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The values – attitude – behavior chain
Charles D. Kerns, Ph.D., MBA
Application: Values drive behavior and therefore need to be consciously stated, but they also need to be affirmed by actions.
Ethics is about behavior. In the face of dilemma, it is about doing the right thing. Ethical managerial leaders and their people take the "right" and "good" path when they come to the ethical choice points. The purpose of this article is to steer your thinking and action toward creating and sustaining an ethical workplace culture. Managerial leaders and their people are invited to explore how values, actions, and behavioral standards can help steer organizational behavior. Values Drive Behavior A well-used axiom in organizational behavior thought asserts that values ultimately drive our behavior. In a nutshell, values exert influence over our attitudes, and attitudes influence our behavior. Values are integral to attitude formation and to how we respond to people and situations. Extensive literature exists dealing with how values relate to effective managerial leadership. A review of this body of work leaves us with the clear picture that values are a key component of effective managerial leadership. There seems to be a subset of virtuous values that align with ethical behavior. In his book, Authentic Happiness, Martin Seligman has reviewed these core virtuous values that influence ethical behavior and appear to have universal appeal. My adaptation of these values as they apply to ethics follows:
Wisdom and Knowledge: The capacity to take information and convert it to something useful. Wisdom comes from capitalizing on one's experience to interpret information in a knowledgeable manner to produce wise decisions. A prerequisite to doing the right thing when facing an ethical dilemma is knowing what to do, knowing the difference between right and wrong. Self Control: The ability to avoid unethical temptations. The capacity to take the ethical path requires a commitment to the value of acting with temperance. Ethical people say "no" to individual gain if it is inconsistent with institutional benefit and goodwill. Justice and Fair Guidance: The fair treatment of people. Justice is served when individuals perceive that they receive a fair return for the energy and effort expended. For example, a leader's commitment to justice is tested continually with the allocation of organizational resources. Are certain individuals and groups given special treatment without regard to objective criteria by which to judge fairness? Ethical leaders value and embrace fair advice and guidance. Transcendence: The recognition that there is something beyond oneself more permanent and powerful than the individual. Without this value, one may tend toward self-absorption. Leaders who are motivated predominately by self-interest
and the exercise of personal power have restricted effectiveness and authenticity. Love and Kindness: The expression through words and deeds of love and kindness. Researchers have documented that there appear to be different types of "love." In an organizational context, love refers to an intense positive reaction to another co-worker, group and/or situation. An organization "with heart" allows for the expression of love, compassion and kindness among and between people, the goodwill which can be drawn upon when one faces ethical challenges. Courage and Integrity: The courage to act ethically and with integrity. These values involve discerning right from wrong and acting accordingly. They impel one to consistently do what is right without concern for personal consequences, even when it is not easy.
In practice, these six categories of virtuous values are intertwined. For example, the capacity to administer resources fairly and offer fair guidance to stakeholders along the way is supported by courage and integrity. Difficult decisions surrounding the allocation of limited resources leave some individuals and groups with less than they would prefer. The redeeming grace is the perception that such decisions are made with fairness and integrity. Unpopular decisions are easier to accept when they are perceived to be derived fairly and with integrity. Driving ethical behavior with values and attitudes requires that there be alignment among values, attitudes, and behavior. Examples of this alignment between each of the virtuous values, associated attitudes, and behavior are offered in Table 1. Table 1: Values ---> Attitude ---> Ethical Behavior Chain Value Wisdom and Knowledge Self-Control Attitude Experience promotes wisdom that helps convert information to knowledge. Self-control means effectively managing reactions to challenging situations and temptations. Acting justly and fairly is a long-term driver of ethical behavior; remember the "Golden Rule." The belief in a power and source outside oneself reduces self-serving actions and increases humility. Ethical Behavior Using knowledge to solve problems ethically and to do what is right. Putting personal motivations aside and acting with objectivity by doing what is right. Establishing just and mutually agreed upon criteria and administering them fairly to all people. Putting institutional and/or stakeholder interests above self interests. Identifying a personal purpose that is aligned with organizational mission.
Love and Kindness
Treating people with Recognizing and encouraging kindness helps increase the others for their contributions.
reservoir of positive affection and love. Courage and Integrity Ethics requires the courage Making unpopular decisions to do the right things based on fair consideration of consistently without regard the facts. to personal consequences. Putting Virtuous Values into Practice "What can managerial leaders do on a proactive basis to encourage ethical behavior? At least five practices help leaders steer their organizations toward ethical conduct. First, any gap between knowledge about what to do and actual actions needs to be closed. If you know what is the right thing to do, just do it. Unfortunately, too often "white collar" criminals will tell us that they knew what was right, yet they failed to do it. John Maxwell, in his recent book "There's No Such Thing as Business Ethics," explains various reasons for ethical transgressions, including that people just rationalize their choices with relativism. While the reasons for the transgressor's actions are varied and complex, the simple truth is that they failed to "do the right thing" in spite of their knowledge. They did not act with wisdom. Second, managerial leaders must be very deliberate about who joins their organization. Many organizational leaders believe that selecting people for their values is as important as selecting for skill sets. Jim Collins, in his compelling book Good to Great: Why Some Companies Make the Leap . . . and Others Don't, underscores how long-term success depends on putting the right people in place. Larry Bossidy, as CEO of Allied Signal, made people selection a top priority and considered it a key task of top management. Selecting people who share your virtuous values is critical to building an ethical culture and long-term business success. Third, new personnel need to be socialized into the organization so as to advance virtuous values. As an executive, I regularly attended new employee orientations to espouse the organization's values. As a way of promoting and influencing ethical behavior, it is very powerful for new employees to hear managerial leaders espouse core virtuous values and to see those values affirmed through the actions of others in the organization. Fourth, accountability and follow-up are critical in putting virtuous values into practice. Systems and procedures can remind people of commitments and help connect words or promises with deeds. In organizations with behavioral integrity, words and deeds count. When virtuous values are driving behavior, the alignment of words and deeds serves to advance the creation of an ethical work culture. Finally, managerial leaders can positively impact the practice of ethical behavior by fairly allocating organizational resources and linking them appropriately. All managerial leaders have five key resources to manage: people, money, capital assets, information, and time. Allocation of these resources and the process managers use to accomplish such distribution can create perceptions of equity and fairness, or inequity and
unfairness. Managerial leaders who value justice and fairness are more likely to deal the cards fairly -- thereby modeling ethical behavior -- than are those who do not. Behavioral Standards and Codes of Conduct: The Safety Net Ideally, managerial leaders and their people will act ethically as a result of their internalized virtuous core values. I like to think of this as ethics from the "inside out." Relying solely on this "inside out" approach, however, is simply naïve in many circumstances. Established behavioral standards and written codes of ethical conduct can help bolster virtuous values and promote ethical organizational behavior. Behavioral standards usually incorporate specific guidelines for acting within specific functional workplace areas. For example, a sales department may clearly outline criteria for expense reimbursements. Codes of ethical conduct have received varying degrees of attention over the past three decades. They can be categorized into three types: Type 1: Inspirational-Idealistic codes of conduct specify global themes such as "Be honest," "Show integrity in all matters," "Practice wise decision making," etc. Such themes are not anchored to specific behavior or situations. Type 2: Regulatory codes of conduct proscribe clearly delineated conduct. This type of code is designed to help as a jurisprudential tool when disputes occur. It is more of a "do and don't" approach. Type 3: Educational/Learning-Oriented codes of conduct offer principles to guide decision making and behavioral reactions into likely situations. This approach is compatible with building a learning organizational culture. For example, the principle and value of fairness might be applied to allocating a bonus pool. Managerial leaders responsible for this process could be engaged in scenarios wherein they would be asked to take "fair action" in making these allocations. Such learning experiences can serve to enlighten and inform so as to foster ethical decision making. Behavioral standards and codes of ethical conduct can help steer ethical behavior by offering a cue or written rule to remind personnel of the right thing to do--an "outside in" process for ethical behavior management. These standards and codes trigger peoples' internalized values, thus gaining strength through firm yet fairly administered consequences. The Ethical Behavior Formula Taken together, virtuous values, actions, and behavioral standards/codes can produce a "formula," such as that illustrated below, that may increase the likelihood of ethical organizational behavior: Virtuous Values + Aligned Action + Behavioral Standards/Codes --->Increased Ethical Behavior.
Consider adapting the six virtuous values and aligning them with key managerial leadership actions such as selection, employee orientation/socialization, and allocation of resources. Behavioral standards and/or codes of ethical conduct can be added as appropriate. Acting on these three formula components may serve to increase the display of ethical organizational behavior. Three Good Reasons to Apply the Formula There are at least three good reasons to practice ethical behavior in your organization. These reasons may motivate you to adapt the "formula" into your managerial leadership practice repertoire.
First, it is the right thing to do. Employees and external stakeholders alike want and deserve to be treated ethically. Taken to the extreme, a culture allowing unethical behavior can breed all manner of damaging and even criminal activity. Second, it makes economic sense. A mounting body of evidence shows that an emphasis on the softer sides of business, including ethics, positively influences the harder traditional bottom line. By listening to employees, effectively recognizing their work, and practicing good ethical behavior, managers have given a boost to such hard measures as operating earnings, ROI, and stock price. Third, in line with a growing trend to look beyond shareholder value to a broader stakeholder perspective, organizational ethical behavior becomes the socially responsible thing to do. Just think for a moment about the impact of Enron's, Tyco's and World Com's unethical behavior on their respective communities, workforces, and other stakeholders.
A Way to Apply the Formula To pull the virtuous values, proactive actions, and behavioral standards and ideas together, I offer you a checklist. The Ethical Behavior Enhancement Checklist is intended to help you promote and practice ethical organizational behavior. The Ethical Behavior Enhancement Checklist Instructions: For each statement below, on a scale of 1 to 10 (0 being lowest, 10 being highest) rate to what extent the statement is true and/or to what extent you currently practice this behavior. Please be candid since this checklist is self-directed and is intended to help you increase the presence of proactive ethical organizational behavior in your enterprise. 1. A set of virtuous values is clearly espoused. 2. Espoused values are routinely affirmed by my actions. (0 – 10) (0 – 10)
3. People in my organization would say that I talk and act in an ethical (0 – manner. 10) 4. People are selected based upon their alignment with our virtuous (0 –
values. 5. New organizational members are oriented to our virtuous values. 6. Systems and processes that hold people accountable for their words and actions are in place. 7. Decisions regarding resource allocation are made fairly. 8. People perceive resources to be distributed fairly. 9. As appropriate, behavioral standards and/or codes of conduct are specified. 10. The economic and people impacts of ethical behavior are measured.
10) (0 – 10) (0 – 10) (0 – 10) (0 – 10) (0 – 10) (0 – 10)
In reviewing your responses to the checklist, you are encouraged to identify the areas of greatest opportunity for improvement and begin a program of change in these areas. Ideally, responses in the range of 8 – 10 would be most desirable. Additional targets for continual growth and improvement can be identified as circumstances warrant. With this checklist in your hands, I challenge you to start measuring, tracking, and enhancing your organization's practice of ethical behavior. Remember, at the most basic level, ethics is about behavior. Doing the right thing is enhanced by espousing a set of virtuous values, aligning your actions with those values, and specifying in key areas those behavioral standards that will encourage others to steer their behavior in an ethical direction. For another look at ethical leadership by current business leaders, see “Dialogue with Four Executives.”
Endnotes 1_ Martin Seligman, Authentic Happiness (New York: Free Press, 2002). 2_ John Maxwell, There’s No Such Thing as Business Ethics (Boston: Warner Books, Inc., 2003). 3_ James Collins, Good to Great: Why Some Companies Make the Leap…and Others Don’t (New York: Free Press, 2001). 4_ See, for example, Jeffrey Pfeffer, “Business and the Spirit: Management Practices That Sustain Values,” Handbook of Workplace Spirituality and Organizational Performance, eds. R. A. Giacolone and C. L. Jurkiewicz (New York: M. E. Sharpe Press, 2003):29-45; and David Ulrich and Norman Smallwood, Why the Bottom Line Isn’t! How to Build Value Through People and Organization (New Jersey: John Wiley & Sons, Inc., 2003).
Daniel Robin & Associates
Making Workplaces Work Better
Seven Attitudes to Dissolve Conflicts
By Daniel Robin
If you notice yourself getting dug in or angry in the face of differing views, ask for a time out and step out of the content for a moment and notice if you are presently moving toward your true goal. If not, or if the situation is just getting too uncomfortable, check to see which of the seven strategies shown below would be most helpful in turning your conflict into collaboration. 1. Define what the conflict is about. Studies on spousal disputes showed that about 75% of the time, partners are fighting about different issues. Ask the other person "What’s the issue?" then "What’s your concern here?" or "What do you feel we are fighting about?" Eventually ask "What do you want to accomplish?" and "How can we work this out?" 2. It’s not you versus me; it’s you and me versus the problem. The problem is the problem. It’s stupid to try to defeat the other side, because after losing, the first thing the other side thinks is I need a rematch (and I’ll come back with more firepower so I can win this time). If we win at the other person’s expense, we also pay a price in the long run. We have a world of rematches of rematches of rematches. Don’t bring your adversaries to their knees, bring them to the table. 3. Identify your shared concerns against your one shared separation. Deal with the conflict from where the relationship is strongest (where you agree), not weakest. It’s easier and thus more likely to be effective if you move from areas of agreement to areas of disagreement, than the other way around. Find common ground by meeting the other person where they are. Acknowledge their viewpoint. Stand on this common ground as a stronger platform from which to work out respective differences. 4. Sort out interpretations from facts. Never ask people who have been in a fight what happened. You’ll get their interpretation, their opinion, their version of what occurred. Instead ask, "What did you do or say?" Then you get perceptions that are much closer to facts, not merely opinions. Facts help clarify perceptions, which is basic to conflict dissolution. 5. Develop a sense of forgiveness. Reconciliation is impossible without it. Many people are willing to bury the hatchet, but they insist on remembering exactly where they buried it — in case they need it for the next battle. Let it go completely (or decide when you will). A brilliant definition of forgiveness: "giving up all hope for a better past." 6. Learn to listen actively. Turn it around, from "when I talk, people listen to me," to "when I listen, people talk to me." Habit Five in Stephen Covey’s 7 Habits of Highly Effective People is "Seek first to understand, then to be understood." Take
time to backtrack and verify what you hear. Listen with the intent to understand; not with the intent to respond. Take the first step toward reconciliation by being willing to listen with the intention to understand, and by being willing to listen first. This unblocks the logjam of right/wrong thinking, of ego and power struggle, of compassion over fear. 7. Purify your heart. You can’t get conflict and violence out of other people without first getting it out of your own soul. We can’t eliminate the weapons of the world without first getting them out of our own hearts. Consider what you really want and find the place inside you that can lead you to it. Peace begins at home. Peace begins with you. Share this article with people around you. Experiment with these strategies, and you’ll be paving the way for peaceful and rewarding interactions in your business and personal life.
