Business Ethics and its Relevance in the Classroom

A new term of studying business ethics begins for second year students at the Ontario college where I teach.  The starting point (and a New Year) is an opportunity to forge fresh relationships, consider new pursuits and re-ignite old ones.  Teaching business ethics is one of my passions.  Providing a reasonable framework to defend its placement in the curriculum is a top goal on Day 1. 

This post addresses one observation from a keen student who claims that business ethics doesn’t really exist outside the classroom.  When you’re hired at a new job, you’ll basically follow the behaviour of those around you: ethics doesn’t factor into the equation, according to this student.  It’s important to remember that each individual is faced with a choice to behave ethically or not, and the responsibility to do the right thing rests squarely on the shoulders of each employee.  Although there is evidence to suggest that workers will emulate the actions of those around them, it’s not a valid reason to do away with studying business ethics.  In fact, I believe it provides a greater impetus for ethics training in business.  Here’s a list of reasons why business ethics is important inside and outside the walls of academia.

1.      Studying business ethics gives teeth to a post-secondary institution’s academic integrity policy.  It pays more than just lip service to why it’s necessary.  Students are exposed to the importance of values that contribute to the greater good.  This notion was reinforced when a high achieving student told me that she’s considered cheating before but dismissed the temptation because it’s wrong.  When she sees others around her cheating, she feels almost compelled to do the same as it seems to create an unfair environment.

2.      Students are exposed to some solid theories and are encouraged to think analytically.  We discuss Ken Blanchard’s ethics checklist in our first class.  Honesty, fairness/balance and consciousness of one’s actions provide a mini ethics test.  During the more intense classes, Kantian theory is outlined.  What if everyone engaged in a similar action?  It’s clear the whole academic system would be meaningless if everyone cheated.

3.      Unfortunately, business ethics case studies are not in short supply.  Current scenarios are brought to light on a regular basis.  Studying business ethics is important because it offers the opportunity to dissect past decisions, discover whether better actions could have been implemented, and suggest ways of preventing similar negative ethical outcomes.  The classic Ford Pinto case study sheds light on important factors influencing the decision-making process.  Students are exposed to the reality that making ethical decisions is not a straight forward proposition.

4.      The influence and power of business is an important reason to study ethics.  Companies like Walmart, Apple and Google have more financial strength than many nations.  Organizations, however, do not necessarily answer to the people in a democratic way.  Their power is concentrated and with it the ability to make decisions that can affect the lives of millions for better or worse.

5.      Finally, I believe that studying business ethics is important because it sheds light on ethical issues that may have otherwise gone unnoticed.  Who are the stakeholders in this scenario?  What impact will be made on the community when a major employer shutters a plant?  What does the aftermath of the financial crisis tell us about the banking industry and the vulnerability of consumers?

Business ethics is important regardless of what transpires in society.  In fact, as ethical misdeeds grow, so does the need for solid and practical ethical training.  One of the biggest, consumer-fueled proofs that businesses are changing is the growing trend of corporate responsibility and sustainability initiatives.  Although some may be done purely for show, I believe that most are seeking to make a positive difference in the lives of people and the environment.  If nothing else, businesses merely seeking to make a profit are becoming more and more passé.  I hope the corporate pursuit of business ethics isn’t merely a fad that will soon be out of fashion.

 

Ethical leadership development and clichés

As the school year begins and scores of students (and teachers) experience both anxiety and excitement, let’s review some clichés and the applicability to ethical leadership development.  Clichés have a bad wrap.  They’re mainly regarded as shallow, trite and meaningless.  I believe the power of the cliché is that it contains a great deal of meaning in a nutshell.  Just as a shortened URL transports us to vast amounts of knowledge, the cliché should be viewed as the tip of the iceberg and gateway to a storehouse of potential wisdom. 

