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Ethics is in a broad sense, preferring right over wrong, or preferring a certain set of values over others. Many organizations have ethics policies that define right and wrong. West Point, for instance has a policy that states, "A cadet will not lie, cheat, or steal, or tolerate those who do." Such ethical values define how people interact in and outside the group and guides decision making.
Almost all decisions have ethical connotations. Ethics apply primarily to effect trade offs between values and norms that collectively represent ethical considerations, and bottom line or purely altruistic considerations. Adherence to ethical norms and values usually sustains long-term integrity whereas the altruistic bottom line approach, which in the strict sense is a type of ethical value in itself, orients itself to short term gains that very often fritter away in the long term.
One classic case of application of ethical values or the lack of them, is the recent instances of banks offering risky loans to customers. Bankers, in their greed to earn more commissions inflate a client’s base salary with uncertain overtime and bonuses to increase their cash coverage ratio and make them eligible for a higher loan beyond their actual repayment capacity. This ultimately led to default and caused the financial crisis of 2009. The banker’s action was considered legal at the time, yet unethical. Disregarding ethical principles allowed banks to gain in the short term, but eventually not applying a strict ethical filter led to bankruptcy and foreclosures.
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Application of Ethics
Kenneth Blanchard and Norman Vincent Peale, in their 1988 bestseller The Power of Ethical Management, recommends decision makers to ask the following questions to determine the extent to which the proposed decision grounds in ethical considerations:
- "Is the decision fair?"
- "Will I feel better or worse about myself after I make the decision?"
- "Does the decision break any organizational rules?"
- "Does the decision break any laws?"
- "How would I feel if the decision was broadcast on the news?"
For instance, economic meltdown that leads to client bankruptcy might end a software development project abruptly midway, with no possibility of revival. The project manager taking a purely bottom line approach would simply fire the staff working on this project and if not needed elsewhere, simply cut his losses. Applying the ethical filters may lead to a different decision.
In the example above, the decision to fire is not fair to employees, as they lose their job at no fault of their own. It is also not be fair to end customers who expected this software to make their payment processes easy. The decision to lay-off and abandon the project however, might not break any organizational rules or any laws, but no project manager would like the news of abandoning a project midway to appear in the local news. The ethical filters force the project manager to brainstorm and conclude that firing employees and abandoning projects would not solve the problem, for the company would soon have to take the same approach to most projects affected by the economic slowdown. The company may then seek alternatives such as the completing the software in-house with modifications to sell it as a generic financial planning toolkit, cutting corners to retain the staff until another project comes by, and other options.
The question of cutting costs may require decisions such as not giving yearly bonuses, which pose another ethical dilemma. The decision to deny bonuses may be fair and logical considering the alternative of bankruptcy and job losses. The manager may not like the idea of denying bonuses, but the manager has to make tough decisions, and the ultimate priority of saving the company from bankruptcy makes the decision the preferred option. The fact that no organizational policy or law actually required payment of a bonus in the first place makes the decision easy. The dire nature of the situation, and the actual purpose of taking this decision would sound good in the local news, if presented correctly.
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The Influence of Culture
Ethical norms and values that compete with the altruistic approach depends on many factors, but cultural factors such as upbringing, religion, philosophical outlook, education, and normative dos and don'ts prevalent in the society all play a key role in influencing and shaping ethical values. Many organizations have a distinct culture, which among other things shapes its ethical outlook.
Religious morals play a major role in determining what is right or wrong in almost all societies. For instance, much of the conventions on moral rights or wrongs in America are based on the Judeo-Christian heritage or the Ten Commandments specifically, even if the society remains vastly secular. In China, the sayings of Confucius may replace Judeo-Christian heritage as the yardstick to determine moral rights and wrongs. Similarly, in much of the Middle East, Islamic teachings serve as the yardstick to determine right and wrong. Applying such religious morals, a project manager working under a tight deliverable schedule in Dubai may face an ethical dilemma of asking an employee to work overtime on Friday, the Muslim holy day, and the weekly day off in the country. The same ethical dilemma in the United States changes to asking an employee to work on weekends to meet deadlines. This dilemma is regardless of the decision, and independent of workplace diversity requirements.
The Protestant work ethics or Puritan work ethic that placed value on hard work as a component of a person's calling and worldly success as a result of personal salvation rather than the other way around, influenced decision making considerably in 17th Century Europe and was a guiding spirit in the spread of mercantilism and commerce. Protestant work ethics have led to incorporation of values such as hard work, effective working practices, and self-reliance as bedrocks of work ethics in the American and Western society. Similarly, values such as "One good deed deserves another," "A gentleman's word is his bond," and "give the Devil his due," all shape work ethics. For instance, a project manager having verbally committed to a bonus at the completion of the project may find compelled to honor the commitment, even when project scope had ensured that the project actually ended in heavy loss for the company, and there remained no legal or contractual basis for such a bonus.
All people apply ethics, but the values that shape ethics, such as stability, conformity, precision, endurance, security, reliability, tradition, or established power depend on factors such as the societal norms, circumstances of upbringing, time spent during formative years, and more. For instance, Saddam Hussein applied ethical principles just as Americans do, the difference being American ethics centered on societal core values such as life, liberty, and the pursuit of happiness whereas Saddam’s ethical yardstick was loyalty and subservience to his Baath party.
The impact of culture on decision making also permeates to other levels. A person’s education level and worldliness may for instance shape decision-making skills. People with low education and low awareness usually fall to scams such as money-chain frauds and Ponzi schemes. Such people on acquiring wealth and becoming business owners tend to assume high-risk projects. In contrast, people with education and awareness may proceed with caution, undertaking a thorough risk analysis before deciding on a project. Similarly, educated white-collar employees may understand the importance of meeting deadlines and remain amenable to overtime where uneducated blue-collar employees may place high value on their assigned weekends, come hell or high water.
The influence of culture on ethics is fundamental to the extent people with different cultural value systems remain confused, frustrated, and even aghast at the decisions made by others. For instance, a U.S. business partner may find it difficult to understand his Indian business partner's decision to let go of a lucrative business opportunity as the group to which the Indian partner belonged to does not rate the project highly. Similarly, Japanese may find it unsettling when the policies of a U.S. company change along with the management.
Ethics and culture affect decision making and organizations that understand this fact and try to improve the quality of their decisions by articulating a clear-cut ethics policy and shaping culture to the desired values, remain in good stead to succeed.
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- Blanchard, Kenneth & Peale, Norman Vincent Peale. (1998) “ The Power of Ethical Management", New York: William Morrow and Company, Inc
- Walden University. “Ethics and Business Decision making." http://thinkup.waldenu.edu/management/leadership-and-decision-making/item/11901-ethics-business-decision-making.%20Retrieved%20June%2022, 2011.
- Robertson, Chris & Fadil, Paul A. "Ethical Decision Making in Multinational Organizations: A Culture Based Model." Texas A&M University. http://worldroom.tamu.edu/Workshops/CommOfRespect07/MoralDilemmas/Ethical%20Decision%20Making%20in%20Multicultural%20Organizations.pdf. Retrieved June 22, 2011.
- National Defense University. "Strategic Leadership & Decision Making: Values and Ethics." http://www.au.af.mil/au/awc/awcgate/ndu/strat-ldr-dm/pt4ch15.html.%20Retrieved%20June%2022, 2011.
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