When Good People Do Bad Things at Work
Rote behavior, distractions, and moral exclusion stymie ethical behavior on the job.
By Dennis J. Moberg The news is full of the exploits of corporate villains. We read about how officials at Lincoln Savings and Loan bilked thousands out of their customers' retirement nest eggs. There are stories of the lies Brown and Williamson Tobacco executives told about the addictive nature of cigarettes and the company's subsequent campaign to destroy whistle-blower Jeffrey Wigant. Also in the news are the top managers at Time Warner who looked the other way rather than forego millions from the sale of rap music with lyrics that advocated violence directed at women and the police. Such acts are hard to forgive. Scoundrels such as these seem either incredibly weak or dangerously flawed. Yet not all corporate misdeeds are committed by bad people. In fact, a significant number of unethical acts in business are the likely result of foibles and failings rather than selfishness and greed. Put in certain kinds of situations, good people inadvertently do bad things. For those of us concerned about ethical actions and not just good intentions, the problem is clear. We must identify the situational factors that keep people from doing their best and eliminate them whenever we can. Problem No.1: Scripts One factor is something psychologists call scripts. This term refers to the procedures that experience tells us to use in specific situations. When we brush our teeth or congratulate a friend on the arrival of a new grandchild, we probably use scripts. Unlike other forms of experience, scripts are stored in memory in a mechanical or rote fashion. When we encounter a very familiar situation, rather than actively think about it, we reserve our mental energy for other purposes and behave as though we are cruising on automatic pilot. In a classic psychological experiment, people approached someone at an office machine making copies and asked, "May I please make just one copy because..." The person at the machine generally complied with this request, but the really interesting finding was that the likelihood of compliance was totally independent of the reasons stated. In fact, superfluous reasons such as "because I need to make a copy" were just as successful as good reasons such as "because my boss told me she needed these right away." Apparently, we have all experienced this situation so often that we don't give the reasons our full attention, not to mention our careful consideration.
One ethical lapse clearly attributable to scripts was Ford Motor Co.'s failure to recall the Pinto in the 1970s. The Pinto was an automobile with an undetected design flaw that made the gas tank burst into flames on impact, resulting in the death and disfigurement of scores of victims. Dennis Gioia, the Ford recall coordinator at the time, reviewed hundreds of accident reports to detect whether a design flaw was implicated. Later, he recalled, When I was dealing with the first trickling-in of field reports that might have suggested a significant problem with the Pinto, the reports were essentially similar to many others that I was dealing with (and dismissing) all the time..... I was making this kind of decision automatically every day. I had trained myself to respond to prototypical cues, and these didn't fit the relevant prototype for crisis cases. Situations like this occur frequently in the work world. Repetitive jobs requiring vigilance to prevent ethical lapses can be found in quality control, customer service, and manufacturing. In this respect, consider what happened when a nurse with a script that called for literal obedience to a doctor's written orders misread the directions to place ear drops in a patient's right ear as "place in Rear." Good people can inadvertently do very bad things. Scripts may also be at work when we come face to face with those who are suffering. In situations where we observe the pain of those in need, scripts permit us to steel ourselves against feelings of empathy. Most of us have been approached by the homeless on the street, exposed to horrific images on the television news, and asked for donations on behalf of the victims of natural disasters. According to research at the University of Kansas, scripts allow people to avoid responsibility for the suffering of others in situations when providing help appears costly. In work contexts, this might explain why businesspeople do not always respond philanthropically to documented cases of human suffering. What appears to be calculated indifference may actually not be calculated at all. Whenever there is repetition, there are likely to be scripts. Accordingly, the best way to eliminate the potential of scripts to result in nethical behavior is to keep people out of highly repetitive situations. Technology can and has been used to eliminate highly routine tasks, but job rotation is also an option. For example, The Daily Oklahoman newspaper of Oklahoma City cross-trains most of its editors and schedules them to switch roles often. This helps keep the editors mentally sharp. One editor who often switches roles from night to night commented: "You're fresh when you come to a particular job. Like last night I did inside [design], and it was a long and torturous night because of the large paper. But then again I turn around and do something thoroughly different tonight, so I don't feel like I'm trudging back to the same old rut again." Oklahoman News Editor Ed Sargent thinks editing quality has improved because those who switch roles are exposed to the different approaches their colleagues take to the job. "Every editor has different opinions, obviously, about what's a big error and what's a little error," he said. Although the original intent of the role switching was to distribute stress more evenly, a side effect is that the paper is probably less prone to ethical lapses.
Problem No. 2: Distractions Scripts are cognitive shortcuts that take the place of careful thinking. A similar human tendency is our mindless treatment of distractions. Think for a moment about the last time you drove to a very important meeting. Once there, were you able to recall any details of your journey? Most of us cannot, which demonstrates that when concentrating on completing an involving task, we don't deal well with distractions. This inattention to what is happening on the periphery can get us into trouble with our spouses and significant others, and it can also result in ethical lapses. In one very telling experiment, divinity students were told that they had to deliver a lecture from prepared notes in a classroom across campus. Half the students were told they had to hurry to be on time, and the other half were told they had more than ample time. On the way, the students came across a person in distress (actually an actor), who sat slumped motionless in a doorway, coughing and groaning. Shockingly, only 16 of the 40 divinity students stopped to help, most of them from the group that had ample time. To those in a hurry, the man was a distraction, a threat to their focus on giving a lecture. Ironically enough, half of them had been asked to discuss the parable of "The Good Samaritan." Mindlessness about distractions at work is most pronounced when employees, with limited means of gaining perspective, are encouraged to be focused and driven. The best way to combat this tendency is for senior managers to model the virtue of temperance. If the president of a company is a workaholic, it is difficult to convince employees to be open to problems on the outskirts of their commitments. In contrast, an organizational culture that facilitates work-family balance or encourages employee involvement in the community may move experiences that should not be seen as mere distractions onto the center stage of consciousness. Problem No. 3: Moral Exclusion A final problem that brings out the worst in good people is the very human tendency to morally exclude certain persons. This occurs when individuals or groups are perceived as outside the boundary in which moral values and considerations of fairness apply. The most striking example occurs during warfare when the citizens of a country readily perceive their enemies in demonic terms. Yet, this tendency to discount the moral standing of others results in us discounting all kinds of people, some of them as close as co-workers and valued customers. Greater awareness and extensive training have reduced some of the exclusion women and people of color have historically experienced. More work needs to be done in this area, as well as in other equally insidious forms of exclusion. One way such exclusion shows up is in our use of pronouns. If we are in marketing and they are in production, the chances are that the distance may be great enough for us to be morally indifferent to what happens to them. Similarly, if we use stereotypic terms like bean counter or sneer when we say management, then it is clear that people in these categories don't count.
Not surprisingly, one way to expand the scope of justice is to promote direct contact with individuals who have been morally excluded. One company that applied this notion in an intriguing way is Eisai, a Japanese pharmaceutical firm. In the late 1980s, Haruo Naito had recently become CEO, and his closest advisers expressed concern that his managers and employees lacked an understanding of the end users of Eisai's products. Hearing this, Naito decided to shift the focus of attention from the customers of his company's products—doctors and pharmacists—to their customers—patients and their families. Eisai managers, he decided, needed to identify better with end users and then infuse the insights from this sense of inclusion throughout the organization. This was a revolutionary idea for this company of 4,500 employees, but Naito believed his employees needed a more vivid reason to care deeply about their work. "It's not enough to tell employees that if they do something, the company will grow this much or their salary will increase this much. That's just not enough incentive," says Naito. "You have to show them how what they are doing is connected to society, or exactly how it will help a patient." Accordingly, Naito decided to send 100 managers to a seven-day seminar: three days of nursing-home training and four days of medical care observation. These managers were then sent to diverse regions throughout Japan, where they had to deal with different people, many of whom were in critical condition. They met patients with both physical and emotional problems; some of the patients they came in contact with died during their internships. This pilot program grew to include more than 1,000 Eisai employees. Pretty soon, even laboratory support personnel had to leave their benches and desks and meet regularly with pharmacists and hospital people. "Getting them out of the office was a way to activate human relationships," says Naito. Another way was to institute hotlines, which have generated product ideas. As a consequence, many new Eisai drugs were produced, including some that have promise in dealing with Alzheimer's disease. Clearly, moral inclusion was stimulated at Eisai at least insofar as the end users of its products are concerned. Failing to Bother Jesuit scholar James F. Keenan reminds us that "sinners in the New Testament are known not for what they did, but for what they failed to do—for failing to bother." We are all prone to this failure, but not necessarily because we are sinners. Repetition, distractions, and our natural tendency to exclude those unfamiliar to us cloud our best thinking and forestall the expression of our virtues. We owe it to ourselves to resist these pernicious influences, and we owe it to those in our work communities to help them to do the same.
The Ethics of Human Capital
By James O'Toole The business media today are fixated on the misdoings of a gallery of rogues: messieurs Ebbers, Skilling, Lay, Scrushy, Waskal, and Kozlowski. Not since the Robber Baron era have the names of corporate leaders been so infamous. And with that infamy has come demand for increased corporate social responsibility. This reaction is understandable, but what does it mean in practice? What specific social responsibilities should businesses assume? It seems to go without saying that executives must obey the law; so the renewed call for social responsibility must mean something more than that. Yet, it can't mean that businesses are responsible for addressing all of society's ills, including those they didn't create, or those over which they have little leverage. And, morally and logically, it can't mean that corporations can compensate for cooking the books by making large philanthropic donations. So what, in fact, is meant by corporate social responsibility? "'Tis a puzzlement," As Yul Brynner used to say. Perhaps a clue to what is meant can be found in the cryptic reference in Sarbanes-Oxley to the responsibility for creating an ethical "corporate culture." But corporate culture is as vague a concept as social responsibility. An idea that can mean almost anything is hardly a useful guide to action. However, when properly defined and understood, crating an ethical culture may be the most-responsible activity in which a corporate leader can engage. When Warren Bennis and I developed the term in Aspen in 1973, we spoke of a corporate culture as the complex whole of behaviors, values, norms, beliefs, and customs that characterize a specific organization. At the time, we were concerned with creating corporate cultures in which there was a good fit between the needs of employees and the conditions of employment. Nonetheless, given that ethics is now the focus, I believe it can be argued reasonably that the creation of an ethical corporate culture is the prime role, task, and responsibility of a virtuous leader. For that to be the case, an ethical corporate culture would be defined as one in which all the stakeholders of an organization are treated with due respect. That is, the legitimate needs of customers, owners, suppliers, host communities, and employees would be both acknowledged and addressed by an organization. Of those constituencies, the least problematic is the customer. If customer needs are not met, a company simply will go out of business. Likewise, if the needs of shareholders aren't met, management will be replaced, or the company will go out of business. So meeting those stakeholder responsibilities, and consequences of failing to do so, are relatively clear. In contrast, and in practice, treating employees with due respect is a far more ethically complex endeavor, and the consequences of the failure to do so are much murkier. Indeed, different companies will have quite different philosophies on the matter; even companies in the same industry and located in the same city, will have quite different interpretations of their ethical responsibilities to employees. For example, there are two major manufacturers of cast iron pipe, both situated in Birmingham Alabama. One, McWare, Inc., made news when it was revealed that it had been cited for something like 800 safety and environmental violations over the last eight years, including numerous cases in which employees had been maimed, burned, made ill, and even killed. Among other ethical shortcomings, workers at McWare had not been trained to handle the flammable
materials in the plant. In contrast, McWare's cross-town competitor, American Cast Iron Pipe, has been cited by Fortune as one of America's best places to work, one in which the training of its blue-collar workers is a priority, as is providing on-site medical care. Most important, American Cast Pipe's workers serve on committees that set and monitor plant safety and work rules. The point of this example is that, by definition, ethics and culture are matters of choice, and that corporate executives have more choice when it comes to how they treat their employees than they do with their other prime constituencies. But just because an ethical issue is complex or murky doesn't mean it cannot, or should not, be addressed, or that virtuous policies cannot be identified and implemented. Moreover, thoughtful analysis reveals that creating a culture in which employees are treated with respect has identifiable, and important, consequences. Some are quite indirect and unexpected For example, in Southern California, a crazed motorist recently attempted to commit suicide by driving his car onto railroad tracks. At the last moment, he thought the better of it, abandoned the car, and ran home. Unfortunately, seconds later a full commuter train crashed into the car, leading to terrible loss of life and to severe injuries to hundreds of people. The accident occurred directly in the back of a Costco Warehouse store. Almost immediately, the blue-collar Costco employees organized themselves into an emergency brigade, and, armed with forklift trucks and fire extinguishers, set out to rescue trapped passengers, and to deliver first-aid to the wounded. It is not coincidental, I believe, that Costco's culture stresses the importance of each worker, rewards all for taking individual initiative, and trusts them to solve problems in the absence of supervision and detailed rules. Costco is among the leaders in the retail industry in terms of making heavy investments in the training and development of its workforce. Hence, if the train accident had to occur, I believe the passengers were at least fortunate that they ended up near a group of people whose skills and instincts had been so well primed to spring to their aid. Of course, we cannot know what might have happened had the accident occurred outside a store owned by one of those retail chains that has adopted the currently more-prevalent human resource strategy: viewing employees as simply factors of production the cost of which needs to be minimized, if their jobs cannot be eliminated. But I will go out on a limb: I cannot help but suspect that people who are treated as fungible, told simply to obey their supervisors, and whose development is not seen as a corporate responsibility, would be far less-prepared to respond to an emergency as quickly, effectively, and appropriately as did the Costco people. The Costco approach of paying living wages, providing decent health care, and treating employees with dignity and respect by rewarding them for participating in self-management, was abandoned by many corporations in the 90s. Numerous companies went in the opposite direction believing, like Wal-Mart, that investing in workers is too costly, and that low-price competitors will drive them out of business if they do so. Sometimes that is true. But in many cases, I believe executives have room for choice. For example, as Fed-Ex has moved to a low-cost model for its drivers (even contracting out), in contrast, its competitor UPS has stayed with its commitment to long-term employment and high pay. For example, their drivers are paid 20% over market, their supervisors, 10% over market, and their CEO is paid way under market. Why has UPS made this choice? They believe their drivers are a key to corporate success, and that having informed and committed workers is the best way to serve customers. It is also the case that the leaders of UPS are former
