Ethical Decision-making in Business Operations

ethics-cross the finger

Last week, we had a special guest come to our MBA class. Rev. Anthony Rodgers, author of How God Restored My Life, shared with us his personal story that showcased a lifestyle of prestige, power, and wealth.  However, this pathway was through illegal and criminal behavior that the average individual would find distasteful.

Rev. Rodger’s was transformed; his life has become a symbol of how individuals can be redeemed and changed.  His lifestyle of drugs and crime are demised.  In the same vein, some business managers act immorally, unethically, and participate in illegal activities that can get organizations into trouble.  Do you remember Enron?  BP Oil?  There is a laundry list of these organizations.

If organizations are serious about having profitable operations, they must have good ethical systems.  Operations management does not exist in a vacuum; other business areas must be considered. Marketing and strategy are underlining principles that must be addressed for organizations selling abroad.

Michael Johnston and Greg Marshall, authors of Relationship Selling, argue that customers who reside in other countries pose unique ethical concerns for salespeople and management, especially in (1) cultural differences and (2) differences in corporate selling policies.[1]

Regis McKenna, author of Relationship Marketing, further suggests that effective marketing is the integration of the customer into the design of the product; to design a systematic process for interaction will create substance in the relationship.[2] Creating a good ethical system is critical for success.

First, any meaningful, ethical program must start with senior management behavior. In fact, ethical behavior must start at the top. Salespeople are not the only members of the sales force who face ethical concerns. Management must address significant ethical issues with (a) salespeople, (b) company policies, and (c) international customers and policies.

I do think that organizational culture is the cornerstone for understanding the ethical environment. Trust is the foundation of any meaningful corporate structure.  Gareth Jones and Jennifer George, authors of Contemporary Management, maintain that when leaders are ineffective, chances are good that workers will not perform to their capabilities.

Johnston and Marshall further suggest senior management style (do their actions match their words), the established culture of the organization, and external forces can create a climate where unethical or even illegal behavior is tolerated.[3] Therefore, senior managers should lead the way by example.

Second, the organization must evaluate the current corporate culture. There are both written and unwritten rules and behaviors that come into play. For example, Enron senior management demonstrated a lack of moral and ethical judgment that played a critical role in its decision-making (i.e. breaking laws) policies.  Therefore, one must review the organizational culture of the organization before attempting to implement an ethics program.

Last, the organization must be committed to a win-win approach. Companies need to have a plan for implementing ethics. However, these plans need to involve the workers. Typically, executives come up with a mandate on corporate policies and HR is forced to implement them.  There is little worker involvement.

Yet, ethical conduct impacts everyone.  Employees at various levels face ethical issues all the time. Their input would be invaluable. This fact has a great bearing on ethical behavior among employees.

Discuss your professional experience on how ethical decision making can impact business operations.

 © 2013 by Daryl D. Green


[1] Relationship Selling by Michael Johnston and Greg Marshall

[2] Relationship Marketing by Regis McKenna

[3] Contemporary Management by Gareth Jones and Jennifer George

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19 thoughts on “Ethical Decision-making in Business Operations

  1. I work in an open environment as referred to in the video above. I would have to agree with the notion that having an open environment in my office space does promote an ethical environment. The example of how to conduct ourselves is demonstrated for us on a daily basis by the boss. This ethical conduct cannot be warded off due to the daily interaction and just physical presence around it. Also, it’s the boss so you tend to fall in line and mimic this behavior by default. Also, we are a presence in the local community which holds us accountable on another level as well. However, productivity is not a strong suit of this type of environment. Constant interruptions and distractions make it virtually impossible to stay on task for a long period of time (Hazrati, 2011, p.1). However, this is a situation is which it is the only viable scenario given the current layout of our facility. The biggest pro is that it is conducive to promoting an ethical product due to the fact that we know if someone is representing our brand in a negative fashion and we are able to ‘right the ship’ if you will. I agree with the video that ethical standards and the environment start from management position. These are the leaders of the entity and thus must lead a profitable, yet ethical venture.