“Walk a mile in someone else’s shoes.”  This statement has a tremendous amount of emotion attached to it as I think about the millions of Syrians displaced from their homes trekking to other lands to escape war.  Often with little more than the clothes on their backs, makeshift shanty towns across borders serve as temporary homes.  The meaning of temporary in this case is anyone’s guess.  Those of us privileged enough to live in stable and peaceful countries should pause and be thankful.  Ethical leadership development is not only a personal endeavour but it also seeks to improve the lives of others.  When we take time to consider the perspective of our employees, spouses, family members, friends and colleagues, we make progress in meeting the needs of those around us.

I firmly believe that if our culture continues to promote self-interest, the very fabric of our communities will erode.  One way to reverse this is by walking a mile in your neighbour’s shoes.  

“A few bad apples ruin the bushel.”  I was reminded recently of how one employee with a negative attitude can influence others (and not in a good way).  Just as those bad apples will not remove themselves from the bushel, it is management’s responsibility to ensure staff embody the culture and vision necessary for success.  Petty in-fighting, jockeying for position and gossiping have no place in the workplace.  Ethical leaders must weed out the problem right away.  More and more evidence suggests that corporations are hiring just as much for attitude and values as abilities.  Corporations train staff to sharpen their abilities but attitude is almost impossible to change.  If you want to be part of a high-performing team, don’t be a bad apple.

“Honesty is the best policy.”  This could really replace a big chunk of an ethics course.  Although I suspect most would agree with this statement, most do not adhere to it religiously.  But isn’t this the point of a good policy?  Honesty is crucial for ethical leadership development.  We need those around us to be honest in assessing our strengths and weaknesses; we also need to be honest with those we mentor about developing their abilities.  Honesty must be demanded in corporate culture: It comes from the top down.  When Alan Mulally took the reigns at Ford Motor Company, he quickly fostered an environment of openness with his executives.  The existing culture did not give enough credence to serious concerns and the picture painted was far rosier than reality.   When Mulally was informed at a meeting with his top brass that the launch of the Edge would be postponed by a week to address a quality issue, he applauded.  The message was loud and clear: honesty is the best policy.  Other department heads followed suit and more issues arose to the surface where potential problems could be reviewed and fixed. 

The cliché itself merely scratches the surface of insight.  Like many things in life, it is vital to dig for the meaning and its applicability to developing oneself as an ethical leader.  As teachers prepare for a whole new academic year, let’s remember that ethical leadership development is a life-long pursuit.  As I remind college students that they’ll only get out of my courses what they put into them, it’s a good thing for all to acknowledge that learning doesn’t stop when formal education ends.  Each of us is responsible for getting out of life what we put into it.

Ethical leadership development and effective communication

Recently I was reminded of the importance of communication in team building and ethical leadership.  There is absolutely no excuse for verbally bullying staff, especially in the presence of customers and employees.  When one is promoted to manager, the title, new business cards and pay increase do not magically impart the ability to inspire and lead others.  One of the most important components of leadership is communication.  Although many take it for granted, effective communication is both art and science.  Individuals can develop it as a point of differentiation – for example, at sales presentations and interviews.  Organizations can use effective communication as a way of getting the team on the same page and pursuing the same mission.  Lee Iacacco, the former head of Chrysler and author of its turn-around plan in the 1980s said, “The most important thing I learned in school was how to communicate.”

Effective communication is purposeful.  Communication must be clear and understood in order to have its intended effect.  The goal of communication must be carefully considered and planned, even in situations that seem relatively innocuous.  Effective communication is essential for ethical leadership.  According to the Stanford Graduate School of Business, when Anne Mulcahy was appointed CEO of Xerox in 2001 as the company teetered with bankruptcy, she attributed effective communication as the most important element of the turn-around strategy.   "I feel like my title should be Chief Communication Officer, because that's really what I do," she said.  "When I became CEO, I spent the first 90 days on planes traveling to various offices and listening to anyone who had a perspective on what was wrong with the company.  I think if you spend as much time listening as talking, that's time well spent."

