Operations Management and Decision-Making Models

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MBA503 – Operations

Management and

Decision-Making Models

Workshop 8 - Conceptual

models for ethical decision-

making

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Student Activity

On the right is a list of words associated with the work

ETHICS. In small groups think of at least three more.

If you were drawing a word cloud – which word would

be the biggest to the smallest.

is an example of an operations management word

cloud

• Morals

• Values

• Character

• Law

• Principles

• Conduct

• Integrity

• Right

Adobe Stock 2019

Lesson Learning Outcomes

1 Develop an understanding of ethics, morals, values,

integrity and principles as concepts

2 Realise the complexity to organisations in operating

as an ethical organisation and how they can be

reinforced

3 Appreciate strategies, models and approaches which reinforce business ethics

4 Recognise the role frameworks of ethical decision making in informing business ethics

LEARNING OUTCOME 1

Develop an understanding of ethics,

morals, values, integrity and principles

as concepts

What is Ethics?

Ethics

Accepted community

values

Standards of right and

wrong

Can be the study of ethics

Beliefs and values

Rights and obligations,

What humans

ought to do

Student Activity

What makes

legality different and the same as the other

words?

What makes

morality different and

the same as the

other words?

What makes Integrity different and the

same as the other

words?

What makes ethics

different and the

same as the other

words?

Ethics Integrity

Legality Morality

Differences and connections between Values,

Principles and Purpose

Tell us what is good

• They are things we strive for, desire and seek to protect

Values

Tell us what is right

• Outline how we may or may not achieve our values

Principles Is our reason for

being

• It gives life to your values and principles

Purpose

Ethics.org.au

Morality and the law M

o ra

li ty

h e

L a

Complying with the

law does not

necessarily

guarantee moral

behaviour, just as

breaking the law

does now always

result in immoral

behaviour

Acting immorally

does not always

result in illegal

behaviour, just as

acting morally does

not necessarily

guarantee the

legality of an action

Student Activity

Working in pairs:

• Can you think of an action that is illegal

but morally right?

• Can you think of an action that is legal but

morally wrong?

• Discuss your answers as a class.

Morality and the Law in Practice

An action can be illegal but morally right:

• Helping a Jewish family in Nazi Germany

• Non-adherence to segregation laws in the USA

An action that is legal can be morally wrong:

• Failure of a person with knowledge of first aid to

render assistance at the scene of an accident,

when there is no valid reason not to help

LEARNING OUTCOME 2

Realise the complexity to organisations

in operating as an ethical organisation

and how they can be reinforced.

Challenges - Business Ethics • To appreciate how

and why it is

challenging for

organisations to

operate ethically – an

appreciation of

business ethics is

critical.

In just about every

gangster movie there is a

scene where the mob

boss says, 'Hey, I’m just

a businessman.”

― William Hageman

Definitions of Business Ethics

• The application of a moral

code of conduct to the

strategic and operational

management of a business.

• Business ethics and therefore

business morality generally

result from an individual's own

moral standards in the context

of the political and cultural

environment in which the

organisation is operating.

At firms hit by

major scandals,

a culture of

making the

numbers at all

costs trumped

any concerns

about how the

targets were

met.”

Healy and Serafeim

(2019 45)

It sounds easy – doesn’t it?

A survey conducted by PwC in 2018 states

• In the previous year ≈ half of the 7,228 participants had experienced economic crimes or fraud in the previous year.

• This % increased by 30% in the last 10 years.

• The survey also showed that more than ½ of the criminals were employees.

(The Thing About Integrity, July-August p. 149 2019)

Business Ethics are hard!

• “Many corporate leaders don’t discover

the magnitude of integrity gaps until a

problem has blown up into a crisis and the

threat of government action or litigation

looms”

• Soltes, (2019, p. 51)

Why is it happening?

• “A culture of making the numbers at all costs trumped any concerns about how the targets

were being met.”

• Executives at companies where problems were

occurring, dismissed or ignored the issues and

didn’t seem them as their problem.

• While ensuring compliance happened they

emphasised and rewarded sales and profit.

