencia considered several factors that shape the organizational context of SMEs in Colombia:

• Governance - SMEs are often family-owned enterprises managed by family members, which creates challenges for reporting unethical conduct and managing conflicts of interest.
• Fewer organizational structures than large enterprises - In their operations, SMEs rely far more on informal processes such as verbal communication than on the formal policies and procedures that structure large enterprises. They thus lack the sound organizational systems that support ethics programs in large organizations. Symptomatic of a lack of structure is the tendency to focus less on medium- and long-term planning than on immediate, day-to-day issues.
• Tendency of some SMEs to remain "informal" where possible - Another factor that shapes the context of the SMEs in Colombia is the dual economy of formal - legally registered - and informal sectors. For many enterprises, this distinction is not absolute; these enterprises observe some regulations while evading taxes and failing to comply with labor regulations.
• Training - Lastly, SMEs in Colombia invest little in training employees in areas not apparently related to technical or commercial matters. Transparencia found that most SME owners do not consider ethics programs essential for achieving their business objectives.

Given the aforementioned context, Transparencia focused on designing a program that is cost effective and that uses clear rhetoric to demonstrate the relationship between ethics and business objectives. They also wanted to ensure that SMEs could implement the methodology without spending resources on external consultants. Additionally, considering SMEs' lack of formal structures and general reluctance to invest in long-term initiatives, they designed flexible modules that SMEs can implement according to their own time constraints and resources.

The Rumbo Pymes program provides participating SMEs with a survey question set, software that computes survey findings, and several training modules. First, the person in charge of this initiative in the SME distributes the survey to employees. The survey measures five aspects of organizational culture: ethics of leadership; communication about ethics; rewards and sanctions; employees' understanding of ethical values; and frequency of observed misconduct. Based on the survey findings, SME leaders identify areas for training. If, for example, the organization performs poorly with respect to the ethics of leadership, they can take the training module on ethical leadership.

The modules are essentially the same "best practices" employed in large organizations, but customized for the needs of SMEs:

• Values and Standards of Conduct - At the core of any ethics program are norms, values and standards that guide the conduct of employees and the expectations of stakeholders. Transparencia's "ethical commitments" module facilitates the collaborative development of a statement that presents employees and leaders with a clear standard for the behaviors the enterprise expects from them.
• Leadership - All modules of the Rumbo Pymes program encourage ethical leadership. One module in particular focuses on specific tools for fostering culture change through leadership. The module emphasizes the fact that any of us has the power to inspire someone else to behave ethically through example and dialogue. The module teaches leaders to address ethical issues that arise in the organization as opportunities for learning. It provides tools for leaders to facilitate discussion about the issue in question and to guide staff through ethical decision making models. Leaders learn to instill a common sense of purpose in the SME based on the organization's values.
• Communicating standards and empowering employees to recognize ethical issues - Standards of behavior are only effective if employees are aware of them and understand what they mean for day-to-day conduct. The Rumbo Pymes training module helps leadership communicate the organization's standards of behavior. It also teaches employees to recognize ethical issues and to speak in terms of the organization's core values.
• Seeking advice about ethics and reporting misconduct - Rumbo Pymes provides SMEs with tools to receive and process confidential reports and requests for advice on matters related to inappropriate behaviors or that give rise to ethical dilemmas. The program suggests types of channels for reports or questions, such as a designated employee, a mailbox of messages. To encourage individuals to report misconduct, the program focuses on instilling a sense of responsibility in each employee for the ethical health of the organization. Lastly, it also employees mechanisms for conflict resolution through dialogue about ethics and values.

One of the key questions Transparencia faces now is how to assess the effectiveness of these programs, both internally in each organization and more broadly in enhancing ethical standards in the business community in Colombia.

