Ethics and Decision Making

There are two ways to think about the relevance of ethics to decision making. The first is making decisions that are ethical; that is, choosing alternatives that are consistent with a set of moral values, norms, and standards. Take a marketing associate who wants to learn consumer opinions about her company’s products. She believes that people will give more honest responses if she says she represents an independent research firm. Her company may be better off if she misrepresents herself, but would doing so be ethical? In a society that values not lying, deciding to disclose her employer’s name is an example of making an ethical decision.

The second way ethics relates to decision making is that some choices involve ethical dilemmas; these involve instances where there are competing claims on what is the “right” thing to do. For example, a hospital may consider closing a costly neighborhood-based clinic for fiscal reasons. Doing so would help the hospital maintain its financial stability and thus its ability to serve a large group of seriously-ill patients, but keeping it open would continue to benefit those in the community who rely on it for routine health care. The decision that needs to made involves choosing between two incompatible “goods;” no matter the choice, some party will be made worse off.

When we talk about ethical behavior, what we’re really talking about are the results of ethical decisions. Beyond the choice itself, a decision maker must opt to follow ethical principles in order to make an ethical decision. This may be a conscious choice, as when someone grapples with an ethical dilemma seeking to resolve it consistent with some set of values; but it may also be done subconsciously or by habit when a person acts instinctively based on her own moral compass to make judgments and choose between alternatives.

Ethics and Decision Bias
Cognitive biases can influence moral judgment and create ethical blind spots. Those blind spots can lead managers to act unethically unintentionally because they are not fully aware of the ethical issues or consequences. Traditionally, organizations have tried to promote ethical decision making and behavior through training that emphasizes the moral components of decisions and encourages managers to choose the most ethical path. This training assumes we make explicit choices between behaving ethically and cheating on behalf of ourselves or our organization.

It’s true that there will always be a small number of “bad apples” in organizations who consciously decide to deceive others for their own benefit, but less deliberate unethical behavior may be far more common. Indeed, all of us are susceptible to unconsciously scrubbing the ethical dimensions of decisions from our minds, a process known as “ethical fading.”  Aspects of everyday work life, including goals, incentives, rewards, and organizational norms, can lead us to classify a decision as a “business decision” rather than as an “ethical decision,” for example, a reframing that increases the likelihood we will behave unethically.

In the early 1990s, for example, Sears, Roebuck and Co. gave its auto repair staff the goal of achieving a challenging daily sales target that led staff to overcharge for their services and make unnecessary repairs. When news of the unethical behavior leaked, Sears suffered a hit to its reputation that lasted for years. Similarly, energy-trading Enron collapsed into bankruptcy in 2001 in part because of its practice of giving its salespeople huge bonuses for meeting challenging revenue goals. In these cases, organizational structures created perverse incentives that led individual decision makers to behave at odds with their moral code—perhaps without consciously recognizing they were doing so.

For decades, national and international cycling associations failed to investigate widespread rumors that many of the top athletes in the sport were, against the rules, taking drugs to enhance their performance. Investigations by outside parties revealing that Lance Armstrong and other star cyclists had engaged in doping and lied in court to cover up their rule-breaking were a major blow to the sport. Why did the cycling world turn a blind eye to this unethical behavior? Decision makers likely were affected by a bias known as “motivated blindness”, or the common failure to notice others’ ethical lapses when we benefit from their behavior and when confronting that behavior would harm us.  Higher-ups in cycling organizations risked harming the sport financially and potentially losing their jobs if they had viewed accusations of doping and cover-ups critically.

A similar situation appears to have played out in the United States in the 1990s when Arthur Andersen and other “Big 5” accounting firms failed to report or even detect fraudulent behavior by clients like Enron during the course of their audits. Because auditors depend on their customers for future business, they face strong incentives to rationalize suspicious business practices and sign off on their financial statements. Such conflicts of interest lie at the heart of motivated blindness. It is almost impossible to view information without bias when we have a stake in the outcome.

Ethical Decision Process
Research suggests that in some ways ethical decision making is no different from any other type of decision making. One study looked at how managers made daily decisions in general, work-related decisions with and without a clear ethical dilemma, and non-work-related decisions. It studied the use of objective and subjective information, consideration of consequences, type of communication with others (e.g., e-mail vs. face-to-face), and the rationale used to support the decision. The results showed that while there were differences between people in their approach to decision-making, individuals tended to follow a similar decision-making process for all types of decisions they made. The researchers concluded that there was no real distinction between the process followed in ethical decision making and that used for other types of decision making.

Even though the structure of the decision process may be the same, what happens at each step of the process will reflect the ethical component of a decision. Recall that part of the rational decision making model is identifying the relevant criteria on which to base the decision. All types of decisions have an ethical or moral dimension to the extent they have an impact on others. It follows that one criteria that should be used for every decision is whether or not an alternative is ethical.

If such a criteria is used, then the analysis portion of decision making that considers the ethical dimension should identify the affected parties (i.e., stakeholders) and their respective values and perspectives. It must also consider the question of obligations to those parties in the context of the consequences that affect them. These are duties owed not because one is legally bound as, for example, with a fiduciary duty or the duty of care. Rather, they are obligations that arise from a sense of right and wrong; for instance, being benevolent toward others or acting with integrity and trustworthiness.

When choosing between alternatives, another step in the rational decision process, ethical reasoning must be applied. This involves using different frames such as utilitarianism, social justice, or the common good perspective to evaluate whether a choice is compatible with a set of ethical values. There are other tests that can be used to assess the options. In an organization, there’s the question of whether the choice is consistent with a code of ethics or conduct. The publicity test asks whether you would be comfortable seeing the decision reported in a newspaper; the answer indicates whether you believe the choice is consistent with social norms. Another screen to use is the defensibility test: could you explain the issue and the choice to colleagues, family, or friends and be comfortable with it? The reversibility test asks whether if you were the one adversely affected by it you would respect the rationale behind the decision.
References

Elm, D.R. and T.J. Radin. “Ethical Decision-making: Special or No Different?” Ethics and Business Law Faculty Publications. Paper 38. (2011).  http://ir.stthomas.edu/ocbeblpub/38

 

Fisher, L.M. “Sears Auto Centers Halt Commissions After Flap.” The New York Times 23 June 1992 http://www.nytimes.com/1992/06/23/business/sears-auto-centers-halt-commissions-after-flap.html

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