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B School
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An important question for leaders: How ethical can we be?
Prof. James l. Heskett, Baker Foundation Professor, Emeritus, at Harvard Business School, writes an hbs working knowledge paper on how managers like to think they act ethically, but at the end of the day, their ethical action is subjective.
Issue Date - 22/12/2011
Umpires and referees favour the home team. That’s the conclusion of research by Tobias J. Moskowitz and L. Jon Werthheim that appeared in their recent book, Scorecasting: The Hidden Influences Behind How Sports Are Played and Games Are Won. It was a biased judgment on the part of supposedly unbiased referees and umpires.

They hypothesise that the cause is a natural tendency to avoid excessive booing by the home team crowd, particularly in the later stages of a contest in which unbiased behavior is most necessary. Of course one could ask, “Are they cheating, especially when they are probably unaware of what they are doing?”

In a new book Blind Spots: Why We Fail to Do What’s Right and What to Do about It, authors Max H. Bazerman, a professor at Harvard Business School, and Ann E. Tenbrunsel, a professor of business ethics at the University of Notre Dame, argue that something they call bounded ethicality leads “even good people to engage in ethically questionable behavior that contradicts their own preferred ethics.”

We do it when it is easy to do, when it is hard to verify, when we have insufficient time or information. We may do it in ways that allow us to preserve our perception of ourselves as an ethical person. Doctors experience it when they make diagnoses and prescriptions biased by their special training while maintaining their belief that they are putting their patients first.

It helps explain why people systematically regard themselves as being much more ethical than they really are. And it supports a conclusion that, unless ways can be found to reduce bounded ethicality, most ethics-based “education” is missing a large part of the problem. In fact, one study found that ethicists who teach the subject are less likely to return library books associated with their research than the general public is to return books that it borrows.

Why should this matter to us? Employees tell us in one way or another that the single most important characteristic of their job is “a boss who’s fair,” who hires, promotes, and recognises the right people. Nearly all bosses think they’re fair, a much larger proportion than is perceived by their employees.

As antidotes to blind spots, Bazerman and Tenbrunsel argue that we can change ourselves, in part through awareness of the phenomenon itself, putting in place “precommitment devices” that seal you to a desired course of action – imagining your eulogy, or reviewing decisions with a friend. For organisations, greater transparency and fewer silos, among other things, can help (as opposed to such things as signing codes of conduct et al).

How do we address these problems? Do we just hire more ethical people? Or do we help people see how they act in ways that are inconsistent with their more reasoned ethical preferences? What can organisations do to increase the likelihood of employees acting ethically? And, what can society do to change the institutions that guide individual and organisational behavior? Or is the problem beyond us? After all, how ethical can we be?

Our perceptions of whether we do “what’s right” depend on such things as the situation, the time frame, the expectations of others, and whether we are face-to-face with the object of our actions. And we are much poorer judges of whether we are doing what’s right than those observing us.

Ravindra Edirisooriya (a Senior Accounting and Finance Major at the Missouri Southern State University) asked, for example, “Can humans be ethical in one environment and unethical in another environment?” Anyone who has studied business cultures in various parts of the world probably would respond affirmatively. Gerald Nanninga (Vice-President, Retail Ventures Inc.) observed that “unethical decisions can often appear to be the ‘best’ decision when using a narrow time.

Turning to the core issue, why do we so often regard ourselves as more fair and ethical than we really are? Why do those with whom we interact judge us differently than we judge ourselves? Phil Clark (CEO, Clark & Associates) commented that “Ethics is in the ‘eye of the beholder,’ not the person carrying out the action.” We may rationalise our behaviors depending on pressure to meet deadlines, desire to further one’s career, or desire to protect one’s livelihood.

In an organisation, doing what’s right starts at the top. Individual managers play an essential role making sure that unethical behavior isn’t practiced. Vasudev Das (Doctoral researcher of Applied Management and Decision Sciences, Walden University) suggests that words of Krishna are appropriate here, to wit: “whatever action a great man performs, common men follow; and whatever standards he sets by exemplary acts, the entire world pursues.” The ‘highest behavior’ any leader can expect from those they lead is the ‘lowest behavior’ they demonstrate.

To the extent that fairness and ethical behaviors are in the eye of the beholder, good leadership involves establishing expectations and meeting them, probably through a process. Tata Institute of Social Sciences applies hiring practices that place a great deal of weight on “attitude” and “listening skills.” Trust is the cornerstone of an efficient and effective system. Bad things happen when it is undermined by unmet expectations or ethical blind spots.

Some of the responses from industry experts to the question of ethics were:
1. Ashraf Khan, Governance Advisor, De Nederlandsche Bank, Amsterdam: Excluding codes of conduct, ethic trainings et al from the described “precommitment devices” is a bit too rough of a statement. Precommitment devices are merely means to an end. Research described by Paul Stern, Dan Ariely and even Marc Hauser seems to indicate that activation of (dormant) norms helps us to “get back on track”. If signing a corporate code (a) reflects norms that are de facto not shared or (b) the code is not brought back now and then to re-activate us, it will be ineffective to precommit individuals. What I gathered from my own share of issues in life and my job as a corporate governance advisor is that once you start becoming more aware of your own behavior, it is a heck of a job to keep staying aware (while simultaneously there is no way back). Secondly, organisational checks and balances to maintain this awareness easily fall into a “tick the box” exercise (there and done, let’s get on with business). Finally, individual managers (tone at the top) play an essential role in making sure this doesn’t happen. And this, again, requires working on your own behavior first and foremostly.

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