    Hazrati, V. (2011). Open office layout is bad for brain! P.1

    • Ben,
      I’m sympathetic to the open work space environment you deal with. I have seen the frustration experience by staff in transitioning to this popular space utilization adoption. This mode of staff housing brings a new spin to ethical behaviors, employee conduct, and personal staff integrity importance. This environment is not always conducive to employee productivity, particularly for those occupations/personalities that don’t fit this model. Computing code and network engineering certainly comes to mind, as these professions typically require intense focus on the task at hand. Meeting financial goals in terms of space utilization and meeting the needs of an increasingly diverse and demanding workforce [1] presents new challenges for management.
      The open work environment requires peer courtesies, professionalism, and ability to deliver task in an often times stressful office arrangement.

      [1] Davis, M, Leach, D. and Clegg, C. (2011). The Physical Environment of the Office: Contemporary and Emerging Issues. International Review of Industrial and Organizational Psychology. (Vol. 26, pp. 193-235).

    • Ben, I agree with your assessment that an open environment will keep employees on an ethical path. When employees are out in front of one another, they are typically more cautious about what they do. They do not want to be the person who gets caught cheating or doing something illegal right in front of their coworkers and when there is an open environment, they have nowhere to hide, the boss could pop in at any given moment.
      This added pressure to do the right thing typically keeps the employees on the straight and narrow. A survey conducted by Ethisphere Institute and Jones Lang LaSalle(2011) found that out of the 200 organizations surveyed, “The statistics indicate that implementing open workspace environments appears to be making an impact, as the majority of respondents (64 percent) have not had any visible ethical violations within the past two years.” By keeping their employees out and visible to all, it discourages unethical behavior. If employees do get out of line, as Ben stated, a coworker will typically steer them back to the correct path. For this reason, I feel open environments are effective.

      Reference

      Jones Lang LaSalle. (2011, Aug 16). Survey reveals open workspace environments gain favor as companies see improved employee engagement and reductions in ethics violations. Retrieved from http://www.joneslanglasalle.com/Pages/NewsItem.aspx?ItemID=22690

    • Ben, I share a very similar workplace as you have depicted above. However, I would like to challenge the viewpoint expressed in the video. The video states that an open office atmosphere promotes ethical behavior by discouraging inappropriate internet usage, sexual harassment, and disrespecting colleagues due to close proximity of office personnel. While this may be true, I believe the open office work atmosphere promotes workplace tension, drama, and reduces employee productivity. I currently work in an open office with cubicle departments. Not a single day goes by that I am not distracted by someone passing my cubicle, a person’s laughter, or the common colleague who needs to discuss their life troubles. According to a recent New York Times article, noise is a serious problem in the open-plan office, and speech, because it is directly understood in the brain’s working memory, is the most disturbing type of sound. Likewise, when a conversation carries to an “unwilling listener,” his or her performance measurably declines in cognitive tasks such as reading, writing, and other forms of creative work, (Armstrong, 2012).

      Armstrong, Barbara T. May 24, 2012.
      Open Workspaces Are Here to Stay. Now, How Do We Get Any Work Done?
      http://www.forbes.com/sites/barbaraarmstrong/2012/05/24/balancing-the-needs-for-collaboration-and-privacy-a-tall-order-in-workplace-design/

      • Rhyne,
        I also found some information of the subject to challenge the viewpoint in the video. While it the open environment does hold people more accountable, it does not promote the most productive environment but I guess one can’t have it all. The point you made about the subconscious stimulus to the brain when people are talking around you is so true. An article in Time Ideas supports your findings by saying, “open-plan offices are generally associated with greater employee stress, poorer co-worker relations and reduced satisfaction with the physical environment” (Paul, 2012, para. 2).

        Paul, A.M. (2012). Workplace woes: the ‘open’ office is a hotbed of stress. Para. 2. Retrieved 30 July 2013.