drivers themselves, and as such they have moral empathy with their workers. They understand that the lowliest worker in the organization is as human as they are, with much the same basic needs. But many large corporations today have become depersonalized; not only do the executives not know their workers personally, they come from different educational backgrounds, and live in different neighborhoods. That makes moral empathy increasingly rare. For example, a few days ago I witnessed a two-hour discussion among corporate board members in which they debated what portion of their expected record high profits should go to top management, and what portion should go to shareholders, profits which could lead to a windfall of as much as a million dollars to the top people in the company. At the end of the discussion, they then reviewed the prime risks facing the company, ones that, if they were to occur, would reduce the profits to be shared by owners and executives, a major risk they identified was a possible increase in the minimum wage in China to $71 per month. Since all the company's manufacturing was in China, that event would greatly increase labor costs. The CFO then said the effect of the increase on the bottom line should be reduced by charging employees more for their room and board. That settled, the board and the executives present went on to other matters. In case you missed what happened, in effect the board decided that the way to guarantee their large bonuses was to reduce the net take home pay of their poorest paid workers. That is, people earning something like seventy dollars a month would earn less so that the bonuses of the highest paid people might not be reduced by a few percent. If that is not an ethical issue, I don't know what is. But I believe the board did not recognize that they had failed to address a major ethical issue. Although they knew that some of their workers already were subsisting on rice, and living as many as twelve to a small room, nonetheless the only ethical they spotted concerned the fairness of the bonuses of the highly paid executives, themselves. Unfortunately, this is probably not that extreme an example. In my frequent interactions with human resource executives from large US corporations, it is clear from what they say, and do, that the prevalent assumption is that the only part of the workforce that is indispensable, and therefore the part on which an investment in development is justified, is the few highly trained and skilled people at the top of the hierarchy. Moreover, in too few of those large corporations do managers believe they have a moral responsibility to address the needs of workers: instead, the assumption is that if workers do not like the conditions being offered, they are free to quit and look for employment elsewhere. In examining the ethics of that assumption, let me climb back off the limb and offer an example of consequences of corporate culture that requires no speculation. Let me describe the way in which Springfield Remanufacturing [now renamed] views its responsibility to its blue-collar workforce, most of whom have high school educations, or less. For nearly two decades, CEO of the company, Jack Stack, has treated those workers as his peers, deserving of the same respect he would give to them if the were ivy-leaguers. To begin, Stack takes the time to teach all his workers everything that might be taught to a student in an MBA class. He teaches them to read balance sheets, and income and cash flow statements. He then gives them the authority to use that information, to be not only self-managing, but then to share in the financial rewards that come from having a company full of people who are taking initiative. Thus, by treating his people with respect, they have the chance to grow,
and the company benefits from hiring whole humans, their brains and not just their hands. And one of the consequences is a truly ethical corporate culture: Can you imagine that anyone would try, or could get away with, cooking the books in such an environment? As the company's CFO says, "It is like having 700 internal auditors out there in every function of the company." In the words of former SAS CEO, Jan Carlzon, "An individual without information cannot take responsibility; an individual who is give information cannot help but take responsibility." Ultimately, the creation of an ethical culture depends on leadership. Particularly, on leaders who show respect for their people. For example, at W.L. Gore and Associates, the founder, the late Bill Gore, spent almost all his time meeting with small groups of employees, discussing his corporate philosophy, and explaining why he had divided the company's worksites so that the 5,000 Gore associates were each members of units with fewer than 150 people. He explained why the company practiced non-management, a system with no titles, no job descriptions, no bosses, and no hierarchy. When you are hired at Gore you are simply told, "Go find something useful to do." In place of rules, the company has four governing ethical principles: 1. Try to be fair with all associates, suppliers, customers. 2. Allow, help, and encourage all associates to grow in knowledge, skill, and scope of responsibility. 3. Make commitments and keep them. 4. Consult with others before making high-risk decisions that would endanger the enterprise. Bill Gore created this culture of trust, commitment, and community because he believed that every person is capable of making a contribution, each wants to be responsible, and all should be held accountable. There is an ancient ethical theory behind this way of leading organizations. In 400 BC, Aristotle argued that the task of a leader is to create conditions under which all followers can realize their full human potential. In this view, leadership is not about the leader's needs for wealth, power, and prestige; instead, it is about the leader's responsibility to create an environment in which followers can develop the capabilities with which they were born. Aristotle believed that the essence of being human was to grow and to develop one's innate capacities, and failure to do so was to neglect one's basic humanity. It was this point Jefferson was paraphrasing in the Declaration of Independence when he noted the goal of the new country being founded in 1776 was to provide conditions in which all citizens could pursue happiness. In Aristotle's terms, happiness means the realization of one's potential. Jefferson thought his new nation would succeed to the extent that its leaders create the opportunity and conditions under which all its people could develop their capacities. Today, given the nature of 24/7 work conditions, and the commitment to long hours that American corporations demand of employees, the only place where most people have the opportunity to develop their capacities is at work. Hence, if corporations do not provide the opportunity for their employees to grow, in effect, they deny them their basic humanity. That is why creating a culture in which the true and basic needs of employees is addressed is the core ethical issue in corporations today. If we translate Aristotle into these modern terms, he provides us with a set of ethical questions to determine the extent to which an organization provides an environment
conducive to human growth and fulfillment. And, Aristotle would say, not only does an ethical leader create that environment but, he or she does do so consciously, and not coincidentally. Motivation is important in ethics. Miami hoteliers cannot claim credit for sunny days, and leaders in Silicon Valley get no ethical credit for providing jobs that are accidentally developmental. Just because working with computers may be an inherently a developmental task, one is not necessarily a marvelous employer for providing people with that opportunity. Aristotle also asks the extent to which we as leaders observe decent limits on our own power in order to allow others to lead and develop. What he's saying is that leadership is inherently such a valuable thing in terms of our growth that, if leaders take all the opportunities to lead for themselves, and don't give others the chance to lead, they are denying their followers the possibility of growth. That's why he says leadership should be shared so that everybody has the ability to participate in it. He says that too many leaders turn their people into passive recipients of their moral feats, and there is nothing inherently ethical about that. In essence, here's the questions Aristotle asks leaders to ask themselves: To what extent do I consciously make an effort to provide learning opportunities to everyone who works for me? To what extent do I encourage full participation by all my people in the decisions affecting their own work? To what extent do I allow them to lead in order to grow? To what extent do I measure my own performance as a manager or leader both in terms of my effectiveness in realizing economic goals and, equally, in terms of using my practical wisdom to create conditions in which my people can seek to fulfill their own potential in the workplace? I do not pretend that it is easy for leaders to create ethical cultures. Tough sacrifices and trade-offs are demanded. For starters, leaders must learn to recognize that they have ethical responsibilities relating to employees, and then must behave courageously and consistently in terms of meeting those responsibilities. For example, during the extended 2001-04 recession, when hundreds of thousands of American workers were loosing their jobs, most corporate leaders assumed they had no other choice but to lay off workers. Nonetheless, out in Silicon Valley, the CEO of Xilinx, Inc, Wim Roelandts, believed there had to be an alternative to laying off workers, even when his company's profits plummeted by 50% in 2001. Even his own board and some of his top executives argued that the only way he could stem the flow of red ink was to lay off workers. But driven by his stated communitarian values of respect for employees, and the concomitant responsibility for providing for their development as human beings, he charged a task force of managers with finding alternatives to layoffs. They come up with a dozen programs that were put into place, including funding educational sabbaticals for workers and paying them modest stipends for volunteering in non-profit organizations. By the way, a year later, the company came roaring back, with all its employees imbued with deep commitment to making it a financial success. Significantly, Roelandts is a self-described "geek" engineer who discovered the importance of ethical analysis. He learned that leadership requires moral imagination, which begins with spotting ethical issues, asking oneself tough questions about the consequences of one's actions, and the creation of better alternatives when all those available have unacceptable consequences. Of course, this runs against prevalent assumptions not only about corporate finance, but also about leadership. In the dominant philosophy, called situational or
contingency leadership, there is only one dimension: A leader is simply measured in terms of her effectiveness at achieving a goal, whether that goal be profits or personal power. Jack Welch proudly proclaimed that he should be judged solely by the criterion of how much wealth he created for shareholders. The leadership philosophy of Wim Roelandts and Jack Stack stands in stark contrast. While they are as concerned as Welch with their effectiveness at producing results, they complicate the task of leadership by also asking to be evaluated on a moral dimension. In addition to effectiveness, they believe they must be judged by the extent to which they create a corporate culture in which the ethical principle of respect for people is never violated. Very few CEOs today set such high standards for themselves. Indeed, many successful and admired corporate leaders consciously reject such ethical measures of performance as inappropriate, impractical, and irrelevant to the task their boards have hired them to do, which is to create wealth. They say their responsibility is to their shareholders, not their employees, and if the social responsibility of employee development interferes with profit making then workers needs must be sacrificed. Aristotle would answer that virtuous leaders have responsibilities to both their owners and their workers, and, if there's a conflict between the two, it is the leaders' duty to create conditions in which those interests can be made the same. It almost goes without saying that this two-dimensional standard of leadership is doubly hard to meet, particularly because it entails practicing what one preaches, that is consistency between word and act. That constituency is known as integrity, and it leads to the most important element in creating an ethical corporate culture: trust. Unfortunately, it is in the realm of integrity that too many corporate executives are failing today. For example, at one of the nation's fastest growing financial services companies, the CEO speaks enthusiastically and proudly about his "valuesbased leadership," the value of his people being at the top of his list of things he says the company holds dear. The bank is a success. It has basically doubled its sales and doubled its profits over the last couple of years. While doing so, it has halved its workforce through domestic outsourcing and by selling off divisions and then contracting for the services of its former employees at lower rates. In essence, the policy of the company is to find ways to pay people less for doing the same work, and now with fewer benefits. What is interesting is that no one in top management, as far as I can discern, sees this as an ethical issue. It is simply considered what a company must do in order to succeed in business. And what is the effect on employee trust, morale, and the senses of community and commitment? I don't know, but I can't help but wonder how its employees would respond if a train were to crash behind the bank's headquarters. Creating an ethical corporate culture turns out to be a lot more difficult task than the authors of Sarbanes-Oxley anticipated. As smart as Aristotle was, even he couldn't provide a clear moral principle for the just distribution of enterprise-created wealth. He admits it's harder to distribute wealth fairly than it is to make it. Nonetheless, here are some Aristotelian questions virtuous leaders might ask themselves, particularly before giving themselves large bonuses at they same time they are outsourcing jobs to contractors who don't pay health benefits: • • Am I taking more in my share of rewards than my contributions warrant? Does the distribution of goods in the organization preserve the happiness of the community; does it have a negative effect on morale?
Would everyone in the organization enter into the employment contract under the current terms if they truly had other choices? Would we come to a different principle of allocation if all of the parties concerned were represented at the table?
We will all answers such questions differently, and that is to be expected. The only hard and fast principle is that an ethical culture is most likely to arise out of a process of rational and moral deliberation among all participating parties. Prescriptively, all Aristotle says is that virtue will certainly elude leaders who fail to engage in rigorous ethical analysis of their actions. The bottom line is that creating an ethical culture starts with asking ourselves tough questions.
A History of Business Ethics
By Richard T. De George The term 'business ethics' is used in a lot of different ways, and the history of business ethics will vary depending on how one conceives of the object under discussion. The history will also vary somewhat on the historian—how he or she sees the subject, what facts he or she seeks to discover or has at hand, and the relative importance the historian gives to those facts. Hence the story I'm going to tell will be somewhat different from the story someone else might tell in various particulars, and I hope that instead of being a dull recitation of facts it might in fact prompt some discussion at the end by those who would tell a somewhat different story. The story I will tell has three strands, because I believe the term business ethics is used in at least three different, although related, senses. Which sense one chooses therefore gives priority to nature of the history of the topic. The primary sense of the term refers to recent developments and to the period, since roughly the early 1970s, when the term 'business ethics' came into common use in the United States. Its origin in this sense is found in the academy, in academic writings and meetings, and in the development of a field of academic teaching, research and publication. That is one strand of the story. As the term entered more general usage in the media and public discourse, it often became equated with either business scandals or more broadly with what can called "ethics in business." In this broader sense the history of business ethics goes back to the origin of business, again taken in a broad sense, meaning commercial exchanges and later meaning economic systems as well. That is another strand of the history. The third stand corresponds to a third sense of business ethics which refers to a movement within business or the movement to explicitly build ethics into the structures of corporations in the form of ethics codes, ethics officers, ethics committees and ethics training. The term, moreover, has been adopted world-wide, and its meaning in Europe, for instance, is somewhat different from its meaning in the United States. The "ethics in business" sense of business ethics In this broad sense ethics in business is simply the application of everyday moral or ethical norms to business. Perhaps the example from the Bible that comes to mind most readily is the Ten Commandments, a guide that is still used by many today. In particular, the injunctions to truthfulness and honesty or the prohibition against theft and envy are directly applicable. A notion of stewardship can be found in the Bible as well as many other notions that can be and have been applied to business. Other traditions and religions have comparable sacred or ancient texts that have guided people's actions in all realms, including business, for centuries, and still do. If we move from religion to philosophy we have a similar long tradition. Plato is known for his discussions of justice in the Republic, and Aristotle explicitly discusses economic relations, commerce and trade under the heading of the household in his Politics. His discussion of trade, exchange, property, acquisition, money and wealth have an almost modern ring, and he makes moral judgments about greed, or the unnatural use of one's capacities in pursuit of wealth for its own sake, and similarly condemns usury because it involves a profit from currency itself rather than from the process of exchange in which money is simply a means.1 He also gives the classic
definition of justice as giving each his due, treating equals equally, and trading equals for equals or "having an equal amount both before and after the transaction."2 In the West, after the fall of Rome, Christianity held sway, and although there were various discussions of poverty and wealth, ownership and property, there is no systematic discussion of business except in the context of justice and honesty in buying and selling. We see this, for instance, in Thomas Aquinas's discussion of selling articles for more than they are worth and selling them at a higher price than was paid for them3 and in his discussion of, and, following Aristotle's analysis, his condemnation of usury.4 Nonetheless he justified borrowing for a good end from someone ready to lend at interest. Luther, Calvin, and John Wesley, among other Reformation figures also discussed trade and business and led the way in the development of the Protestant work ethic.5 R. H. Tawney's Religion and the Rise of Capitalism6 argues persuasively that religion was an essential part in the rise of individualism and of commerce as it developed in the modern period. The modern period, however, sought the divorce of the religious from the secular and politics from religion. In the process, economics and economic activity were similarly divorced from religion and joined with politics to form what was known as political-economy. John Locke developed the classic defense of property as a natural right. For him, one acquires property by mixing his labor with what he finds in nature.7 Adam Smith is often thought of as the father of modern economics with his An Inquiry into the Nature and Causes of the Wealth of Nations. Smith develops Locke's notion of labor into a labor theory of value. In modern times commentators have interpreted him as a defender of laissez-faire economics, and put great emphasis on his notion of the invisible hand. Yet the commentators often forget that Smith was also a moral philosopher and the author of The Theory of Moral Sentiments. For him the two realms were not separate. John Stuart Mill, Immanuel Kant, G. W. F. Hegel all wrote on economic matters and just distribution. Karl Marx, however, stands out as the most trenchant critic of capitalism as it had developed up through the Nineteenth Century, and Marx's critique in one form or another continues up to today, even when not attributed to Marx. Marx claimed that capitalism was built on the exploitation of labor. Whether this was for him a factual claim or a moral condemnation is open to debate; but it has been taken as a moral condemnation since 'exploitation' is a morally charged term and for him seems clearly to involve a charge of injustice. Marx's claim is based on his analysis of the labor theory of value, according to which all economic value comes from human labor. The only commodity not sold at its real value, according to Marx, is human labor. Workers are paid less than the value they produce. The difference between the value the workers produce and what they are paid is the source of profit for the employer or the owner of the means of production. If workers were paid the value they produced, there would be no profit and so capitalism would disappear. In its place would be socialism and eventually communism, in which all property is socially (as opposed to privately) owned, and in which all members of society would contribute according to their ability and receive according to their needs. The result would be a society (and eventually a world) without exploitation and also without the alienation that workers experience in capitalist societies.