Effective communication “sweats the small stuff”.  Ethical leaders care about the fine details of communication.  If the communication does not contain the required information, it can confound the intended recipients of the message.  Every effort must be made to eliminate noise.  In the marketing research data collection business, it was crucial to the success of each project that we saw eye-to-eye with the client on objectives.  If these were not communicated effectively, the project’s end goal would be in jeopardy.   Dr. Gilbert Amelio, former CEO of National Semiconductor stated,

“Developing excellent communication skills is absolutely essential to effective leadership.  The leader must be able to share knowledge and ideas to transmit a sense of urgency and enthusiasm to others.  If a leader can’t get a message across clearly and motivate others to act on it, then having a message doesn’t even matter.”

Effective communication speaks to the heart and mind, providing inspiration.  One of the greatest storytellers in the modern age was Sir Winston Churchill.  He instilled hope in the people of Britain through his emotional and patriotic messages.  Aristotle offers insight into effective communication through his discourse on logos, pathos and ethos. In order for communication to persuade, it must exhibit logos – reason and logic.  Secondly, the communication must resonate with the audience through pathos – an appeal on the emotional level.  Finally, these two elements will not have their intended impact without ethos – the credibility and ethical character of the communicator.  Unfortunately, in this day and age, it is not difficult to achieve the first two.  Doing so without a life of integrity reduces the potency of the communication.  Walking the talk is crucial and there are times when saying nothing at all, but modeling what one believes, is the most profound communication of all.  

Ethical leadership depends on effective communication.  In this technology-laden era of instant messages and social media relationships, a beneficial way to differentiate on both the individual and organizational levels depends on effective communication.  Destination and purpose, focusing on details and touching both the heart and mind are characteristics of effective communication.  Without ethical conduct and integrity, communication – no matter how poetic and logical – loses its effectiveness.  Ethical leaders understand that in order to ask for one’s allegiance, they must touch the heart.   No matter how much knowledge a leader possesses, it is not a substitute for a caring attitude.  Effective communication affords the opportunity to demonstrate compassion everyday.

India's Companies Bill and CSR

The Companies Bill recently passed in the upper house of India’s parliament mandating that the board of directors “shall ensure” 2% of net profits of larger firms be committed to CSR.  India is among the first countries to require CSR spending through legislation.  Although this appears to be a positive development, a key question to ask is whether Corporate Social Responsibility should be an organizational requirement.  Compelling companies to give – even to worthy causes – condones a well-known human character flaw: being forced to complete a task rarely produces the same result as willingly completing the task.

CSR is more than just spending.  CSR is a mindset seeking to benefit stakeholders within the organization’s sphere of influence.  Social responsibility is not borne from the pocket book.  It emerges from a sense of doing what is right for the greater community, creating a sense of purpose for the company.  The drawback to the legalized approach to CSR is that it leads organizations and business leaders to believe that social responsibility is simply a line item in the annual budget.  For CSR to be successfully implemented within an organization, it must be more than just an initiative but a way of doing business.  Simply spending does not capture the heart of CSR.   

Honeybees are a crucial part of the global food chain.  As the number of honeybee colonies dwindles, it affects the worldwide availability of strawberries, pears and raspberries.  Haagen-Dazs has partnered with researchers and donated to honey bee studies to help reverse the honey bee population decline.  The initiative not only helps Haagen-Dazs with the ongoing preservation of fruit for the company’s frozen novelties but other food companies and the environment.  If the company was ordered to create a CSR program, would it have a similar look and feel? 

Source: A. B. Carroll, "The Pyramid of Corporate Social Responsibility: Toward the Moral

Management of Organizational Stakeholders," Business Horizons (July-August

1991): 39-48.