    • Ben, I agree with your assessment that an open environment will keep employees on an ethical path. When employees are out in front of one another, they are typically more cautious about what they do. They do not want to be the person who gets caught cheating or doing something illegal right in front of their coworkers and when there is an open environment, they have nowhere to hide.
      This added pressure to do the right thing typically keeps the employees on the straight and narrow. A survey conducted by Ethisphere Institute and Jones Lang LaSalle(2011) found that out of the 200 organizations surveyed, “The statistics indicate that implementing open workspace environments appears to be making an impact, as the majority of respondents (64 percent) have not had any visible ethical violations within the past two years.” By keeping their employees out and visible to all, it discourages unethical behavior. If employees do get out of line, as Ben stated, a coworker will typically steer them back to the correct path.

      Jones Lang LaSalle. (2011, Aug 16). Survey reveals open workspace environments gain favor as companies see improved employee engagement and reductions in ethics violations. Retrieved from http://www.joneslanglasalle.com/Pages/NewsItem.aspx?ItemID=22690

  2. The accounting profession has seen sweeping legislative change since the Enron and WorldCom scandals. The Sarbanes-Oxley Act (SOX) became law in 2002 to tighten accounting procedures in an attempt to prevent future accounting fraud [1] The activities involved in these scandals were more than unethical; it was criminal. The accounting profession is extremely regulatory for good reason. Consistency, accuracy, truth, direction, profit/loss performance, and employee livelihood are at stake. Ethical behavior can be closely linked to policies and procedures, but company expectations of employee morality and integrity cannot be overlooked. In my career as an accountant, I am truly proud of working within an organization that fosters ethical decision making. Not only in the financial side of the business, but the company has policies and expectation to ensure employee safety, policies and expectations to protect the environment, and avenues that are available to all staff to voice concerns and report questionable activities. Unethical behavior is not tolerated which sets a positive tone from the top. In my field, financial compliance is critical to continued federal funding

    [1] Maleske, M. (January 2012) 8 ways SOX changed corporate governance. InsideCouncil Magazine. Retrieved from http://www.insidecounsel.com/2012/01/01/8-ways-sox-changed-corporate-governance

    • Kim,

      Excellent! It’s refreshing to work for an ethical company.

      All,

      Have you ever worked for an unethical organization? How was the morale in that organization?

      Professor Green

  3. As a baby-boomer, I’ve been with the same entity for the past 25 years. During my tenure, 3 different organizations have been award the Laboratory management contract for the DOE. I have witnessed somewhat of a morale shift under each new management structure. Staff becomes apprehensive until the new leadership team is grounded and the employees once again become confident and trusting.
    Ethical behavior applies to so many facets of an organization, including theft, vendor relationships, bending the rules for gain sake, environmental protection, policy adherence, human working relationship conduct are only a few of the areas requiring ethical decisions[1]. For those employees that pride themselves with high values and job integrity, witnessing even the slightest infraction from less ethical staff can be disheartening.
    In my 25 year tenure, as regulations and policies have tightened, employee training requirements have increased. The company has done a great job in keeping the staff trained and aware, which minimizes the guess work to some degree. In the company environment, refresher training includes conduct expectations and reminded of the consequences of unethical behavior.

    [1] Phillips, C. (n.d.) Kinds of Unethical Behavior in Business. Chron.com. Retrieved from http://smallbusiness.chron.com/kinds-unethical-behavior-business-20479.html

    • Kim,
      Interesting, you have 25 years of experience and expertise accumulated. Business ethics should be set by each company and required to be followed by all employees of the company. “Business ethics, seeks to provide ethical insight and guidance to individuals in business, businesses as organizations, and to society” [1].
      From previous personal experience, In my previous work I was responsible for all ethical issues for the company and has been a difficult task, but I learned the basics of successful work is to apply ethical standards in all its details. The sensitivity of the security situation in the program of reconstruction of Iraq at that time, Forced all staff to stay at the same location with the contractor on the project, that made them in a difficult position and vulnerable to bribery, and temptations in the acceptance gifts, all that made me in a great challenge. It took a double act for the application of the principles of work ethic, Was the most difficult things is to maintain the confidentiality of information to employees because that will putting their lives at risk.