Marx's notion of exploitation was developed by Lenin in Imperialism: The Highest Stage of Capitalism, in which he claims that the exploitation of workers in the developed countries has been lessened and the workers' conditions have improved because the worst exploitation has been exported to the colonies. His criticism has been adapted by many contemporary critics who claim that multinational corporations derive their profits from the exploitation of workers in less developed countries. Marx appealed to the workers of his time and helped start the labor movement, which improved the situation of the workingman. Marx's collaborator, Frederich Engels, saw the world as divided between those who follow Marx and those who follow religion, and the Marxists sought the hearts and minds of the workers. Refusing to yield the moral high ground, Pope Leo XIII in 1891 issued the first of the papal encyclicals on social justice, Rerum Novarum. As opposed to Marx, it justified private property, while seeking the answer to exploitation in the notion of a just wage, which was one sufficient "to support a frugal and well-behaved wage-earner," his wife and his children.8 Later popes followed Leo's example. Pope Pius XI in 1931 wrote Quadragesimo Anno, which morally attacked both Soviet socialism and laissezfaire capitalism, a theme continued by Pope John Paul II in Laborem Exercens (1981) and Centesimus Annus (1991). The U. S. Catholic Bishops in 1984 issued a Pastoral Letter on the U.S. Economy along the same lines, although more open to the U. S. free enterprise system. The aim of the encyclicals was not to propose any particular economic system but to insist that any system should not be contrary to Christian moral principles and should improve the conditions of the masses of humanity, especially of the poor and the least advantaged. Hence although the popes were critical of existing economic structures, the emphasis in the pulpits was still primarily on individuals living up to the demands of morality, including the giving of charity to those in need. The same is true of the Protestant tradition as of the Catholic, even though there is no central authority to issue documents such as the encyclicals. Perhaps the most influential protestant figure in this regard was Reinhold Niebuhr whose trenchant critique of capitalism in Moral Man and Immoral Society9 became the basis for courses in seminaries and schools of theology. In 1993 the Parliament of the World's Religions adopted a Declaration of a Global Ethic10 that condemned "the abuses of the Earth's ecosystems," poverty, hunger, and the economic disparities that threaten many families with ruin. The idea of ethics in business continues until the present day. In general, in the United States this focuses on the moral or ethical actions of individuals. It is in this sense also that many people, in discussing business ethics, immediately raise examples of immoral or unethical activity by individuals. Included with this notion, however, is also the criticism of multinational corporations that use child labor or pay pitifully low wages to employees in less developed countries or who utilize suppliers that run sweat shops. Many business persons are strongly influenced by their religious beliefs and the ethical norms that they have been taught as part of their religion, and apply these norms in their business activities. Aaron Feuerstein is a prime example of someone whose actions after fire destroyed almost all of his Malden Mills factory complex kept his workers on the payroll until he could rebuild. He has stated often and publicly that he just did what his Jewish faith told him was the right thing to do.
This strand of the story is perhaps the most prominent in the thinking of the ordinary person when they hear the term business ethics. The media carries stories about Enron officials acting unethically and about the unethical activities of Arthur Andersen or WorldCom, and so on, and the general public takes this as representative of business ethics or of the need for it. What they mean is the need for ethics in business. Business Ethics as an Academic Field Business ethics as an academic field, just as business ethics as a corporate movement, have a more recent history. The second strand of the story that I shall tell has to do with business ethics as an academic field. The 1960s marked a changing attitude towards society in the United States and towards business. The Second World War was over, the Cold War was ever present, and the War in Viet Nam fostered a good deal of opposition to official public policy and to the so-called military-industrial complex, which came in for increasing scrutiny and criticism. The Civil Rights movement had caught the public imagination. The United States was becoming more and more of a dominant economic force. American-based multinational corporations were growing in size and importance. Big business was coming into its own, replacing small and medium-sized businesses in the societal image of business. The chemical industry was booming with innovation, and in its wake came environmental damage on a scale that had not previously been possible. The spirit of protest led to the environmental movement, to the rise of consumerism, and to criticism of multinational corporations. Corporations, finding themselves under public attack and criticism, responded by developing the notion of social responsibility. They started social responsibility programs and spent a good deal of money advertising their programs and how they were promoting the social good. Exactly what "social responsibility" meant varied according to the industry and company. But whether it was reforestation or cutting down on pollution or increasing diversity in the workforce, social responsibility was the term used to capture those activities of a corporation that were beneficial to society and usually, by implication, that made up for some unethical or anti-social activity with which the company had been charged. The business schools responded by developing courses in social responsibility or social issues in management— courses which continue to thrive today. For the most part, in the 1960s such courses put an emphasis on law, and the point of view of managers prevailed, although soon that of employees, consumers and the general public were added. The textbooks paid no systematic attention to ethical theory, and tended to be more concerned with empirical studies than with the development or defense of norms against which to measure corporate activity. The history of the social responsibility movement is a story in itself and one that different people are writing somewhat differently. One version, by Archie Carroll, describes social responsibility as a pyramid that encompasses the four types of responsibility that businesses have: At the bottom is economic, then legal, then ethical and then philanthropic. And although some representatives of corporate social responsibility claim that they did business ethics before business ethics became popular and although some claim that what they do is business ethics, that is not the story of business ethics I am going to tell today.
Business ethics as an academic field emerged in the 1970s. Prior to this time there had been a handful of courses called by that name; and a few figures, such as Raymond Baumhart,11 who dealt with ethics and business. For the most part ethical issues, if they were discussed, were handled in social issues courses. Theologians and religious thinkers, as well as media pundits continued writing and teaching on ethics in business; professors of management continued to write and do research on corporate social responsibility. The new ingredient and the catalyst that led to the field of business ethics as such was the entry of a significant number of philosophers, who brought ethical theory and philosophical analysis to bear on a variety of issues in business. Business ethics emerged as a result of the intersection of ethical theory with empirical studies and the analysis of cases and issues. Norman Bowie dates the birth of business ethics as November 1974, with the first conference in business ethics, which was held at the University of Kansas, and which resulted in the first anthology used in the new courses that started popping up thereafter in business ethics.12 Whether one chooses that date or some other event, it is difficult to identify any previous period with the sort of concerted activity that developed in a short period thereafter. In 1979 three anthologies in business ethics appeared: Tom Beauchamp and Norman Bowie, Ethical Theory and Business; Thomas Donaldson and Patricia Werhane, Ethical Issues in Business: A Philosophical Approach; and Vincent Barry, Moral Issues in Business. In 1982 the first singleauthored books in the field appeared: Richard De George, Business Ethics; and Manuel G. Velasquez, Business Ethics: Concepts and Cases. The books found a ready market, and courses in business ethics both in philosophy departments and in schools of business developed rapidly. As they did, the number of textbooks increased exponentially. The field developed very similarly to the field of medical ethics, which had emerged ten years earlier in the 1960s, and the name paralleled that of the earlier field— although even whether the term "business ethics" should be adopted was discussed among the relatively small group that was engaged in starting what has become a field. The seminal work of John Rawls in 1971, A Theory of Justice, had helped make the application of ethics to economic and business issues more acceptable to academic philosophers than had previously been the case. Whereas most of those who wrote on social issues were professors of business, most of those who wrote initially on business ethics were professors of philosophy, some of whom taught in business schools. What differentiated business ethics as a field from social issues in management was 1) the fact that business ethics sought to provide an explicit ethical framework within which to evaluate business, and especially corporate activities. Business ethics as an academic discipline had ethics as its basis. While social responsibility could be and was defined by corporations to cover whatever they did that they could present in a positive light as helping society, ethics had implicit in it standards that were independent of the wishes of corporations. To that extent, 2) the field was at least potentially critical of business practices—much more so than the social responsibility approach had been. If we take Archie Carroll's pyramid, those in business ethics did not see ethics as coming after economics and law but as restraints on economic activity and as a source for justifying law and for proposing additional legal restraints on business when appropriate. As a result business ethics and business ethicists were not warmly received by the business community, who often perceived them as a threat—something they could not manage, preaching by the uninformed who never had to face a payroll.
The development of the field was far from easy, and those academics working in it initially also found a cool reception both from their colleagues in philosophy departments and from those in business and in business schools. The former typically did not see business as a philosophically interesting endeavor, and many of them had an anti-business mind-set. The latter questioned whether philosophers had anything of interest to bring to business. The initial efforts were tenuous, and more and more people entered the field who were often ill-informed, or who, in fact, adopted polemical attacks against or positions in defense of business. Many observers dismissed business ethics as a fad that would pass. Many misunderstood its aims and envisioned it as providing justification or a rationale for whatever business wanted to do. It took a number of years for the field to define itself, incorporate standards of scholarship and rigor, and become accepted. As a field, business ethics covered the ethical foundations of business, of private property, and of various economic systems. 3) Although the field was concerned with managers and workers as moral persons with responsibilities as well as rights, most attention was focused on the corporation—its structure and activities, including all the functional areas of business, including marketing, finance, management, and production. Related issues, such as the environmental impact of business actions, were included in most courses and texts, as were, with increasing attention, the activities of multinational corporations. As a field, business ethics included a good deal, but not all, of what was covered in social issues courses and texts, as well as giving structure to discussions of ethics in business. As it emerged by the middle of the 1980s it was clearly interdisciplinary, with the lines between philosophy and business research often blurred. Initial discussions of business ethics introduced students to two of the basic techniques of moral argumentation, that used by utilitarians (who hold that an action is right if it produces the greatest amount of good for the greatest number of people), and that used by deontologists (who claim that duty, justice and rights are not reducible to considerations of utility). Other approaches were soon introduced including natural law, virtue ethics (based on Aristotle), and the ethics of caring (often associated with a feminist approach to ethics). An initial philosophical discussion that arose concerned the moral status of corporations and whether one could appropriately use moral language with respect to them, or whether the only proper objects of moral evaluation were human beings and their actions. That controversy has not completely subsided, but most authors take into account the fact that most people do attribute actions and policies to corporations as well as to the individuals within them. What did the development of business ethics as an academic field add that common sense morality couldn't handle; and who was the target audience? Those in philosophy added a theoretical framework to the area that had been previously lacking. Within that framework they integrated both the personal responsibility approach that ethics in business emphasized and the social responsibility of business approach, which they pushed explicitly into the ethical realm by applying ethics to economic systems, to the institution of business, and especially to corporations. Common sense morality and the ethics in business approach that I described are fine for the ordinary, everyday aspect of ethics in business. Employees shouldn't steal
from their employers, and companies should cheat their customers. No one needs an academic business ethicist to tell them that. And if that is all business ethics had to contribute, it would indeed be superfluous. But what the business ethicists could add is not only arguments that show why most common sense judgments are indeed correct, but also the tools by which the morality of new issues could be intelligently debated. They could and did also join that debate—the debate for instance on whether affirmative action is justifiable, and even more basically, what affirmative action means. Ethicists analyzed and defended workers' rights, the right to strike, the ethical status of comparable worth in the marketplace, what constitutes bribery and whistle blowing, and so on. One need only look at the journals for the wide variety of issues that have been clarified, discussed, and argued—often to a conclusion. The moral status of leveraged buyouts, of greenmail, of outsourcing, of restructuring, of corporate governance raise complex issues to which ordinary common sense morality has no ready answers or obvious intuitive judgments. It is odd that no company would think of making a serious financial commitment without extensive study, but some people think that moral judgments should be made instantaneously and require no thought, study, debate or time. Levi-Strauss, long noted for governing by values, knew enough that it had a high level committee study whether it was appropriate to operate in China for three months before coming to a decision. If those in business ethics wrote only for themselves, however, one could well question the relevance of what they wrote to business. What they wrote helped inform a large number of teachers who teach business ethics, and in turn has influenced a large number of students who have gone on to be practitioners. Moreover, many of those in business have also turned to the writings of those in business ethics, or have asked them for guidance as consultants on issues or for help in writing corporate codes or designing training programs. The media as well frequently turns to those in the field for guidance, help, or sound bites. Many of the academics in business ethics have made an effort to open a dialogue with those in business, and have frequently been successful in doing so. The audience, therefore, has been not only colleagues and students, but also corporate managers and the general public. Mediating between the academic in his or her office and the corporate executive have also been a host of non-academic consultants, many of whom use the scholarly material to become informed about the state of the art and the arguments for or against various positions. Some of these act not only as intermediaries but, in a sense, as translators, translating technical jargon into business-speak. The development of the field, moreover, was not restricted to textbooks and courses. What differentiates earlier sporadic and isolated writings and conferences on ethics in business from the development of business ethics after the mid-70s is that only in the latter period did business ethics become institutionalized on many levels. By the mid-1980s there were at least 500 courses in business ethics taught across the country to 40,000 students. Not only were there at least twenty textbooks in the area and at least ten casebooks, but there were also societies, centers and journals of business ethics. The Society for Business Ethics was started in 1980. The first meeting of the Society for Business Ethics was held in conjunction with the meeting of the American Philosophical Association in December in Boston. Other societies turned increasing attention to business ethics, including the Social Issues in Management Division of
the Academy of Management, which had been established in 1976. Other societies emerged, such as the International Association for Business and Society. Still other societies, some specialized, and some general were formed as well. A number of European scholars became interested in the American developments and organized the European Business Ethics Network (EBEN), which held its first meeting in 1987. Many individual European nations in turn established their own ethics network or business ethics society. In general, the European approach to business ethics has placed more emphasis on economics and on social structures, with less emphasis on the activities of corporations as such, than the U. S. approach does. Both approaches were captured in the International Society for Business, Economics and Ethics, which was founded in 1989. That society in turn helped national groups throughout the world to develop local or regional societies of business ethics, so that now there are societies in a large number of both developed and less developed countries. Simultaneous with these developments were the founding of centers for business ethics at a variety of academic institutions, and the establishment of a number of journals dedicated to business ethics, in addition to those journals that carry articles in business ethics among others. The Bentley College Center for Business Ethics was founded in 1976 and continues as one of the leading business ethics centers. Over a dozen more appeared within the next ten years, and many others have been established since then around the United States and in countries around the world. The Markkula Center includes business ethics as one of its areas, as we well know. The first issue of the Journal of Business Ethics appeared in February 1982; the first issue of the Business Ethics Quarterly in January 1991; and the first issue of Business Ethics: A European Review in January 1992. A number of other journals in the field have appeared since then. The field has continued to develop as business has developed. By the mid 1980s business had clearly become international in scope, and the topics covered by business ethics expanded accordingly. Thomas Donaldson's The Ethics of Business Ethics (New York: Oxford University Press, 1989) was the first systematic treatment of international business ethics, followed by Richard De George's Competing with Integrity in Internal Business (New York: Oxford University Press, 1993). The focus on multinational corporations has been broadened in the light of the globalization of business to include ethical issues relating to international organizations, such as the World Trade Organization. Similarly, just as business has moved more and more into the Information Age, business ethics has turned its attention to emerging issues that come from the shift. By 1990 business ethics was well established as an academic field. Although the academicians from the start had sought to develop contacts with the business community, the history of the development of business ethics as a movement in business, though related to the academic developments, can be seen to have a history of its own. Business Ethics as a Movement Business ethics as a movement refers to the development of structures internal to the corporation that help it and its employees act ethically, as opposed to structures that provide incentives to act unethically. The structures may include clear lines of responsibility, a corporate ethics code, an ethics training program, an ombudsman or a corporate ethics officer, a hot or help line, a means of transmitting values within
the firm and maintaining a certain corporate culture, and so on. Some companies have always been ethical and have structured themselves and their culture to reinforce ethical behavior. Johnson & Johnson's well-known Credo was written and published by General Robert Wood Johnson in 1943. But most companies in the 1960s had paid little attention to developing such structures. That slowly began to change, and the change became a movement when more and more companies started responding to growing public pressure, media scrutiny, their own corporate consciences, and, perhaps most importantly, to legislation. We have already seen that big business responded to criticism in the 1960s by turning to corporate social responsibility, and the movement can be traced back to that period. The U. S. Civil Rights Act of 1964 was the first piece of legislation to help jump start the business ethics movement. The Act prohibited discrimination of the basis of race, color, religion or national origin in public establishments connected to interstate commerce, as well as places of public accommodation and entertainment. Many corporations added equal opportunity offices to their human resources department to ensure compliance, and in general the consciousness of business about discrimination, equal opportunity, and equal pay for equal work came to the fore. This in turn led to more consciousness of workers' rights in general, and of corporate America's need to respect them. The U. S. Occupational Safety and Health Act of 1970 enforced the mandate to take those aspects of workers' rights seriously. In the same year the Environmental Protection Act forced business to start internalizing the costs of what had previously been considered externalities—such as the discharge of toxic effluents from factory smokestacks. In 1977, following a series of scandals involving bribery by U. S. firms abroad including the Lockheed $12 million bribery case that led to the fall of the Japanese government at the time, the U. S. government passed the Foreign Corrupt Practices Act. The Act was historic because it was the first piece of legislation that attempted to control the actions of U.S. corporations in foreign countries. The Act prohibited U. S. companies from paying large sums of money (or their equivalent) to high level government officials of other countries to obtain special treatment. A number of companies prior to the Act had already adopted the policy of refusing to pay bribes as a matter of ethical principle. IBM, among others, was known for adherence to this policy, as was Motorola. The Act forced all companies to live up to the already existing ethical norm. Its critics complained, however, that it put U. S. companies at an unfair disadvantage vis-à-vis companies from other countries that were permitted to pay bribes. The U. S. government applied what pressure it could to encourage other countries to follow its lead, and finally twenty years later the OECD countries agreed to adopt similar legislation. In 1978 General Motors and a group of other U. S. companies adopted what are known as the Sullivan Principles, which governed their actions in South Africa. The signatories agreed that they would not follow the discriminatory and repressive apartheid legislation in South Africa and would take affirmative action to try to undermine apartheid not only by not following the existing South African apartheid statutes, but also by lobbying the South African government for change. Adherence to the Principles was seen as a way by which American companies could ethically justify doing business in South Africa. They were adopted in part as a response to public pressure on the companies to leave South Africa. The Principles have become a model for other voluntary codes of ethical conduct by companies in a variety of other ethically questionable circumstances.