CSR becomes less impactful when it’s a legal requirement.  Archie Carroll’s CSR pyramid is a helpful visual reminder of the different levels of Corporate Social Responsibility.  The pyramid, from bottom to top, is economic, legal, ethical and philanthropic.  A company must be economically viable before it can be a good corporate citizen.  In other words, a company must be engaged in a profitable business activity.  This is the foundation for all other levels.  After this, a company must hold to the legal requirements of business including but not limited to paying taxes, providing employees with a safe working environment and obeying all laws.  The economic and legal aspects of CSR (the bottom two layers of the pyramid) are required by society while the ethical aspect is expected and the philanthropic desired.  Legalizing CSR knocks the ethical component down a rung to a legal issue.  Some companies may be happy to tick a box by giving to a CSR initiative satisfying corporate obligations, but it could hinder germane progress in the social arena.  Social progress requires buy-in from management and the workforce alike, transforming the organization and making a positive impact on the community: It is certainly not an easy task.  The mandated CSR law will make it easier to spend without passion for the cause or purpose.  Will consumers be more sceptical of company efforts to be good corporate citizens when CSR is required?   

The Indian government is attempting to implement good corporate citizenship through legislation.  Only time will tell whether the new Companies Bill will truly benefit the mainstream Indian population.  While the intent of the law may be noble, it could have the opposite effect - companies donating to CSR activities out of obligation and behaving like scoundrels nonetheless.      

The decision to pursue ethical leadership development

A journey of 10,000 miles begins with one single step.  The saying may be a truism, but in reality, need not be a daunting prospect.  A purposeful journey requires two things: destination and desire.  After a decision is made to pursue ethical leadership development what should one do?  The first steps on the road to ethical leadership development include learning, leading by example and dreaming big to improve the lives of others.

Decide to learn today.   Ethical leaders are lifelong learners.  They are passionate about new developments in their industry and how these changes can positively impact their business.  No matter how well you know your discipline, there are always new things to learn and trends to observe.  Management guru Peter Drucker directs us to “identity the future that has already happened.”  The only way to accomplish this is by adopting a continuous learning approach.  For example, in Canada the baby boomers are approaching retirement which will not only create job vacancies but vast potential opportunities for delivering solutions to this market segment.  As advances in health care increase life expectancy, it is not uncommon for individuals to work until 65 and still have 20 years of living ahead.  Learning the values, beliefs and attitudes of this demographic group can open doors to fulfill unmet needs in the marketplace.

Decide to lead by example today.  “I serve with honor on and off the battlefield…I lead by example in all situations” is the Navy SEAL creed.  One of the most powerful statements any leader can make is leading by example.  Navy SEAL combat veteran and internet marketing professional, Brent Gleeson states that people will only truly follow leaders they trust.  Imagine a situation requiring more trust from your team than a combat unit on the front line.  One of the main reasons the Navy SEALs are successful is because each soldier is trained to earn trust no matter age or rank.  An organization with the same attitude can truly outperform.  Each time an ethical leader promises and follows through, a deposit is made in the trust account of team members.  A long-term disposition to lead by example fosters an environment of loyalty and respect.  Although I didn’t necessarily enjoy performing every job function at our marketing research company, I learned the value of never asking an employee to do something I wouldn’t do myself.  The message communicates that the leader is willing to get his hands dirty and support the team for a common purpose.

Decide to dream big today.  The ethical leader is responsible for championing a shared vision benefiting others.  If one is to create a dream, it might as well be big.  In many parts of the world today, access to education is restricted.  Malala Yousufzai, the Pakistani girl fighting for the right to learn, was violently targeted by the Taliban because she supports education for girls.  She miraculously survived the attack and continues to advocate against extremism.  No one would have blamed Malala or her family had she disappeared from the public eye after her recovery from hospital.  Malala’s actions demonstrate what it means to chase a dream that will ultimately benefit others. 

Ethical leadership development can be your reality today.  The lifelong journey begins with taking deliberate steps each day to improve self and community.  The decision to become an ethical leader begins now.  Deliberately decide to adopt an attitude of learning.  No matter what your profession, decide to become an expert in your field by learning of the new developments in your industry and the competitive landscape.  Deliberately decide to lead by example.  Ensure your words and actions match.  You may not notice, but people are watching and it won’t take them long to figure out if you’re “walking the talk”.  Finally, deliberately decide to dream big.  Most of us won’t be speaking to the UN about improving access to education for girls, but we can still make a difference in the lives of our families and communities by adopting a big dream.  No matter where you are in life today, you can decide to take the first step on the path to becoming an ethical leader.                 