      [1] Brenkert, G.G. (2010). The limits and prospects of business ethics. Business Ethics
      Quarterly, 20(4).

  4. The economic principle to maximize profit cynically interpreted sounds something like, “make profit by any means”. But in reality, the monetary cost of unethical behavior in the U.S. is 3 trillion annually (Foote, 2009). To the point, ethical business practices are good for the bottom line and help to maximize profit (Jose, 1999). But institutionalizing ethics is a challenge considering that each person has unique a unique moral compass.

    Ethics are learned through personal learning, organizational policies, and culture (Foote, 2009). Between the implicit and explicit institutionalizing of ethics, implicit forms such as leadership, corporate culture, and top management support are arguably more effective than explicit forms such as ethics officers, ethics committees, and ethics newsletters (Jose, 1999). In other words, explicit forms of ethics in an organization are important but it is even more important that leadership practice what they preach to support a culture of ethics.

    Foote, Marianne, F. (Aug. 2009). Employee Learning and the Institutionalization of Ethics. Dissertation Submitted, UGA. Athens, GA. Web accessed. https://getd.libs.uga.edu/pdfs/foote_marianne_f_200908_phd/foote_marianne_f_200908_phd.pdf

    Jose, Anita; Thibodeaux, Mary, S. (1999). Institutionalization of Ethics: The Perspective of Managers. Journal of Business Ethics. Vol. 22, No. 2, Nov., 1999. Web accessed. http://www.jstor.org/discover/10.2307/25074196?uid=3739912&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21102567532917

    • While I agree that making ethical decisions in the business place can help companies save money, I don’t think it necessarily means that companies need to make ethical decisions in order to maximize their profit. When people today make unethical decisions in their organization, they are doing it with profitability or some other incentive in mind. Does making unethical choices come back to bite you? Of course it does, but our laws and practices here in the United States often don’t punish them enough.

      I don’t think many large companies are very scared of the repercussions of their actions. I’ve read many articles about how companies have gotten away with wrist slaps for crossing unethical boundaries. “It isn’t uncommon for business decision makers to encounter opportunities to earn hefty profits from illegal behavior where either the likelihood of prosecution is small or the expected penalties are less than the probable gains” (Radcliffe, 2012, para. 3). Companies that save millions of dollars by disposing of waste inappropriately are fined for fractions of what they saved. Actions such as this, limit the pressure that employees and businesses face to make ethical decisions.

      Radcliffe, D. (2012, July 5). Should Companies Obey the Law If Breaking It Is More Profitable?. The Huffington Post. Retrieved July 30, 2013, from http://www.huffingtonpost.com/dana-radcliffe/should-companies-obey-the-law_b_1650037.html

      • Josh, I don’t think it’s the companies as a whole that are unethical but rather employees that think the company is too big or bureaucratic to notice their infractions. At my company there was recently some insider trading by one high figure in the IT department. People will often push the limits as long as they think no one watches. At Coca-Cola we had local internal audits, corporate internal audits, independent audit company, as well as government regulatory audits.

        An article in The Houston Chronicle list 7 ways companies can combat unethical behavior. The two I find most critical states “Create checks and balances rather than putting related responsibilities in the hands of one employee, create a system of checks and balances to minimize the opportunities for unethical behavior. Hire for values. When businesses hire employees, many seek to bring on individuals who have the education and experience but employers who want to prevent unethical behavior need to also look at candidates’ values to ensure they mesh with the company’s culture. In conclusion companies have to seek out unethical behavior out rather than wait for a disaster.

        Brookins, M. (2013). Ways to prevent unethical behavior in the workplace. Retrieved from http://smallbusiness.chron.com/ways-prevent-unethical-behavior-workplace-21344.html

  5. The economic principle to maximize profit cynically interpreted sounds something like, “make profit by any means”. But in reality, the monetary cost of unethical behavior in the U.S. is 3 trillion annually (Foote, 2009). To the point, ethical business practices are good for the bottom line and help to maximize profit (Jose, 1999). But institutionalizing ethics is a challenge considering that each person has a unique moral compass.