By the 1980s many companies had started reacting to calls for ethical structures, and more and more started adopting ethical codes and instituting ethics training for their employees. Each wave of scandals, which seemed to occur every ten years or so, resulted in more pressure for companies to incorporate ethics into their structures. In 1984 the Union Carbide disaster at its plant in Bhopal, India, which killed thousands of people and injured several hundred thousand, focused world attention on the chemical industry. This led to the chemical industry's adopting a voluntary code of ethical conduct known as Responsible Care, which became a model for other industries. In 1986, in response to a series of reported irregularities in defense contracts, a special Commission Report on the situation led to the establishment of the Defense Industry Initiative (DII) on Business Ethics and Conduct, signed by thirty-two (it soon increased to fifty) major defense contractors. Each signatory agreed to have a written code of ethics, establish appropriate ethics training programs for their employees, establish monitoring mechanisms to detect improper activity, share their best practices, and be accountable to the public. The DII became the model for what has been the most significant governmental impetus to the business ethics movement, namely, the 1991 U. S. Federal Sentencing Guidelines for Corporations. That law took the approach of providing an incentive for corporations to incorporate ethical structures within their organizations. If a company could show that it had taken appropriate measures to prevent and detect illegal and unethical behavior, its sentence, if found guilty of illegal behavior, would be reduced considerably. Appropriate measures included having a code of ethics or of conduct, a high-placed officer in charge of oversight, an ethics training program, a monitoring and reporting system (such as a "hotline"), and an enforcement and response system. Fines that could reach up to $290 million could be reduced by up to 95 percent if a company could show bona fide institutional structures that were in place to help prevent unethical and illegal conduct. The result was a concerted effort on the part of most large companies to incorporate into their organizations the structures required. This led to the development of a corporate position known as the Corporate Ethics Officer, and in 1992 to the establishment of the Corporate Ethics Officer Association. The most recent legislative incentive to incorporate ethics in the corporation came in the Sarbanes-Oxley Act of 2002, passed as a result of a rash of scandals involving Enron, WorldCom, Arthur Andersen and other prominent corporations. The Act requires, among other things, that the CEO and CFO certify the fairness and accuracy of corporate financial statements (with criminal penalties for knowing violations) and a code of ethics for the corporation's senior financial officers, as well as requiring a great deal more public disclosure. Corporations have responded to legislative and popular pressure in a variety of ways. The language of social responsibility rather than explicitly ethical language is still probably the most commonly used. Self-monitoring of adherence to a corporation's stated principles and self-adopted standards is becoming more common, and some companies have voluntarily adopted monitoring of their practices, policies and plants by independent auditors. The notion of a Triple Bottom Line, which involves financial, social and environmental corporate reporting, has been adopted by a number of companies. Other popular reporting mechanisms include corporate environmental sustainability reports and social audits, which vary considerably in what is reported and how it is reported. Ethical investing is another aspect of the movement, and
mangers of ethical investment funds have begun proposing stockholder proposals as a means of encouraging more ethical behavior on the part of corporations in which they own stock. Nor is the business ethics movement confined to the Unites States. Other countries have adopted legislation similar to that of the United States, and the UN has developed a voluntary Global Compact for Corporations. The Compact, which was endorsed by all governments, contains nine guiding principles, which focus on human rights, labor standards, and the protection of the environment. Over 1,500 companies world wide have joined the compact, and it seems likely that more and more will feel the pressure to become signatories and to abide by the required standards. The business ethics movement, like business ethics itself, has become firmly entrenched. The concern for ethics in business continues. Business ethics as an academic field contributes discussion forums, research and teaching that inform both ethics in business and the business ethics movement. The business ethics movement is responsive to the other two and in turn has interacted with them. All three together make up the history of business ethics in its broadest sense. From an academic perspective, looking back over the past thirty or so years, a lot has been accomplished. A historian deals with the past and not the future. But looking to the future, it is easy to see that there is still a lot to do. Both globalization and the march into the Information Age are changing the way business is done and the ethical issues businesses face. If business ethics is to remain relevant, it must change its focus accordingly. If there is anything that the story I've told can teach us, it is that business ethics is neither a fad as some claimed early on, nor an oxymoron, as so many lamely joked. It is a vibrant, complex enterprise developing on many levels, with the three strands I've mentioned intertwining in complex, dynamic and fascinating ways. We can expect all three to remain vibrant and interacting for the foreseeable future. Notes 1. Aristotle, Politics, Book I, especially Ch. 8-10. 2. Aristotle, Nicomachean Ethics, ed. Roger Crisp (Cambridge: Cambridge University Press, 2000), p. 88.
3. Summa Theologiae, II-II, Question 77.
4. Question 78.
5. (See Max L. Stackhouse, Dennis P. McCann and Shirley J. Roels, with Preston
N. Williams, eds., On Moral Business: Classical and Contemporary Resources for Ethics in Economic Life (Grand Rapids, Mich.: William B. Eerdmans Publishing Company, 1995).
6. New York: Harcourt, Brace and Co., 1926.
7. (John Locke, "Of Property," Second Treatise: An Essay Concerning the True
Original, Extent and End of Civil Government).
8. Rerum Novarum, nos. 45-46.
9. New York: Scribner's, 1932. 10. Available at http://www.earthspirit.org/Parliament/parliamentstat.html.
11. "How Ethics Are Businessmen?," Harvard Business Review, 39 (4) (1961) and
Clarence Walton Corporate Social Responsibilities (Belmont, CA: Wadsworth Publishing Co., 1967).
12. Norman E. Bowie, "Business Ethics," in New Directions in Ethics, ed. Joseph P.
DeMarco and Richard M. Fox, New York: Routledge & Kegan Paul, 1986. References Aquinas, Thomas St., Summa Theologiae Aristotle, Politics; Nicomachean Ethics, ed. Roger Crisp, Cambridge: Cambridge University Press, 2000. Barry, Vincent, Moral Issues in Business (Belmont, Calif.: Wadsworth, 1979). Beauchamp, Tom and Norman Bowie, Ethical Theory and Business ( Englewood Cliffs, NJ: Prentice-Hall, 1979; 6th ed, 2001) Baumhart, Raymond, "How Ethics Are Businessmen?," Harvard Business Review, 39 (4) (1961)). Bowie, Norman E., "Business Ethics," in New Directions in Ethics, ed. Joseph P. DeMarco and Richard M. Fox, New York: Routledge & Kegan Paul, 1986.) De George, Richard Business Ethics (N.Y.: Macmillan, 1982; 5th ed., Prentice-Hall, 1999). De George, Richard T., "The Status of Business Ethics: Past and Future," Journal of Business Ethics,6 (1987), pp. 201-211. De George, Richard, Competing with Integrity in Internal Business (New York: Oxford University Press, 1993) Donaldson, Thomas and Patricia Werhane, Ethical Issues in Business: A Philosophical Approach (Englewood Cliffs, NJ: Prentice-Hall, 1979; 7th ed., 2002) Donaldson, Thomas, The Ethics of Business Ethics (New York: Oxford University Press, 1989). John Paul II, Pope, Laborem Exercens (1981); Cenesimus Annus (1991).
Lenin, V. I., Imperialism: The Highest Stage of Capitalism (1917). Leo XIII, Pope, Rerum Novarum, 1891. Locke, John, "Of Property," Second Treatise: An Essay Concerning the True Original, Extent and End of Civil Government. Niebuhr, Reinhold, Moral Man and Immoral Society (New York: Scribner's, 1932). Pius XI, Pope, Quadragesimo Anno (1931). Plato, Republic. Rawls, John, A Theory of Justice (Cambridge, Mass., Belknap Press of Harvard University Press, 1971). Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations; The Theory of Moral Sentiments. Stackhouse, Max L., Dennis P. McCann and Shirley J. Roels, with Preston N. Williams, eds, On Moral Business: Classical and Contemporary Resources for Ethics in Economic Life (Grand Rapids, Mich.: William B. Eerdmans Publichsing Company, 1995). Tawney, R. H. Religion and the Rise of Capitalism (New York: Harcourt, Brace and Co., 1926). U. S. Catholic Bishops, "Economic Justice for All: Pastoral Letter on Catholic Social Teaching and the U.S. Economy," 1986. Velasquez, Manuel G, Business Ethics: Concepts and Cases (Englewood Cliffs, NJ: Prentice-Hall, 1982; 5th ed., 2002) Walton, Clarence, Corporate Social Responsibilties (Belmont, Calif., Wadsworth Pub. Co.,1967). Richard T. De George is University Distinguished Professor of Philosophy and of Business Administration, and Director of the International Center for Ethics in Business at the University of Kansas. He is the author of over 180 articles and the author or editor of twenty books, including The Ethics of Information Technology and Business (2003); Business Ethics (1999), now in its fifth edition and also available in Japanese, Russian, Serbian and Chinese; and Competing With Integrity in International Business (Oxford, 1993), also translated into Chinese. He delivered this paper February 19, 2005, at "The Accountable Corporation," the third biennial global business ethics conference sponsored by the Markkula Center for Applied Ethics.
