ILLCONCEIVED GOALS – BILL CLINTON ‘S DESIRE

Setting goals and incentives to promote a desired behaviours but they encourage a negative one

“Ridiculous Lengths for Desires TO INCREASE HOMEOWNERSHIP” – BusinessWeek Editor Peter Coy

Provided Mortgages loans to first time buyers with

Promoted paper thin down payments
shaky financing and incomes

Consequences of Desires

Increased Demand leads to High Prices Waves of Defaulters of Loan

BILL CLINTON ‘S DESIRE – INCREASE HOMEOWNERSHIP

Analysis

1. Increase Homeownership never meant to inspire unethical Behaviors.

2. Effective Goals and reward systems are missing.

Suggestion

1. Organizations require practical goals to excel.

2. Rewarding employees for achieving narrow goals.
3. Leaders should take the perspective of those whose behaviors
they are trying to influence and think through their potential
responses.

“Defaulters should never have bought a home in first place”

Motivated Blindness– 2008 FINANCIAL CRISIS

Psychological Phenomenon – It is well known that people see what they want to see and easily
miss contradictory information when its in their interest to remain ignorant

2008 Financial Crisis 1. Home prices began to fall in early 2006.

2. Subprime lenders began to file for bankruptcy.
3. Losses from subprime loan investments caused a panic that
froze the global lending system.
4. When the bubble burst, financial institutions were left holding
trillions of dollars worth of near-worthless investments in
subprime mortgages.

Why ?
1. Decisive conflicts of interest by Organizations
2. The objective of these agencies is to determine the creditworthiness
of financial institutions and the debts they sell
3. The largest agencies Standard & Poor’s , Moody’s and the Finch, were-
and still are paid by the companies they rate.
Motivated Blindness– Significant impact on Managers
IGNORING EMPLOYEE OVERLOOKING WARNING
CONCERNS SIGNS

FAVOURITISM AND BIAS

GROUPTHINK AND
RESISTANCE TO CHANGE
CONFIRMATION BIAS

In summary, motivated blindness can impact managers by leading to the ignorance

or dismissal of employee concerns, overlooking warning signs, displaying
favoritism and bias, resisting change, and succumbing to groupthink and
confirmation bias. Being aware of this cognitive bias is essential for managers to
mitigate its effects and make more objective, ethical, and informed decisions.
WHAT IS INDIRECT BLINDNESS ?

Carried out indirectly through

intermediaries or third parties

More lenient in our judgment of

unethical actions

Not directly performed by the individuals

or organizations responsible.
MAX BAZERMAN EXPERIMENT AND RESULTS

Participants' harsher judgment of

Version A Version B the pharmaceutical company in
Subgroup A
• Drug price was • Drug price was
Participants' more lenient
raised from raised from judgment of the pharmaceutical
$3/pill to $9/pill $9/pill to company in Subgroup B
$15/pill via
smaller
Participants' assessment of the
pharmaceutical more unethical scenario when
presented with both versions
REMEDIES

• Recognize and address the ethical implications

• Be aware of the potential for indirect blindness

• Take ownership of the ethical implications

• Reflect on whether their actions and decisions contribute to an environment

OVERVALUING OUTCOMES - AN IDEA

What happens when you discover the employee who saved the company money with
favourable contracts used unethical means?

• Unethical behaviour is ignored as long as the

outcome is positive
• Not enough emphasis on decision process
• Judge on the basis of results

Give a pass to
Reward the
unethical
employee based
behaviour if the
on the outcome
outcome is good
BAZERMAN’S RESEARCH
A pharmaceutical researcher working on a product determines whether or not to include clinical
patients in the study.

Story A Story B

4 subjects were withdrawn The researcher makes up 4

more data points

Results moved significantly Analysis proved to be more

after adding the data significant

Drug goes to the market Drug does well in the market

Kills four and injures Generates profit, no side

hundreds effects

Drug is withdrawn from the Shows no significant side

market effects in future
RESULTS AND ANALYSIS
• Participants who read story A were much more critical of the researcher than the ones who read story B
• Response changed when the outcomes from both were removed

Conducting experiments without Examples What managers can do to overcome

informed consent or manipulating
data can lead to short-term
breakthroughs but erodes trust in the
scientific community, undermines the
integrity of research, and hampers
future progress.
• Environmental Impact on Economic judgement mistake?
Growth • Beware of this bias
• Manipulative marketing tactics • Examine the behaviours that drive
• Unfair labour practices in supply good outcomes
chains • Reward quality decisions not just
• Pharmaceutical Industry good results

“Good guys finish last. But they are still good guys.”
CONCLUSION

• Ethics are important not only in business but in all aspects of life.
• We need to avoid forcing ‘ethics’ through surveillance instead we should ensure that
managers and employers are aware of biases that lead to unethical behavior.
• Ethics are the foundations on which a civilized society is built.
• A business or society that lacks ethical principles is bound to fail sooner or later.
• A company's ethics will determine its reputation and will ensure success of an
organization in the long run.
• Ethics also influences those who are associated and interact with the organization like –
customers , stakeholders , employees, competitors etc.
• Therefore we hope all organizations maintain and live up to a certain level of
acceptable moral behavior and business ethics.