The road to ethical leadership development

The journey of ethical leadership development is a lifelong pursuit and the final destination is always further down the road.  The last two posts discussed some of the characteristics of the ethical leader and the daily focus of the ethical business leader.  To discuss leadership implies a destination.  Where will we be a year from now as we continue to focus on our regular endeavours?  The ethical leader must establish and impart a long-term vision, take others along the journey and gauge whether goals are being achieved.

Ethical leaders establish a vision.   Ethical leaders must constantly remind the team of the company’s worthy vision or its raison d'être.  Employees will toil when they know their contribution is adding to the greater good.  The ethical leader serves as the champion for the vision, charged with keeping the lofty goals as “top of mind” with its stakeholders.  Any company or board of directors can create a vision statement strewn with the latest buzz words and catch phrases.  The ethical leader not only believes in the vision but acts in a manner consistent with fulfilling the vision.  Savitz and Weber conducted research with Ohio-based energy provider AEP.  The company’s vision was to provide a safe environment for workers through a “zero harm” policy.  Savitz and Weber outline Edgar Schein’s three components of organizational culture: Artefacts (“what we do”), Espoused Values (“what we say”) and Underlying Assumptions (“what we believe”).  If all three are not aligned, it is difficult to pursue organizational goals.  For example, if the company states that safety is important but does very little aside from posting the obligatory signage to promote safety, a conflicting message will demoralize and confuse employees.  Ethical leaders establish and maintain the vision, taking the necessary steps for success.

Ethical leaders take others on the journey.  Ethical leaders are not lone wolves.  They work in an ecosystem that depends on multiple layers of responsibility, employees with varying degrees of knowledge and expertise and numerous other obligations.  No leader can do everything.  This was probably one of the most difficult things for me to learn.  When entrepreneurs start a venture, they are typically doing all sorts of things as chief cook and bottle washer.  In order to scale the business, this immature attitude must change.  And there is no room for ego.  A common theme with entrepreneurs who grow businesses is entrusting certain aspects of the company to individuals who are much more capable.  Continue hiring folks who are smarter and better in certain areas, and focus on the business of ethically leading the business.  Hiring and retaining top talent is facilitated by the organization’s worthy vision.  People want to be part of something special, and as an ethical leader, it is important to groom others to fulfill the vision.

Ethical leaders gauge success.  Ethical leaders must keep the ship on course and constantly monitor whether goals are met.  The ethical leader is responsible for establishing the proper steps to fulfill the vision.  In our example concerning AEP and its “zero harm” policy, how this is to be accomplished must be clearly outlined.  A good rule for all leaders when establishing objectives that further an organization’s vision is to follow S.M.A.R.T.  (There seems to be some uncertainty as to who is responsible for coining the acronym.)  A “smart” objective is specific, measurable, attainable, realistic and timely.  For example, a person stating that they want to get healthier is not using the “smart” guideline.  On the other hand, a person claiming that they want to get healthier by losing 10 pounds in three months through a combination of diet and regular exercise is using the “smart” approach.  The only way ethical leaders can realistically pursue success is by creating tangible bit-sized morsels from the company’s long-term vision.  These objectives can be gauged by the ethical leader to monitor whether the ship is headed to the right destination.

Ethical leaders create a worthy vision, take others along for the ride and constantly monitor results.  Without the vision, leaders are not leaders at all because leaders are on a journey to a specific place.  One of the main duties of the ethical leader is to champion the vision and help others understand its significance.  Without vision, it is impossible to hire and retain the best talent since human beings have an innate desire to be part of something that contributes to the greater good.  Gauging success is a fool’s errand without vision: If your destination is nowhere in particular, you’ll certainly get there.      