Guidelines for organizational ethics Health Progress, Jul/Aug 2001 by Magill, Gerard, Prybil, Lawrence
Save a personal copy of this article and quickly find it again with Furl.net. Get started now. (It's free.) In recent years, health care organizations have worked so hard to achieve fiscal responsibility that they have sometimes constrained services and reduced access. The result has been a backlash of public distrust. However, a more ethical approach to the delivery of care can help such organizations regain the respect of skeptical patients and disheartened communities. To further that end for Catholic health care, this article will suggest a practical approach to organizational ethics. We realize, of course, that the principles and practices of organizational ethics already influence daily behavior in health care to some degree. Unfortunately, however, health care leaders have many fewer resources in organizational ethics than they have in, for example, biomedical ethics. In this article, we hope to focus on organizational ethics in a way that will provide guidelines for organizations committed to high standards of ethical conduct, patient care, and community service. TOWARD A VIRTUOUS ORGANIZATION Organizational ethics and biomedical ethics are related, though distinct, fields in health care ethics. Biomedical ethics deals with ethical issues concerning biomedicine, clinical services, and patient care. Organizational ethics, by contrast, deals with value-related issues concerning an organization in the broadest sense: mission, vision, sponsorship, governance, and leadership. (The term, as we use it, encompasses what some writers allude to as "business ethics" and "corporate ethics.") Organizational ethics is related to, but broader than, compliance programs, which typically try to ensure that organizations abide by legal and regulatory requirements. At its best, organizational ethics seeks to foster a virtuous
organization, in which ethical principles inspire appropriate decision making and moral behavior among all its personnel. We believe that an approach to organizational ethics aimed at fostering a virtuous organization will influence behavior among personnel more effectively through general guidelines than through explicit rules; when it comes to nurturing responsible and ethical conduct, persuasion works better than prescription. A virtuous organization respects the resources entrusted to it by its community.1 Sound stewardship requires a Catholic health care organization to treasure the heritage it has received from its community as the necessary context for the prudent use of its limited resources. It encourages the organization's sponsors, faithful to their Catholic identity and mission, to conduct operations in an ethical manner. Stewardship enhances the organization's commitment to the community, on one hand, and the community's trust in the organization, on the other. This reciprocity could be described as Catholic health care's community covenant. By nurturing this community covenant, the ministry can rebuild and strengthen the community's trust in health care in general. Indeed, a Catholic health care system or hospital that is considering an initiative in organizational ethics should, first, aim at creating a virtuous organization, and, second, do this by fostering among personnel a sense of stewardship that respects the community covenant. Such a foundation in stewardship cannot help but positively influence decision-making processes and standards of conduct for personnel throughout the organization. BASIC COMPETENCIES FOR ORGANIZATIONAL ETHICS Any initiative in organizational ethics will require basic organizational competencies. A Sense of the Reciprocity between Sound Stewardship and the Community Covenant This competency is at the very foundation of organizational ethics. Perhaps the most basic meaning of stewardship in Catholic health care is the passing on from one
grateful generation to another of Christ's healing ministry. The notion of stewardship highlights the church's traditio, a Latin word for "the act of handing over." Of course, this obligation also implies fiscal responsibility. Yet one of the greatest dangers the ministry faces today-especially as it struggles in the most competitive market it has ever seen-is a tendency to focus so strongly on fiscal propriety that it compromises its basic mission of healing care. One could rephrase a well-known biblical warning by asking: What purpose is accomplished if the ministry gains all the fiscal stability in the business world, but loses its soul in the process? The primary meaning of stewardship requires Catholic health care to act as an ecclesial ministry, serving and nurturing its communities as sacramental expressions of God's biblical covenant with humankind, as revealed in Scripture and honored in church tradition.2 The great biblical covenant fundamentally entails a relationship of trust. Hence the community covenant is a basic relationship of trust between Catholic health care organizations and the communities they serve. Building such trust is a serious challenge these days, as public opinion surveys increasingly show. The work must be done, nevertheless. Stewardship calls on the ministry to enhance trust in the communities it serves. Trust is the necessary condition for fostering the community covenant required by an ecclesial ministry. Resource management and fiscal responsibility are critical elements of stewardship. But trust provides the foundation for organizational ethics in health care. A ministry that seeks to enhance the community covenant will readily try to shape its hospitals and health care systems as virtuous organizations. They will develop principles and processes that inspire good behavior. To be truly virtuous, such organizations must adopt a practical perspective that integrates what they are (their missions), how they function (especially their decision-making processes), and how they behave (their ethical conduct). Mission office personnel typically nurture this integration in Catholic health care institutions; most do it well. However, to be fully effective such personnel must possess the appropriate authority (with support from sponsors, boards of trustees, and executive management) and the relevant skills (including training in organinational development). Above all, such personnel must be guided by a
strategic plan to integrate mission, decision-making processes, and ethical conduct. Without such a plan, the virtuous organization is unlikely to come about. An Ethical Decision-Making Process To conduct an initiative in organizational ethics, the organization in question must also possess a reliable method for making decisions involving ethics-what might be called an ethical resolution process. The goal here is to apply ethical principles to everyday behavior and decision making. For the process to work effectively, of course, the organization must foster an environment in which personnel are encouraged to perceive problems and analyze their components. The process works in the following manner. Identifying the Problem. This stage of the process involves three steps: * Recognition of the problem's relevant aspects. Those involved, including the organization's stakeholders, gather the necessary data and consider the ethical dilemma in light of the relevant organizational values. * Designation of the root problem. Those involved clarify both their goals, on one hand, and the obstacles to those goals, on the other. Having done that, they define the basic ethical conflict, distinguishing it from lesser ones. * Estimation of the problem's cause. Those involved explain why the problem has occurred, distinguishing the basic cause from related symp- toms. Resolving the Problem. This stage also has three steps: * Clarification of feasible options. Those involved create an environment in which the process can unfold, researching and refining various options and identifying the ethical implications of each option. * Determination of the best option. Those involved evaluate the options, eliminating those that do not fit the process's goals. * Implementation of the decision. Those involved test the option to ascertain whether it truly is the best in terms of ethics and other considerations (e.g., costs, benefits, risks, practicality). Assuming that the option passes the test, those involved
communicate its adoption throughout the organization and arrange for appropriate follow-up and assessment. Standards of Conduct Finally, the organization must have standards of conduct that encourage improvement in all its operations. These standards-which should be integrated with the organization's stewardship guidelines and decisionmaking processes-will enable leaders to use resources in a manner that enhances the community covenant. ORGANIZATIONAL ETHICS IN ACTION Organizational ethics can provide guidance for leaders in any dimension of health care. Here are two examples. Governance Boards of health care organizations are today undergoing significant changes, all of which have far-reaching ethical implications. Boards of all types are shifting from a largely advisory role to one in which they are strong advocates for stakeholders; in the not-for-profit sector, in particular, many boards today involve representatives of the community in their organizations' strategic oversight.3 In these cases, as well as many others, the proper use of organizational ethics will encourage boards to integrate stewardship guidelines, decision-making processes, and standards of conduct in their work. This integrative matrix can make three contributions: * It helps clarify the board's role as steward of the organization's mission and values as they apply to the community covenant. * It promotes effective communication and problem solving through participatory decisionmaking processes that honor the organization's strategic vision, all the while respecting appropriate confidentiality. * It seeks to inspire strategic change while avoiding micromanagement, on one hand, and board isolation, on the other.
Partnership with Physicians So far, no reliably successful model for a partnership between health care systems and physicians has emerged. The pressures generated by cost containment, declining reimbursements, and changing consumer needs continue to frustrate such arrangements.4 Some partnerships have had disastrous financial performances.5 However, organizational ethics can help both sides to move toward effective partnerships through an integrative matrix. The matrix encourages prospective physician-system partnerships to discover and embrace a common mission that enhances the community covenant by improving the delivery of high-quality patient care. This sense of stewardship helps the partners avoid the zero-sum game of economic self-interest that so often dooms such arrangements. STEWARDSHIP AND COMMUNITY Many areas in health care cry out today for guidance from organizational ethics. And the number of specific areas needing it most-for example, capitated contracts, information management, and technical acquisitions-is rapidly growing.6 In this article, however, our main emphasis has been on improving relationships between Catholic health care organizations and their communities. Specifically, we have tried to offer guidelines to aid the integration of stewardship with decisionmaking processes and ethical behavior. By focusing on stewardship and the community covenant, Catholic health care can ensure for itself a bright future. Copyright Catholic Health Association of the United States Jul/Aug 2001 Provided by ProQuest Information and Learning Company. All rights Reserved.
Build an Organization Based on Values
The Strategic Planning Framework for Vision, Mission, Values By Susan M. Heathfield Values are traits or qualities that are considered worthwhile; they represent an individual’s highest priorities and deeply held driving forces. Value statements are grounded in values and define how people want to behave with each other in the organization. They are statements about how the organization will value customers, suppliers, and the internal community. Value statements describe actions which are the living enactment of the fundamental values held by most individuals within the organization. Vision is a statement of what the organization wants to become. It should resonate with all members of the organization and help them feel proud, excited, and part of something much bigger than themselves. A vision should stretch the organization’s capabilities and image of itself. It gives shape and direction to the organization’s future. Mission/Purpose is a precise description of what an organization does. It should describe the business the organization is in. It is a definition of “why” the organization exists currently. Each member of an organization should be able to verbally express this mission Strategies are the broadly defined four or five key approaches the organization will use to accomplish its mission and drive toward the vision. Goals and action plans usually flow from each strategy. One example of a strategy is employee empowerment and teams. Another is to pursue a new worldwide market in Asia. Another is to streamline your current distribution system using lean management principles. I recommend that you start developing this strategic framework by identifying your organization’s values. Create an opportunity for as many people as possible to participate in this process. All the rest of your strategic framework should grow from living these. In upcoming articles, I will explore the rest of this framework. What are Values? The following are examples of values. You might use these as the starting point for discussing values within your organization. ambition, competency, individuality, equality, integrity, service, responsibility, accuracy, respect, dedication, diversity, improvement, enjoyment/fun, loyalty, credibility, honesty, innovativeness, teamwork, excellence, accountability, empowerment, quality, efficiency, dignity, collaboration, stewardship, empathy, accomplishment, courage, wisdom, independence, security, challenge, influence,
learning, compassion, friendliness, discipline/order, generosity, persistency,optimism, dependability, flexibility Why Identify and Establish Values? Effective organizations identify and develop a clear, concise and shared meaning of values/beliefs, priorities, and direction so that everyone understands and can contribute. Once defined, values impact every aspect of your organization. You must support and nurture this impact or identifying values will have been a wasted exercise. People will feel fooled and misled unless they see the impact of the exercise within your organization. If you want the values you identify to have an impact, the following must occur. • • • • • • • People demonstrate and model the values in action in their personal work behaviors, decision making, contribution, and interpersonal interaction. Organizational values help each person establish priorities in their daily work life. Values guide every decision that is made once the organization has cooperatively created the values and the value statements. Rewards and recognition within the organization are structured to recognize those people whose work embodies the values the organization embraced. Organizational goals are grounded in the identified values. Adoption of the values and the behaviors that result is recognized in regular performance feedback. People hire and promote individuals whose outlook and actions are congruent with the values.
Only the active participation of all members of the organization will ensure a truly organization-wide, value-based, shared culture. In an upcoming article I will discuss a process you can use to help your organization identify and adopt a value-based culture. Why Values, What Values? "Our people are our most important asset." You’ve heard these words many times, if you work in the human resources field. Yet how many organizations act as if they really believe these words? Not many. These words are the clear expression of a value, and values are visible through the actions people take, not their talk. Values form the foundation for everything that happens in your workplace. If you are the founder of an organization, your values permeate the workplace. You naturally hire people who share your values. Whatever you value, will largely govern the actions of your workforce. If you value integrity and you experience a quality problem in your manufacturing process, you honestly inform your customer of the exact nature of the problem. You discuss your actions to eliminate the problem, and the anticipated delivery time the customer can expect. If integrity is not a fundamental value, you may make excuses and mislead the customer. If you value and care about the people in your organization, you will pay for health insurance, dental insurance, retirement accounts and provide regular raises and bonuses for dedicated staff. If you value equality and a sense of family, you will wipe
out the physical trappings of power, status, and inequality such as executive parking places and offices that grow larger by a foot with every promotion. Whatever You Value Is What You Live in Your Organization You know, as an individual, what you personally value. However, most of you work in organizations that have already operated for many years. The values, and the subsequent culture created by those values, are in place, for better or worse. If you are generally happy with your work environment, you undoubtedly selected an organization with values congruent with your own. If you're not, watch for the disconnects between what you value and the actions of people in your organization. As an HR professional, you will want to influence your larger organization to identify its core values, and make them the foundation for its interactions with employees, customers, and suppliers. Minimally, you will want to work within your own HR organization to identify a strategic framework for serving your customers that is firmly value-based. Strategic Framework Every organization has a vision or picture of what it desires for its future, whether foggy or crystal clear. The current mission of the organization or the purpose for its existence is also understood in general terms. The values members of the organization manifest in daily decision making, and the norms or relationship guidelines which informally define how people interact with each other and customers, are also visible. But are these usually vague and unspoken understandings enough to fuel your long term success? I don’t think so. Every organization has a choice. You can allow these fundamental underpinnings of your organization to develop on their own with each individual acting in a selfdefined vacuum. Or, you can invest the time to proactively define them to best serve members of the organization and its customers. Many successful organizations agree upon and articulate their vision, mission or purpose, values, and strategies so all organization members can enroll in and own their achievement.
An Overview of the Organizational Core Values Concept
By Marie J. Kane 1. Definition--Core Organizational Values are a set of beliefs that specify universal expectations and preferred modes of behavior in a company. They point the way to purposeful action and approved behavior. 2. Core Values create a foundation of attitudes and practices that support long-term success. 3. Core Values provide reference points for shaping and building the business. 4. Successful companies place a great deal of emphasis on values. In general, these companies share several values-related characteristics:
They stand for something--that is, they have a clear and explicit philosophy about how they intend to conduct their business. Management pays serious attention to clarifying and role modeling values and to ensuring that they are successfully communicated and embodied in the organization The organization's values are known and committed to by the people who work for the company. The values are integrated into the company's way of doing business (policies, procedures, compensation practices, performance appraisals, etc.). They affect all aspects of the company from what products get made or sold to how people are treated.
5. Shared values affect performance in three main ways:
Managers and others throughout the organization give priority attention to what is stressed in the corporate values system and this in turn supports producing the priority results. All employees generally make better decisions, because they are guided by their perception of the shared values. When employees know what their company stands for, when they know what standards they are to uphold, then they are much more likely to make decisions that will support those standards. People are more likely to recognize that they are an important part of the organization. They are more motivated because life in the company has more meaning for them. They work harder because they are dedicated to what is expressed in the organization's core values.
6. Applications of Values also arise specifically in:
Managing Crisis by making it apparent immediately what action to take and having unanimity in doing so. (The Johnson & Johnson handling of the Tylenol scare and subsequent regaining of public confidence and market share is a classic example.) Managing Change by defining dimensions and "putting life" into a company's strategy for change. Managing Growth by attracting and keeping the superior people required for creating and appropriately managing growth and profitability.
7. To achieve Vision and Mission, you must plan, act, and believe. Values must support plans and actions. Plans and actions must be conceived and implemented within the context of the organization's core values.
The Impact of Policies on Organizational Values and Culture
LTC William F. Bell, USA 3230 Birnamwood Dr Colorado Springs CO 80920 Introduction. The hypotheses of this paper are three-fold. First, the values of any organization are primarily communicated to its members through the organizational policies that most directly effect them. Furthermore, changes in the values over time impact organizational culture. Second, that all policies have unintended 2nd and 3rd order consequences or side effects that take significant time to come to the attention of the senior leadership.1 These effects can be either positive or negative. Unintended effects can also have combined impacts. Third, implementing fundamental or cultural change within organizations in response to unintended negative consequences is very difficult. This paper will propose a causal chain that ties policies to values and to culture in potentially negative ways. It will then use current Army personnel policies to illustrate how this causal chain can explain certain negative effects of personnel policies on Army values. The paper will recommend options for changing policies to meet or support stated values, again using the Army's personnel system as an example.
Why do organizations have or espouse values? Organizational values set acceptable or expected norms or bounds of behavior for the individual members of the organization. Without organizational values, organization members will, by default, follow their individual value systems. These may or may not promote behavior that the organization finds desirable. Therefore, organizations establish values to provide their members guidelines for their behavior. Organizational values also provide the framework for the culture of the organization. Culture is the body of custom, ideas, assumptions, and institutional patterns transmitted from one generation to the next and are particularly powerful in determining individual behavior.2 It is "the collective programming of the mind."3 Any values that has the net result of potentially changing culture must be analyzed very carefully because it is very difficult to reverse those changes. Obviously, the values of the organization should support the mission of the organization. It would make little sense for an organization to espouse values that work against its long-range goals.4 To summarize, the values of the organization should provide a guide
or framework for the organizations members in accomplishing their part of the organization's mission.