    Ethics are learned through personal learning, organizational policies, and culture (Foote, 2009). Between the implicit and explicit institutionalizing of ethics, implicit forms such as leadership, corporate culture, and top management support are arguably more effective than explicit forms such as ethics officers, ethics committees, and ethics newsletters (Jose, 1999). In other words, explicit forms of ethics in an organization are important but it is even more important that leadership practice what they preach to support a culture of ethics.

    Foote, Marianne, F. (Aug. 2009). Employee Learning and the Institutionalization of Ethics. Dissertation Submitted, UGA. Athens, GA. Web accessed. https://getd.libs.uga.edu/pdfs/foote_marianne_f_200908_phd/foote_marianne_f_200908_phd.pdf

    Jose, Anita; Thibodeaux, Mary, S. (1999). Institutionalization of Ethics: The Perspective of Managers. Journal of Business Ethics. Vol. 22, No. 2, Nov., 1999. Web accessed. http://www.jstor.org/discover/10.2307/25074196?uid=3739912&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21102567532917

  6. I 100% agree with the statements that any meaningful, ethical program must start with senior management behavior and that ethical behavior must start at the top.

    Regardless of whether our business leaders want to be role models, they are. Dadhich and Bahal state that The fact that the leader is expected to behave as a role model, implies that the behavior is normative and idealistic which
    corresponds to the prevalent ethical norms (2008, p. 17). So if the boss is continually skipping out on meetings or perhaps making personal copies with the business copy machine, it is an automatic green light to all those that report to him that it is ok to do this as well. Whether he likes it or not, he is the example to his reports for the simple fact that he is in a leadership position. He sets the ethical tone of the business and should be aware of that responsibility and take it with the utmost seriousness.

    Dadhich, A., & Bhal, K. (2008). Ethical leader behaviour and leader-member exchange as predictors of subordinate behaviours. Vikalpa: The Journal for Decision Makers, 33 (4), 15-25.

  7. In order for any organization to have long-term success, it must consistently make ethical business decisions. A company that consistently makes ethical decisions will be trusted (Center on Education and Training for Employment [COE], n.d.). My career is in accounting and I don’t have a job if ethics are tossed to the side. Enron is an example of what happens to a business that does not make ethical decisions. In my professional experience, making ethical decisions helps businesses set organizational standards that aid the company in gaining a positive and strong reputation to secure a loyal customer or client base.

    Reference
    Center on Education and Training for Employment. (n.d.). Ethical behavior is good business. Retrieved from http://www.entre-ed.org/_teach/ethics.htm

    • Brennan,I completely agree with you that in order for an organization to have a long term success an organizations must make correct ethical decisions. I think this can be achieved in many ways, but one of the most successfully way is by establishing “code of ethics” for the business decision process. A formal code of ethics can not only help employees in quick decision making process, but also set firm rules and guidelines for everyone to follow.
      Second important point to success would be implementing correct ethical policies for the shareholders and consumers. I believe this is really important, because this insure the shareholder about the future of the company. It also helps secure long term financial growth of the company by creating positive interest within the shareholders “Dividend policies provide an opportune setting to examine how firms simultaneously manage the diverging interests of shareholders” (Shao, 2012)

      Liang Shao 2012, dividend policy: balancing shareholders and creditors interests, retrieved from http://onlinelibrary.wiley.com/doi/10.1111/j.1475-6803.2013.12002.x/full

  8. Making continuous ethical business decisions and following the code of ethics is the key for long-term success for any business. Ethical business practices means that the highest standards for legal and moral must be observed in relationships with the people in business and community. This practice is really important because it creates a benchmark within the society for other business to follow.
    Even though non ethical decision might provide faster financial results, but can damage the reputation of the firm or the organization in a long run “ Short term profit at the cost of losing a customer is long term death for your business.” (Ingram, 2002). As a leader it is always important to know how to make ethical business decisions because this practice can help you set the standards throughout the organization.

    David Ingram, 2002, How to Make Ethical Business Decisions, retrieved from http://smallbusiness.chron.com/make-ethical-business-decisions-445.html

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