( Healy & Serafeim, G, 2019 July- August “How to scandal proof your company” July-

August 2019, Harvard Business Review, p. 42)

The ethical gap – between what is desirable

versus actual?

Think, Pair and Share

1) Think - By yourself – consider the list on the right.

Which one has the greatest

gap between desirable and

actual practice?

2) Pair – With the person next to you – how do your

list compare

3) Share - What does the whole class say?

• Health • Education • Government • Public Service • Banking, finance and insurance • Charities and NPOFP • Large corporations • Professional membership

associations

• Small to medium enterprises • Media • Trade worker association s

The Ethics Gap

The Ethical Expectation Cap (2018, p. 51)

Governance Institute of Australia 2018 – The Ethics Index 2018,

https://dcwebsvr.governanceinstitute.com.au

Student Activity

• View the following video:

• https://www.youtube.com/watch?v=9yslB

3BkDm8&feature=youtu.be

• What organisational norms are evident

here?

• You would be surprised how common this

situation really is.

View the following video:

Organisational Norms 1

• A major characteristic of an organisation is

its members’ shared acceptance of

organisational rules.

• Leaders / managers can experience role

tension – what it means to be ethical

versus efficient.

What is expected of an efficient manager What is expected of an

ethical person.

Organisational Norms 2

Organisational pressures can lead to unethical behaviour • The need to meet corporate objectives, to be a

team player, and to conform to organisational norms can lead otherwise honourable individuals to engage in unethical conduct.

Groupthink • Group members may have the illusion that the

group is invulnerable or that because the group is good or right, whatever it does is permissible.

Organisational Norms 3

Diffusion of responsibility

• Responsibility for what an organisation does can become fragmented or diffused throughout the group, with no single individual seeing himself or herself as responsible for what happens.

• In any large group or organisation, diffusion of responsibility for its actions can lead individuals to feel anonymous and not accountable for what happens.

LEARNING OUTCOME 3

Appreciate strategies, models and

approaches which reinforce business

ethics.

The Importance of Business Ethics

• Despite being hard – Business Ethics are

important

• The public – customers – expect and want

ethical behaviour

• Business needs to be truly acting in a way

which goes beyond purely profit-based

motivations, towards a model which works for

everyone – what is called the

Triple Bottom Line:

• People, Planet, Profit

•

Student Activity

In groups of 4 – list 5 ways that operations management can contribute to

the triple bottom line

Category List 5 examples

People 1

Planet 1

Profit 1

Overview of Ethical Decision-

Making Frameworks

Brown University (2019)

Frameworks for Ethical Decision-

Making 1

• In the consequentialist framework, we focus on the future effects of the possible courses of action, considering the people who will be directly or indirectly affected.

• We ask about what outcomes are desirable in a given situation, and consider ethical conduct to be whatever will achieve the best consequences.

• It is a pragmatic utilitarian approach.

www.brown.edu/academics/science-and-technology-studies/framework-making-ethical-

decisions

Frameworks for Ethical Decision-

Making 2

• In the duty framework, we focus on our

duties and obligations in a given situation,

and consider what ethical obligations we

have and what things we should never do.

• Ethical conduct is defined by doing one’s

duties and doing the right thing, and the

goal is performing the correct action.

www.brown.edu/academics/science-and-technology-studies/framework-making-

ethical-decisions

Frameworks for Ethical Decision-

Making 3

• In the virtue framework, we try to identify the character traits (either positive or negative) that might motivate us in a given situation.

• We are concerned with what kind of person we should be and what our actions indicate about our character.

• We define ethical behaviour as whatever a virtuous person would do in the situation, and we seek to develop similar virtues.

www.brown.edu/academics/science-and-technology-studies/framework-making-

ethical-decisions

Summary of Key Ethical Theories

• Virtue ethics states that character matters above all else. Develop and demonstrate the virtues of courage, compassion, wisdom, and temperance. Avoid vices like greed, jealousy, and selfishness.

• Utilitarianism holds that acting rightly involves maximising the amount of happiness and minimising the amount of suffering around you. The greatest good for the greatest number constitutes what is right and what is wrong.