Why are ethics programs important for SMEs in Colombia? - Making the case to donors, local stakeholders and - most importantly - to SME owners and employees

SMEs account for 92% of the country's commercial establishments and 40% of the total production of the country.(2) Providing SMEs - a vital part of the country's institutional and economic fabric - with the tools to conduct business ethically is critical to Transparencia's mission to "lead systematic corruption fighting efforts focused on transforming our public and private institutions so we may have effective and reliable organizations in Colombia, with upright citizens and companies." Furthermore, SMEs that do business in accordance with high ethical standards contribute to a sound business environment in Colombia (e.g. that promotes fair competition and a level playing field, private property rights, contract enforcement and lower costs of entry for new firms) which, in turn, promotes economic growth.(3) High ethical standards and good governance of SMEs are an integral part of Colombia's economic and social development.

A number of international donors recognize the development benefits of ethical conduct and good governance in SMEs. The value of a commitment to ethics by SMEs is also clear to multinational organizations who depend on the ethical conduct of their suppliers and distributors (and who have watched prosperous companies suffer serious reputational damages for the unethical conduct of their suppliers). Furthermore, Transparencia has been working in developing alliances with Colombian trade unions and large enterprises. The most difficult group to convince of the benefits of ethics in SMEs has been the SMEs themselves.

In order to "make the case" to SMEs to participate in the program, Transparencia presents the following points:

• Reputation: A sound ethics program adds value by protecting and enhancing the enterprise's reputation. Reputation is important for strengthening business relations and earning clients' loyalty in any enterprise, and is especially important for SMEs because i) they are usually involved in the production chains of large enterprises and their own sustainability may depend on maintaining positive relations with these clients; ii) a good reputation can facilitate access to financing services; and iii) a positive reputation reinforces capacity to export and be competitive in a context of globalization and international trade agreements.
• Corruption risks prevention: Ethics programs can educate SMEs about corruption and provide them with tools to conduct business honestly. As discussed previously, many SMEs engage in unethical (and illegal) practices to cut costs such as tax evasion, failure to comply with labor regulations and failure to register the enterprise. If detected, these enterprises incur crippling fines.
• Fostering teamwork: SME owners dedicate a substantial amount of time and energy to resolve conflict with or between their employees, and to motivate them to live the enterprise's mission. This work becomes easier when the relations among employees are based on ethical values supported by everyone in the enterprise.
• Organizational structure: Rumbo Pymes helps the enterprise develop organizational structures. Although flexible and designed to function without the comprehensive structures of large enterprises, program activities do help define business conduct and establish more efficient controls.

Transparencia por Colombia presently has 20 SMEs enterprises participating in the Rumbo Pymes program. They are working to augment participation through alliances with trade unions and partnerships with large corporations that have an interest in both enhancing ethical standards in the business community in Colombia and benefiting from suppliers and distributors dedicated to ethical conduct.

Authors:

Abby Davidson with Alma Rocio Balcazar, Henry Gil and Jenny Martínez
Ethics Resource Center 2005-04

Transparencia por Colombia, the ERC’s partner center in Bogotá, has developed a methodology for implementing ethics programs in small and medium enterprises (SMEs). 

by Abby Davidson (ERC) with contributions from the Rumbo Pymes team at Transparencia por Colombia: Alma Rocio Balcazar, Henry Gil and Jenny Martínez
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1. Under Colombian legislation, small enterprises have 11-50 employees and assets from $81,000 to $811,000; medium enterprises have 51-200 employees and assets from $811,000 to $4,800,000.
2. See Transparencia por Colombia's website: http://www.transparenciacolombia.org.co/
3. See Thorsten Beck, Asli Demirguc-Kunt and Ross Levine, SMEs, Growth and Poverty: Cross-Country Evidence. World Bank, Washington, D.C., November 2003, available at: http://www.worldbank.org/research/bios/tbeck/sme.pdf Drawing from a sample of 76 countries, this study demonstrates a correlation between a sound business environment (based on the four components of competition, private property rights, sound contract enforcement and low entry and exit barriers) and economic growth.