Week 4 - Debate an Ethical Issue

ETHICS

Why Ethical People Make Unethical Choices by Ron Carucci

DECEMBER 16, 2016

Most companies have ethics and compliance policies that get reviewed and signed annually by all

employees. “Employees are charged with conducting their business affairs in accordance with the

highest ethical standards,” reads one such example. “Moral as well as legal obligations will be

fulfilled in a manner which will reflect pride on the Company’s name.” Of course, that policy comes

directly from Enron.  Clearly it takes more than a compliance policy or Values Statement to sustain a

truly ethical workplace.

YOU AND YOUR TEAM SERIES

Creating an Ethical Workplace

When You Feel Pressured to Do the Wrong Thing at Work by Joseph L. Badaracco

Keep a List of Unethical Things You’ll Never Do by Mark Chussil

When Tough Performance Goals Lead to Cheating by Colm Healy and Karen Niven

Corporate ethical failures have become painfully common, and they aren’t cheap.  In the last

decade, billions of dollars have been paid in fines by companies charged with ethical breaches. The

most recent National Business Ethics Survey indicates progress as leaders make concerted efforts to

pay holistic attention to their organization’s systems. But despite progress, 41% of workers reported

seeing ethical misconduct in the previous 12 months, and 10% felt organizational pressure to

compromise ethical standards. Wells Fargo’s recent debacle cost them $185 million in fines because

5300 employees opened up more than a million fraudulent accounts.  When all is said and done,

we’ll likely learn that the choices of those employees resulted from deeply systemic issues.

Despite good intentions, organizations set

themselves up for ethical catastrophes by creating

environments in which people feel forced to make

choices they could never have imagined.  Former

Federal Prosecutor Serina Vash says, “When I first

began prosecuting corruption, I expected to walk

into rooms and find the vilest people.  I was

shocked to find ordinarily good people I could

well have had coffee with that morning. And they

were still good people who’d made terrible

choices.”

Here are five ways organizations needlessly

provoke good people to make unethical choices.

It is psychologically unsafe to speak up. Despite

saying things like, “I have an open door policy,”

some leadership actions may inhibit the courage

needed to raise ethical concerns.  Creating a culture in which people freely speak up is vital to

ensuring people don’t collude with, or incite, misconduct.  Elizabeth Morrison of New York

University, in Encouraging a Speak Up Culture, says “You have to confront the two fundamental

challenges preventing employees from speaking up.  The first is the natural feeling of futility —

feeling like speaking up isn’t worth the effort or that on one wants to hear it.  The second is the

natural fear that speaking up will lead to retribution or harsh reactions.” A manager’s reactions to an

employee’s concerns sets the tone for whether or not people will raise future issues.  If a leader

reacts with even the slightest bit of annoyance, they are signaling they don’t really want to hear

concerns.

There is excessive pressure to reach unrealistic performance targets. Significant research from

Harvard Business School suggests unfettered goal setting can encourage people to make

compromising choices in order to reach targets, especially if those targets seem unrealistic. Leaders

may be inviting people to cheat in two ways.  They will cut corners on the way they reach a goal, or

they will lie when reporting how much of the goal they actually achieved.  Says Lisa Ordonez, Vice

Dean and professor at the University of Arizona, “Goals have a strong effect of causing tunnel vision,

narrowly focusing people at the expense of seeing much else around them, including the potential

consequences of compromised choices made to reach goals.”  Once people sense the risk of failure,

they go into “loss prevention” mode, fearing the loss of job, status, or at-risk incentives. The

Veterans Administration learned this lesson the hard way when trying to address the 115-day wait

time in their Phoenix hospital. They set a new goal of reducing the wait to 14 days, which resulted in

an alleged 24-day wait. But employees said they felt compelled to manipulate performance records

to give the appearance of meeting these goals. As many as 40 veterans died waiting for care at the

Phoenix center, some more than a year. Organizations must ensure people have the resources,

timelines, skill and support they need to achieve targets they are given, especially ambitious stretch

goals.