Summary of Key Ethical Theories

• Kantianism emphasises the principles

behind actions rather than an action’s

results - being motivated by proper universal

principles that treat everyone with respect.

• Contract theory proposes thinking about

ethics in terms of agreements between

people. Doing the right thing means abiding

by the agreements that the members of a

rational society would choose.

Summary of Key Ethical Theories

• Care ethics focuses ethical attention on

relationships before other factors. Acting

rightly involves building, strengthening and

maintaining strong relationships. Acting

rightly thus displays care for others and for

the relationships of which they are a part.

To care ethicists, relationships are

fundamental to ethical thinking.

Applied Ethics

• The field of business ethics examines moral controversies relating to the social responsibilities of capitalist business practices, the moral status of corporate entities, deceptive advertising, insider trading, basic employee rights, job discrimination, affirmative action, drug testing, and whistle blowing.

• Issues in environmental ethics often overlap with business and medical issues. These include the rights of animals, the morality of animal experimentation, preserving endangered species, pollution control, management of environmental resources, whether ecosystems are entitled to direct moral consideration, and our obligation to future generations.

http://www.iep.utm.edu/ethics/

The problem and solution

• The Problem

“Despite govern- mandated corporate

expenditure systems to deter

white-collar crime, data and anecdotal evidence indicate

that it’s continuing to rise.

• The Causes

“Extensive research suggests that the

real culprit is not the systems but weak

leadership and flawed corporate cultures that push

employees to make the numbers at all

costs

• The Solution

Leaders need to broadcast that crime hurts everyone in the organisation, punish

perpetrators equally, hire managers with integrity, create decision-making processes that reduce

the opportunity for illegal or unethical acts and

champion transparency

(Idea in Brief, 2019, p. 44)

Morality and Professional Codes

• Professional codes of conduct are rules

designed to govern a given profession

(medicine, law, accountancy etc.)

• Professionals are understood to have agreed to

be bound by these rules.

• Violation of the professional code may result in

the disapproval of one’s peers and, in serious

cases, loss of one’s licence to practise that

profession.

Chartered Financial Analysts –

Code of Ethics

• Act with integrity, competence, diligence, respect and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession,

and other participants in the global capital markets.

• Place the integrity of the investment profession and the interests of clients above their own personal interests.

• Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and

engaging in other professional activities.

• Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.

• Promote the integrity and viability of the global capital markets for the ultimate benefit of society.

• Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.

Investopedia, 2019

https://www.investopedia.com/terms/c/code-of-ethics.asp

Ethical questions In order for companies to operate ethically, their leaders

need to operate ethically. Here are some recommended

questions leaders should ask themselves before making a

decision

1) Would I be happy for this decision to be headline new

tomorrow (also know as the Sunlight Test)

2) Is there an ethical non-negotiable at play?

3) Will my action make the world a better place?

4) What would happen if everybody did this?

5) What will this do to my character or the character of my

organisation?

6) Is this consistent with my values and principles

Business Ethics and Morals

• Moral behaviour can profoundly benefit

people and immoral behaviour can do

harm.

– Are products healthful or harmful?

– Are work conditions safe or dangerous?

– Are personnel procedures biased or fair?

– Is privacy respected or invaded?

Who judges what is ethical

behaviour - Australia?

Urban Dictionary (2019)

LEARNING OUTCOME 4

Recognise the role frameworks of ethical

decision making in informing business

ethics

Activity

• Read this case study:

http://public.tepper.cmu.edu/ethics/AA/mgmt

17-case.pdf

• Using the ethical theory allocated to your

group draft a response to the person

concerned.

http://public.tepper.cmu.edu/ethics/AA/mgmt17-case.pdf

Process for Applying the

Frameworks

1. Recognise an ethical issue exists

2. Identify and consider the parties involved

3. Formulate actions and consider alternatives

4. Make a decision and consider it

5. Act

6. Reflect on the outcome – are changes

necessary?

www.brown.edu/academics/science-and-technology-studies/framework-

making-ethical-decisions