How do organizations establish or set values in the minds of their members? Organizations must use a broad-spectrum approach to educate its members of the organization's values. Obviously values are only important when the organizations' members have accepted them. First, organizations should write them down and widely publicize them. If an organization has initial entry and/or continuing education requirements, the values should be explained in detail to the members as they "pass through" the organization's education system. Second, it must require all of the senior leaders of the organization to demonstrate or live by the values. Douglas Macgregor states that highly successful organizations do not simply proclaim a set of values; rather they immerse their managers as well as their employees in the ideology to an obsessive degree.5 Any perceived disconnect between the behavior of the senior leaders and the values of the organization will strongly undermine the commitment of the organization to those values in the minds of its members. This is important because the adherence of the members to the organization's values is the essence of discipline. Anything that undermines values also undermines organizational discipline. Third, new members learn the values of the organization through their initial socialization processes with other members of the organization. This is an informal method, quite powerful, but chancy as it assumes that the older organization members hold to the stated values of the organization.6 The last means of establishing the organization's commitment in its own values is more indirect, but the most powerful. It must demonstrate those values to the organization's members through the organization rules and policies.7 Statements are not enough. The values must be "sold" to the constituents through actions.8 This brings us to the basic assumption of this paper- that humans act rationally and rely on reason to perceive reality effectively. This "Objectivist" view is basic to this paper's hypotheses and means that organization members will individually evaluate reality and act accordingly. To state another way, it means that values are objectively evaluated based on the direct experience of the members. The creation of culture and the socialization of the organization's members rely heavily on learning processes to ensure an institutionalized reality.9 In many cases this is trial and error learning.10 This learning may take place in planned or informal, often unintended ways.11 The reward system of the organization (promotion, training selection, benefits, prestige, etc.) highlights what values are truly organizationally important. Individuals will then execute behaviors that further their long term professional survival and well being.12 This strongly implies that if there is a difference between what an organization declares as its values and the values
demonstrated by its policies, the rational members would put priority on the values determined from the policies.13 The synthesis of above is the following concept: The greater the impact of the organization's rules and policies on an individual, the more the values of that organization are taught and reinforced in the individual's mind.
What types of policies teach individuals the most about the organization values? If one accepts the preceding, this question is logical and obvious and the answer is a logical one to ask. The policies that most personally and directly affect the members of the organization are those that teach the members the most about the organization's values and culture. Organizations have many policies that have little to no impact on its members except in special situations. Other policies are instituted for statutory reasons, but have slight impact on a day to day basis. The policies that have the greatest impact on the individuals in any organization are those that affect promotions, separations, school or training selections, family issues, and assignments, i.e. the personnel policies. An individual learns more about the values of their organization from its personnel policies than any other single source.14 Therefore, it follows that the personnel policies of an organization have the greatest impact on demonstrating and teaching the values of an organization to its members.
What if there is disagreement between the stated values and the demonstrated or "derived" values?15 If there is any disagreement between what the organization states as its values, and in how the organization demonstrates its values, successful individuals will go with the values the organization demonstrates.16 As stated earlier, individuals will often go to great lengths to rationalize their self-interest-oriented (and derived value) behavior in stated organizational value terms to avoid this disagreement. In some cases, this disagreement often requires management to consciously exhibit a type of organizational hypocrisy, or publicly stating support for the stated values of the organization while acting in accordance with the contrary demonstrated values of the organization. It also appears from reviewing the literature that truth is an early casualty to this disagreement. That is to say, the wider the "values gulf" is perceived, the more difficult for "bad news" to make its way through the organization and to rise to the top management. It is ludicrous to think that these value disagreements or dilemmas are lost on the organization's members, even when they have "successfully" rationalized their behavior in derived value terms. Any significant separation between the stated and actual values of an organization causes cynicism among the organization's members in direct proportion to the size of the separation17. Individuals that fail to adapt to the actual (not the stated) values of the organization will not succeed in the organization.18 Therefore, failure to act in accordance with the actual (not stated) values of the organization is a type of
professional suicide. It also follows that those who quickly adapt to the actual values of the organization have a decided advantage over those who do not. Substantial disconnects between the stated and demonstrated values of an organization will have the greatest averse impact on the more idealistic members of the organization, because they are likely to hold onto the stated values longer. This likely puts them at a significant disadvantage in terms of promotions, selections, and assignments.19
How do policies impact the individual?20 All policies, personnel or otherwise, have both intended and unintended effects. All policies are implemented by organizations for specific reasons or to accomplish specific goals. These are the intended effects. Often, but not always, the policy contains a feedback mechanism so that the management can determine its success or failure. The major difficulty with organizations and organizational policies is the failure to recognize that organizations are very complex organisms. Organizations are not "closed" systems, but are acted upon by many outside influences, i.e. are "open" systems.21 Policies effect the complex organization in ways that can not be foreseen or anticipated.22 These "unintended" effects can be positive and/or negative.23 Unintended effects can be 1st, 2nd, or 3rd order effects. Whereas, it may be possible to anticipate a 1st order effect (i.e. this happened because of this), it is difficult to anticipate 2nd order effects and virtually impossible to anticipate 3rd order ones. It is also very difficult to design feedback mechanisms to track those effects. Note that the unintended effects can be both positive AND/OR negative. There may be differences in impact on different groups within the organization. They may also have both positive and negative impacts on the same group.24 Unintended effects can get really complicated, because policies, particularly personnel policies, do not exist in isolation. With apologies to Sir Isaac Newton's Theory of Gravity, every policy has an influence on every other policy. (This appears to be especially true of personnel policies, probably because the informal communications network would accent them.25) Sometimes the positive consequences of one policy may cancel out the negative consequences of another policy. It is just as possible that the negative unintended 2nd and 3rd order effects of one policy synergistically reinforce the negative 2nd and 3rd order effects of one or more other policies in a kind of compounding effect.26 Last, these effects tend to insidiously move the component values of the organization progressively further and further from the initial organizational values.27 It is in the 2nd and 3rd order effects that the problems occur with most policies. This is because (1) they are very difficult to anticipate, (2) they can interact in unforeseeable ways, (3) their effects can slowly build over time, (4) when detected their interpretation can be discounted or biased due to overconfidence or organizational compartmentalization, and (5) the fact that effects are, for example, a 3rd order effect, has no bearing on how severely they can impact an individual or an organization. The 3rd order effect of a policy may be devastating to an individual whereas the original intended
effect has little or no impact. For the individual, the intended effects of policies are meaningless; only the actual effects of policies on the individuals have meaning. It is what impacts the individual that is meaningful to the individual and therefore determines his behavior as well as his understanding of the actual organizational values system. Unintended positive and negative effects teach individuals the values of the organization. It does not matter that the organization did not intend those 1st, 2nd, or 3rd order negative effects. The individual has no clear way to ascertain whether the effects were intended or not. 28 Nor is that particularly relevant. To them adaptation is professional survival; therefore it is logical. To summarize thus far, the successful individuals in any organization are those who adapt their behavior to the unintended, as well as intended, effects of policies as well as to the actual (vice stated) values of the organization. It goes without saying that the organization may end up with its personnel believing a set of organization values that are considerably different than those either intended or desired. These derived values may also work directly against the organization's goals or objectives.
Can organizations deal with the unintended negative impacts of policies? It takes time for an organization to become aware of the unintended negative impacts of policies. In particular 2nd and 3rd order impacts can be very subtle or long developing.29 Often they are difficult to trace back to the original policy or policies that caused them.30 By the time an organization becomes aware of negative unintended impacts of its policies, the successful members of the organization have already adjusted to those impacts. In other words, they have in large part been considered an organizational success because they have successfully and early modified their behavior to the new value paradigm.31 Also, by the time the organization becomes aware of negative unintended impacts of its policies, many personnel have been attrited because they have either failed to adapt to the new value paradigm or are prevented from doing so because of conflict with their personal value system. In many cases these members joined the organization because of the confluence of their personal values with those stated by the organization and the perceived (again, not necessarily intended) organizational hypocrisy drives them out. It is unfortunate because many of them are the members of the organization that the senior management most values or needs because of their very idealism. It therefore can be concluded that the longer an organization takes to discover the unintended negative effects of a policy or policies, the more members of the organization will owe their very success to their adaptation to the new paradigm. An example may illustrate this dilemma for an organization. Lets theorize a company that operates in teams of employees working on specific projects. Senior management of a company decide to add a requirement for periodic peer ratings of these workers intended
to get them to work closer together and require development of interpersonal skills. These peer ratings will go into the workers' personnel folders for use in "counseling." Many of the workers did what management said they wanted- they provided honest feedback to their peers. Other groups, formed around the informal organizations at the company, decided to work together to make everyone in the group look good. The project teams quickly split into two groups those that did as management requested, and those that "played the game." Distrust built in the organization. Those that "cooperated" with each other on the peer ratings had a marked advantage; furthermore, they also cooperated against the other group. Those that did the peer ratings, as management wanted got significantly lower scores. They became discouraged and left the organization as they were bypassed for promotions and raises. New members were socialized into the company by the remaining workers who "played the game." Productivity began to flatten as many of the now disgruntled or departed workers were among the most productive.32 The senior management now discovers that a set of policies that was implemented many years ago has caused a significant or fundamental change in the actual or operational values of the organization. These values vary considerably from the stated values of the organization. The most successful members of the organization follow the new value paradigm because they ascertained the delta between the actual and stated values early on. Those members who adhered to the stated values have been reduced in numbers to impotence. What is the impetus for the organization to readdress its policies to changes to its values? The more members of the organization owe their success to their successful adaptation to the new value paradigm, the more difficult it becomes for the organization to change the policies to remove the original unintended negative effects.33
How do organizations implement fundamental change? "Fundamental change" is defined as change that affects the core or culture of the organization. Organizations can intentionally change or unintentionally change. Fundamental change takes a considerable length of time. Intentional, fundamental change requires that the entire scope of organization policies be integrated and focused toward the change. In private organizations, managers often find it far easier to tinker with the compensation system than attempt real change to the company's culture.34 Real change is difficult. Logically, the more tightly integrated the values and policies are toward the fundamental change, the more rapid the change will be.35 Unintentional fundamental change can also occur because of an unintended shift in the values of the organization due to negative consequences or effects from policies that have gone undetected or uncorrected for a long period of time.36 Intentional change to these unintended effects can occur when the senior leadership recognizes the need for the change before they are either co-opted by the new paradigm or becomes too hard to do because too much of the organization has successfully adapted. This can either be the changing of the stated values to match the policies, or, the changing of the policies to match the stated values, or, a conscious decision to live with the dual
sets of values (stated and actual.) This may be more common than one might imagine. For example, the stated values may have benefit for the organization politically while the actual values may have benefits for the organization operationally or administratively. As an aside, Macgregor points out that most highly successful organizations are unwavering on their core, stated values, but are willing to throw out any policies that are deemed unsuccessful at reinforcing those values.37 This deliberate reintegration of the policies of the organization with the desired values of the organization may be easier to accomplish in private organizations where the "bottom-line" is the primary focus vice public organizations that must respond to a variety of influences and focuses.38 In any event, reintegration of policies can only occur with unwavering, rigid leadership at the helm of the organization.39
How do organizations change when the senior leadership is unwilling or unable to change the values of the organization? It is the ultimate responsibility of leadership to recognize and correct the policies of the organization when they have become maladapted to the intended culture of the organization.40 But this is often easier stated than accomplished. When the senior leadership of the organization owes its success to the new paradigm, internal change becomes highly unlikely. Like tends to promote like. As has often been stated, organizations like innovation, but reward conformity.41 Or to put it another way, organizations often reward successful, but limited, initiative; however, they do not necessarily encourage it.42 Any organizational changes contain an element of risk. Furthermore, the risks of changing are believed to be less well known than the consequences of not changing. Leaders become committed to losing policies or selectively interpreting performance feedback indicators in such a way as to rationalize inaction.43 At some point the new value paradigm becomes the norm by which members are evaluated. This homogeneity in top management makes any strategic change even less likely.44 Change can either be internally generated or externally generated. At this point, only external stimulus can cause the organization to fundamentally change its policies to align them with its stated values. To restate the above, for fundamental change to occur, the values of the organization must be brought into line with its policies or visa versa. This is especially true for personnel policies, because, as stated, they have the greatest impact on establishing the values of the organization in the minds of its members. Corporate or private organizations are aware, albeit possibly viscerally, of the need for external stimulus for change to occur. They are also aware of the difficulty in having senior leadership that owes its success to a particular policy (or set of policies) engineer fundamental change. For corporate organizations, the external stimulus is simple: decline of profitability or market share.45 This gives them an unmistakable yardstick by which to evaluate the success or failure of policies. If fundamental change is required, outsiders are routinely brought in who haven't been products of the organization policies to execute
the needed change. They recognize that products of a system have great difficulty fundamentally changing their system. Public organizations generally find it more difficult to execute fundamental change without external stimulus, although political appointees can be valuable to public organizations because they are free to break paradigms they are not part of.46 Military organizations, in particular, do not have (or exercise) the option in a strategic sense of "bringing in new leadership" to change organizational values under most circumstances. This occurs with decreasing frequency in peacetime at the company, battalion and brigade level. It rarely occurs at any higher level without some other impetus (ex. moral turpitude.) Military fundamental change usually requires either (1) an organizationally emotional significant event (ex. Vietnam), or, (2) action by an external agency (ex. Congress with Goldwater-Nichols.), or, (3) battlefield failure or fear of failure (ex. GEN Marshall during WW II.) Even these deliberate fundamental changes eventually sowed the seeds of their own decay. The policies of one period become the major problems or obstacles of the next period of the organization's history.47
Model Summary. The crux of the above causal chain or model is that the policies of all organizations can create a gap between the stated values of an organization and its actual or operational values. This is primarily due to the unintended 2nd and 3rd order consequences of the policies and the values they teach the members of the organization. By the time that the senior leadership of the organization becomes aware of these unintended effects, a substantial portion of the members of the organization has adjusted to the new value paradigm. Those members that did not adjust or were slow to adjust are disadvantaged in the organization. At the point that the senior leadership is co-opted by the new value paradigm, change back to the stated values of the organization is no longer possible without an external impetus. If this new value paradigm is left in place, it will begin to change the organizational culture. In short, policies effect values and values effect culture. Awareness of this causal chain should make managers less wedded to the policies of the past that preclude organizations from realizing their stated and desired values. Specific recommendations for managers will be saved until the end. Now that we have constructed a model or causal chain for values and policies, we will examine how this model may apply to actual Army policies.