Conflicting goals provoke a sense of unfairness. And once a sense of injustice is provoked, the stage

is set for compromise.  Maureen Ambrose, Mark Seabright, and Marshall Schminke’s research on

organizational injustice clearly shows a direct correlation between employees’ sense of fairness and

their conscious choice to sabotage the organization.  Consider one organization I worked with whose

pursuit of growth created conflicting goals. The head of Supply Chain was given a $3.5 million

capital investment to overhaul a plant to triple its production. Some of that funding came from the

25% budget cut in marketing in the same division.  At the same time, Sales divided its quota

territories to raise topline performance. The intensity of resentment in the salesforce at having to

drive revenues with smaller territories was compounded by having fewer marketing dollars to sell

more product. The conflicting goals created excess product capacity that was bottlenecked getting to

market.  Two years later, the organization was indicted for channel stuffing.

Too many leaders assume that talking about ethics is something you do when there’s been a scandal,

or as part of an organization’s compliance program.  Everyone gets their annual “ethics flu shot” in

the mandatory review of the compliance policy, and all is well for another year. Nick Eply, professor

at the University of Chicago, in Four Myths about Morality and Business, says, “It’s a myth to think

‘Everyone is different and everything is relative.’ You actually have to teach people the relative value

of principles relative to choices.”  Leaders have to infuse everyday activities with ethical

considerations and design policies and norms that keep ethics top of mind.  Jonathan Haidt,

Professor of Business Ethics at NYU and founder of says, “It’s important to talk about the positive

examples of ethical behavior, not just the bad ones.  Focusing on the positive reasons you are in

business, and reinforcing the good things people do strengthens ethical choices as ‘the norm’ of the

organization.”

A positive example isn’t being set. Leaders must accept they are held to higher standards than

others.  They must be extra vigilant about not just their intentions, but how it is others might

interpret their behavior. While they can’t control every possible misinterpretation, leaders who

know their people well make careful choices in how they react to stressful situations, confront poor

performance, how politic they are in the face of controversy, and how receptive they are to bad

news.  Above all, even in what might be considered the smallest “white lie,” ethical leaders are

careful not to signal that hypocrisy is ok.  As an example, a leader may casually review an

employee’s presentation and provide feedback like, “I think we need to take these two slides out —

that data is inflammatory and we don’t want to derail the ultimate outcome which is to convince the

budget committee to give us the resources we want.”  While the leader might presume he has acted

in the best interest of the group — going to bat for resources they need- the person building the

presentation has just been told, “We can’t tell the entire truth because it could prevent us from

getting what we want.”  Leaders must put themselves in the shoes of those they lead to see what

unintended messages they may be sending.

Organizations who don’t want to find themselves on a front-page scandal must scrutinize their

actions to far greater degrees than they may have realized.  In an age of corporate mistrust, creating

ethical workplaces takes more than compliance programs.  It requires ongoing intensified effort to

make the highest ethical standards the norm, and ruthless intolerance of anything less.

Ron Carucci is co-founder and managing partner at Navalent, working with CEOs and executives pursuing transformational change for their organizations, leaders, and industries. He is the best-selling author of eight books,

including the recent Amazon #1 Rising to Power. Connect with him on Twitter at @RonCarucci; download his free e-book on

Leading Transformation.

Related Topics: RISK MANAGEMENT | LEADERSHIP

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13 COMMENTS

Rashmi Airan  7 months ago

“When I first began prosecuting corruption, I expected to walk into rooms and find the vilest people. I was shocked to

find ordinarily good people I could well have had coffee with that morning. And they were still good people who’d

made terrible choices.” This is something I can strongly relate to, having made poor ethical choices to work with a

shady client as an attorney. I was indicted and served a prison sentence because I did not listen to that wrenching

feeling in my gut that told me to ask more questions. It's now my mission to fight for ethical vigilance.

https://www.rashmiairan.com/ethical-vigilance/  

I firmly believe that even good people can make bad decisions. Thank you for the article, very well written.  

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