Ethical leadership development in action

Last week’s post discussed the qualities of ethical leaders including integrity, compassion and skilful communication.  The current issue discusses the focus of the ethical leader.  In which specific areas should the ethical leader devote time and energy in a world of ever-growing demands?  There are many tasks an ethical leader can accomplish which may be good, but what should be pursued?  It goes without saying that the ethical leader’s time is valuable.  I was reminded recently by Adam Bryant’s post on LinkedIn that it is imperative to distinguish between action and activity.  The latter may offer a sense of accomplishment and enjoyment but does not necessarily lead to the desired destination.  The former is purposeful, goal-driven and pursues the long-term agenda.  Ethical leaders should focus their time equally on the following: self, company and employees.

Ethical leaders invest in personal development.  Ethical leaders are learners.  They love to learn new concepts benefiting themselves and others.  Tim Sanders describes this type of person as a love cat.  The most important transformation that occurs when one loves to learn is that they are open to change.  Even after 20 years on the job, it is possible to continue learning.  This should seem obvious because the business landscape changes over the years but there are still far too many people who think they know everything there is to know about their industry.  Ethical leaders passionate about knowledge often become great teachers who seek to help others.  Dee Hock, founder and CEO Emeritus at Visa states:

“Here is the very heart and soul of the matter. If you look to lead, invest at least 40% of your time managing yourself -- your ethics, character, principles, purpose, motivation, and conduct. Invest at least 30% managing those with authority over you, and 15% managing your peers. Use the remainder to induce those you ‘work for’ to understand and practice the theory. I use the terms ‘work for’ advisedly, for if you don't understand that you should be working for your mislabeled ‘subordinates,’ you haven't understood anything. Lead yourself, lead your superiors, lead your peers, and free your people to do the same.  All else is trivia.”

Ethical leaders invest in the company.  Ethical leaders find ways to benefit the company.  The result may be new growth opportunities, marketing plans or products, but the driving force is always leadership.  Ethical leaders must make time to lead.  Leadership is not management.  Both are important and the roles may intertwine; however, it is only leadership that blazes a new path and ventures into previously unknown territory.  Most global companies perform management functions exceptionally well, but fewer are led exceptionally well.  As global PC shipments fall, and sales of the new Surface tablet position the product on the brink of irrelevance, Microsoft’s future depends on leadership not management.  It is natural for a company that developed the most popular operating system in the world to continue focusing on business as usual.  Ethical leaders invest in organizations to produce the unusual.

Ethical leaders invest in employees.  The stakeholder concept includes employees, society, government, suppliers, competition and clients.  Business does not grow in a vacuum, and to varying degrees, depends on stakeholders for vitality and sustained growth.  Employees are arguably the most important stakeholder in any organization.  Countless businesses understand the cliché but do not demonstrate how employees are valuable.  The perfunctory holiday party does not cover a multitude of ills during the course of the year.  Ethical leaders invest in employees by rewarding a job well done (a very simple “thank you” note which any ethical leader can afford regardless of financial circumstances).  Ethical leaders understand that the company is like a second family and employees are more than the job titles on business cards.  It’s been shown time and again that financial earnings are not the most important part of the job.  Ethical leaders invest in employees by rewarding workers.  Gratitude is a form of reward and reaffirms that a job was performed well and sends a positive signal to engage in more of the same. 

Time is certainly a valuable and irreplaceable commodity.  It cannot be horded or manufactured, so it is vital that time spent by ethical leaders propels the business closer to the desired destination.  I spent years on activity – managing projects, teams, budgets, vendors – but not enough time on goal-oriented action items.  Keeping busy felt good and I enjoyed various aspects of the work, but my time was not being used effectively.  I learned that establishing a vision, empowering a capable team, delegating tasks and practicing ethical leadership are vital to the long-term success of any company.  Ethical leaders invest in self, company and employees by deliberately focusing on ways to improve each area on a daily basis.