An example of the application of the causal chain to the U.S. Army. In his annual report to the President and the Congress, Secretary of Defense William Cohen stated that "readiness is cumulative. It takes 20 years to develop senior military leaders.A decline in .adequately trained people will lengthen the amount of time it takes to rebuild readiness."48 The report is self-congratulatory in stating, "Readiness has been
maintained."49 Secretary Of The Army Togo West and the Chief of Staff General Dennis Reimer echo those statements and add the need for competent leaders, as they are the keys to the Army's success in peacetime and war.50 Others are not so sure. For example, in a recent issue of the Army War College publication Parameters, LTG (Ret.) Walter Ulmer reports that a number of "cracks" are emerging in unit readiness. Most troubling are his reports, echoed in an increasing number of professional military journals of "fear of failure."51 GEN Sullivan stated in an April 28 letter to the Association of the United States Army's regional, state, and local chapters, "Experience tells me we are headed for trouble. Scholars have learned from the pathology of military defeats that commanders who hold slavishly to preconceived ideas.often lose with disastrous consequences."52 Other articles and books have been equally critical of the apparent growing problems in the Army.53 In particular, the "fear of failure" or risk averse behavior and decision making is being increasingly reported by those in the best position to assess the Army's ability to operate under war-time conditions, the observers at the Combat Training Centers (CTCs). A review of the Center for Army Lessons Learned (CALL) website for CTC lessons learned revealed this strong underlying theme.54 The first question is, does this relate to values? The Army's leadership manual states that leaders must have initiative and exhibit candor and courage. It says that leadership must be decentralized, develops trust, and must demonstrate risk-taking skills.55 Officers are evaluated on their efficiency reports on these first three values, but not on the last three (although it could be argued that they are "implied"56). The Annual Report on The Army After Next Project agrees that prudent risk taking and trust by leaders will be critical to battle field success in the future.57 Force XXI Operations strongly supports this notion.58 It would appear, therefore, that the growing concerns about risk aversion are most definitely related to values. The next question is what caused the separation between stated Army values and the operational values to occur? In a recent article in Armor Magazine, MAJ Donald Vandergriff clearly puts the responsibility on the personnel system. He believes that the current system undermines trust and is directly responsible for creating a risk averse atmosphere.59 LTG Ulmer strongly implies the same.60 The key question then becomes, how did it occur? This author believes that the initial step in the creation of a risk averse officer corps was the shift to a new Officer Reporting System report in 1979.61 This form replaced the previous report form that had been used since 1973 and had several advantages.62 The primary problem with the old report form was inflation i.e. there was no way to prevent the steady rise of "average" scores. This was to be corrected in the new form. Furthermore, the senior rater (the superior of his superior in simplistic terms) of the rated officer was the only rater allowed a numerical rating. This was a significant change from the old form and fundamentally changed the relationship between the rated officer, his rater, and his senior rater. Under the old system the officer's rater and senior rater (called endorser), had equal weight in the numeric score given the officer. As this score was the main focus of promotion and selection boards, there was a psychological shift in the importance of the senior rater to the rated officer.63 The officer corps began to place
increasing importance on the relatively sparse contacts the officer had with his senior rater. Some may only see their senior rater at most 6-8 times per year (some only 1-2 per year), yet these fleeting contacts were seen as critical to the officer's career. Reports and statistical measurements gained increased importance as a means of communication with the senior rater vice personal contact. In particular, many officers became reluctant to allow subordinates latitude to make mistakes as those might come to the attention of the senior rater.64 The officer's rater or immediate superior would have the same understanding of the importance of his/her senior rater, etc.65 The 1979 OER also made patronage more effective as it now allowed senior raters to openly advance the careers of selected officers at the expense of others with little to know practical interference from raters. It may also be significant, if only in the minds of the rated officers, that the rank peers of the senior rater are those that sit on all promotion and school selection boards. Another new OER was recently put into effect. It attempts to combat senior rater inflation and give personnel managers more tools for determining future assignments, but leaves the senior rater- rater dynamic intact.66 The Army downsizing began the next step in the causal chain. It started in earnest with the end of the Gulf War and continues, it is perceived, to this day. The removal of the bottom 1/3 of the officer corps made the remainder much more conscious of their professional vulnerability.67 An Army career was no longer seen as stable. Officers became even more concerned about their efficiency reports and the infrequent senior rater contacts that impacted them. Even fewer risks seemed prudent for the officer, because it was perceived that any failure could impact their career.68 One bad report could end a career.69 Duty with soldiers in units (vice duty on staffs) began to be viewed as "risky" where before it was avidly sought. The impact of the Goldwater-Nichols Defense Reorganization Act of 1986 began to be felt during this time. The net result on the officer was to halve the amount of time he was allowed to spend as a major in tactical units.70 Whereas before, a major might spent two years or more as a battalion operations officer and/or battalion executive officer, now the requirements for joint service duty allowed 12 months of tactical unit duty for most. Also during the last several years a shortage of captains who have commanded companies (i.e. branch qualified) has developed. As a result, the Army Personnel Command (PERSCOM) changed policy and captains now spend 12 to 18 months in command of companies where before they had command for two years or more.71 Furthermore few, if any, captains are allowed now to spend any significant time at the battalion or brigade level to gain additional experience. Instead they are now quickly transferred out to meet the personnel system's need for "branch qualified" captains.72 Lieutenants must now do the jobs that would have been performed by the captains, thereby denying them valuable platoon leader and company executive officer time and experience. The captains and majors also now have half as much time to "make a name for themselves" with their senior raters. This focuses their units' attention on a large number of short-term, measurable tasks to the possible exclusion of longer-term efforts.73
Recently, as a result of problems at the Army basic training centers, the decision was made to divert 100 lieutenants from tactical units to serve as company executive officers. This may be a worthwhile policy to increase visibility of officers in those units, but further decreases the tactical unit experience of officers. Compounding the experience issue is another recently announced personnel policy change in the promotion of lieutenants to captain. Previously this occurred after 48 months in the Army. The policy change will promote them to captain after 42 months.74 Battalion commanders now and in the future will have much less tactical unit experience than those ten years ago.75 This further impacts their willingness to engage in risks and to effectively mentor and trust their subordinates.76 It should be no surprise that their subordinates echo their risk aversions. New members of the officer corps will obviously adapt these attitudes quickly as they are socialized into the Army structure. Two other factors are becoming increasingly important in the creation of a risk averse culture. There is a growing atmosphere of casualty aversion in the military. Although the impact was seen in Somalia and in current operations in Bosnia, its roots stretch back through the Gulf War to the Vietnam War and the all-volunteer army. . This pressure comes for both the military and political leadership. The military is not only reluctant to risk its members, but also its very expensive weapon systems. In a very real sense, casualty aversion equals risk aversion.77 Closely tied to casualty aversion is the impact of information technologies. It is now possible through advanced communications systems for the highest levels of command to bypass intervening levels of command and directly monitor the activities and actions of their lowest subordinate units. All indications are that this information technology trend will continue. It is highly questionable whether or not the senior commanders will succumb to the temptations to "meddle" in the actions of their subordinates when they disagree with their decisions.78 It does seem probable that the awareness of higher command visibility of every detail of their actual operations will further dampen junior leader initiative and cause even more risk aversion to avoid "instant criticism."79 This could potentially create the same type of animosities that existed during the Vietnam War between the units engaged in combat and the senior officers orbiting overhead in their command and control helicopters. It should also be noted that the demands of the information data bases will likely occupy an increasing percentage of the officer corps time in garrison (vice leading soldiers). Morris Janowitz in1960 first commented upon the last element of the causal chain. It is a narrowing of the differences between how the officers view a military and civilian career.80 Some of this is due to a strong civilian job market and some due to changing societal beliefs. The Army, in its advertisements to convince young men and women that the Army was "just another job," did much of it. It has impacted the possible commitment of both officers and their spouses to the "Army life." Another dynamic at work is the fact that the military is increasingly an older force with a growing number of married members. An older, married Army is likely to be more risk averse even if none of the other factors were in play. Every policy addressed above had well-focused, well-intended reasons for being implemented. The new efficiency report attacked the inflation problem of the old; the
downsizing focused on minimizing personnel turbulence; the Goldwater-Nichols Act was to increase joint training among the officer corps; the captains were diverted to assist in the training of the reserve components; and the lieutenants were to free the company commanders to spend more time with the trainees under their command. Yet the entire above causal chain has had the synergistic effect of increasing risk aversion. We assumed that parts of the personnel system existed independent of the system as a whole.81 Each policy had the unintended consequence of making the officers reluctant to assume risk and each policy compounded the effects of the other. The net result is a large numbers of officers who see no professional benefit to engaging in prudent risk behaviors beyond "check the block" assignments. The gulf between the stated values and those practiced in the Army grew. The individual officers had no way to determine if the Army intended the operative set of values or not. It became irrelevant, as those who adapted to the new paradigm were successful. At a point the new operative values became the paradigm for success.82 Trust has been a casualty to career survival in the minds of many officers and the need to obtain patrons became more important. Risk aversion has its own 2nd order effect on the ability for an organization to be self-critical. Ideas do not flow freely from individuals that do not trust the organization.83 Risk taking is not viewed as relatively rewarding; rather it was viewed as potentially career damaging. The Army is hypocritical in stating that it wants competitive officers; yet these same officers should be satisfied with only making middle field grade rank.84 The proof of the above causal chain can be found in the "Secretary of the Army's Senior Review Panel on Sexual Harassment." A significant finding of the report was that "many leaders have not gained the trust or confidence of their soldiers." Of 14,498 soldiers surveyed, only 54% of the men and 41% of the women reported that the leaders in their company set good examples for soldiers. Furthermore, 43% of the men and 47% of the women said that their leaders were more interested in looking good than being good. Last, 37% of the men and 40% of the women felt that the leaders were more interested in their careers than the well being of their soldiers.85 One may argue with the model used to explain the rise of risk averse behavior by the officer corps, but this report, combined with the anecdotal CTC evidence is hard to refute.86 Note that the National Training Center Commander was instructed by his superior at Forces Command to find ways to promote and reward risk taking and initiative by visiting units.87 An additional proof may be found in the yet to be released 1997 Leadership and Professionalism Assessment. The Army Times reported examples from a July 1997 briefing prepared for the Center for Army Leadership on the study. The briefing stated ". the Army's current culture forces some officers to behave in ways that are contrary to the Army's stated values." In addition, a "zero-defects" environment coupled with a perceived reluctance on the part of senior leaders to acknowledge the problems was reported. Example quotes from numerous soldiers would indicate that truth has been sacrificed in favor of careerism and that senior officers are not held in high regard.88 None of this bodes well for combat success.
Conclusions and recommendations. All organizations suffer from the unintended consequences of policies. It is impossible to avoid them. It is critical for an organization to never believe that they are immune from these effects. They must put into place feedback mechanisms that not only track the implementation of individual policies, but also continually gauge the value health of the organization. All policies, personnel policies in particular, must be periodically evaluated in accordance with three criteria. First, did the policy achieve its desired end? Second, does the policy enforce or reinforce the values of the organization? Third, does the policy work in conjunction with other policies to further the organization? If leaders can not step back from the culture of their organization and analyze it objectively, the values and culture will manage the leader instead the leader driving the values.89 Any challenge to the basic assumptions at work in an organization will cause anxiety and defensiveness, but the fundamental role of leaders is to constantly do exactly that. To paraphrase Edgar Schein, if one wishes to distinguish leadership from management, it can be argued that managers are controlled by existing and actual organizational values while leaders shape, create, and change the organization's values to develop the culture the organization requires.90 Once an organization's leadership has detected a significant separation between the stated and actual operation values of the organization, the problem becomes much more difficult. This is the case for the Army. The problem is more difficult because a substantial portion of the members of the officer corps have adjusted to the new value paradigm and it therefore would require a much larger effort over a greater length of time to correct. As stated in the above model, the longer the senior leadership delays in addressing the separation in values, the more the cynicism of the members will grow and the greater the loss of credibility by the senior leadership. It is interesting to note that American military cadets, in comparison with those of twelve other Western countries, begin their careers with some of the highest ratings for initiative and candor. They also have the second highest score for desirability of security.91 This implies that their risk aversion may be learned, but with a cultural root. The keys to reversing a significant, long-standing gap in values for any organization is four fold. These are (1) provide education, (2) re-establish credibility, (3) provide leadership, and (4) enforcement. The Army must make a long term, large sustained commitment to have any chance to impact the growing culture of risk aversion.92 The most important initial step would be to make clear what their values are in very unambiguous terms. This would likely be painful to many, but embraced by many others. Changing values to fit an acronym while ignoring important policy impacts is not useful in providing the organization the solid base and continuity that it needs. The second step must be for the Army to give those values credence. A panel of very distinguished personnel with great credibility within and outside the Army should be convened.93 Experts from academia and business, as well as former Congressmen and military leaders should be included. The Inspector General and the Army Research Institute should be put at its disposal. The panel's charter would be to review and
recommend changes to every major personnel policy in the Army in accordance with the above three questions.94 Many of the recommendations in LTG Ulmer's article should be considered.95 Obviously great care must be taken to understand the systems involved as improper re-engineering could make the problem even worse.96 An additional task would be to recommend feedback mechanisms on the policies and the values of the Army. This is vital if the Army is to avoid finding itself in the same position in the future. Any organization is more likely to change if it has developed routines for monitoring and making changes.97 Next, more leadership continuity at the unit level must occur. The time leaders spend in tactical units is too short if the desire is to create a culture of excellence in those units. The Army must ask itself the basic question of whether or not its priority is to its units or to the needs of the personnel managers. The final step for the Army must be to constantly and continually immerse the officer corps in the work of the panel and its results. This must be driven forcefully from topdown. Any perceived value hypocrisy on the part of senior leaders must be ruthlessly dealt with as the entire officer corps would be watching for any signs or early indicators of values that differ from the stated ones. It is critical that the credibility of the senior leadership be re-established. There is likely to be significant resistance to these proposals. Much of the senior leadership denies that risk aversion problems exist or believe that it is merely a temporary event caused by the downsizing.98 A kind of cognitive dissonance seems to have set in, reinforced by past successes and the apparent belief that the Army's culture is an immutable entity. As has been stated, however, downsizing is only one facet of the problem and the Army's culture is changing. The large number of potential current sources for risk aversion compounds the Army's problem. As Argyris states, "Every time the previous conditions are reinforced, the consequences are reinforced."99 Time is not on the Army's side. It is important to note that at no time has it been said that the stated values of the Army changed, only how they were perceived and implemented by the organization. What the Army stands for has not changed, only how things are done.100 The Cold War is over. It takes two decades to build an officer corps. It is now time for the Army to change or develop the policies, systems, and culture that will give our nation the leaders necessary to command Army 2020. It really doesn't matter if the Army is manned by the best educated, best paid, or best trained soldiers in the world if the Army's policies have created an officer corps without the core values to lead those soldiers effectively on the battlefield. The only alternative is to let disaster force the necessary changes.101 " From Long Island to the present, unhappy observers of the Army have noted that good human material in the ranks has failed to realize its potential because of inadequate leadership at the junior and middle levels, from squad to battalion. Good leadership, when it appears at those
levels in our first battles, stands out. We may reasonably ask.what produces, after ten years of service, an effective sergeant or captain."102
At the end of World War II, the U.S. Army conducted a study comparing the effectiveness of 24 representative divisions from the European Theater. Of the top ten divisions only one was American. Unsurprisingly, it was the quality of the 88th Infantry Division's leadership that made the difference.103 Successful organizations have three learning-related factors: well-developed core values and competencies, an attitude that supports continuous improvement and the ability to fundamentally renew or revitalize.104 "In the end, the incalculables of determination, morale, fighting skill, and leadership far more than technology will determine who wins and who loses."105
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