Ethics and Decision Making
Because many decisions involve an ethical component, one of the
most important considerations in management is whether the
decisions you are making as an employee or manager are ethical.
Here are some basic questions you can ask yourself to assess the
ethics of a decision.
- Is this decision fair?
- Will I feel better or worse about myself after I make this
decision?
- Does this decision break any organizational rules?
- Does this decision break any laws?
- How would I feel if this decision were broadcast on the
news?
The current economic crisis in the United States and many other
parts of the world is a perfect example of legal yet unethical
decisions resulting in disaster. Many experts agree that one of the
driving forces behind the sliding economy was the lending practices
of many banks (of which several no longer exist). In March of 2008,
a memo from JPMorgan Chase & Co. was leaked to an Oregon
newspaper called “Zippy Cheats & Tricks” (Zippy is Chase’s
automated, computer-based loan approval system). Although Chase
executives firmly stated that the contents of the memo were not
company policy, the contents clearly indicate some of the
questionable ethics involved with the risky loans now clogging the
financial system.
In the memo, several steps were outlined to help a broker push a
client’s approval through the system, including, “In the income
section of your 1003, make sure you input all income in base
income. DO NOT break it down by overtime, commissions or bonus. NO
GIFT FUNDS! If your borrower is getting a gift, add it to a bank
account along with the rest of the assets. Be sure to remove any
mention of gift funds on the rest of your 1003. If you do not get
Stated/Stated, try resubmitting with slightly higher income. Inch
it up $500 to see if you can get the findings you want. Do the same
for assets” (Manning, 2008).
While it is not possible to determine how widely circulated the
memo was, the mentality it captures was clearly present during the
lending boom that precipitated the current meltdown. While some
actions during this period were distinctly illegal, many people
worked well within the law and simply made unethical decisions.
Imagine a real estate agent that knows a potential buyer’s income.
The buyer wants to purchase a home priced at $400,000, and the
agent knows the individual cannot afford to make payments on a
mortgage of that size. Instead of advising the buyer accordingly
and losing a large commission, the agent finds a bank willing to
lend money to an unqualified borrower, collects the commission for
the sale, and moves on to the next client. It is clear how these
types of unethical yet legal decisions can have dramatic
consequences.
Suppose you are the CEO of a small company that needs to cut
operational costs or face bankruptcy. You have decided that you
will not be issuing the yearly bonus that employees have come to
expect. The first thing you think about after coming to this
decision is whether or not it is fair. It seems logical to you that
since the alternative would be the failure of the company and
everyone’s losing their jobs, not receiving a bonus is preferable
to being out of work. Additionally, you will not be collecting a
bonus yourself, so that the decision will affect everyone equally.
After deciding that the decision seems fair, you try to assess how
you will feel about yourself after informing employees that there
will not be a bonus this year. Although you do not like the idea of
not being able to issue the yearly bonus, you are the CEO, and CEOs
often have to make tough decisions. Since your ultimate priority is
to save the company from bankruptcy, you decide it is better to
withhold bonuses rather than issuing them, knowing the company
cannot afford it. Despite the fact that bonuses have been issued
every year since the company was founded, there are no
organizational policies or laws requiring that employees receive a
bonus; it has simply been a company tradition. The last thing you
think about is how you would feel if your decision were broadcast
on the news. Because of the dire nature of the situation, and
because the fate of the business is at stake, you feel confident
that this course of action is preferable to laying off loyal
employees. As long as the facts of the situation were reported
correctly, you feel the public would understand why the decision
was made.
Decision Making Around the Globe
Decision-making styles and approaches tend to differ depending
on the context, and one important contextual factor to keep in mind
is the culture in which decisions are being made. Research on
Japanese and Dutch decision makers show that while both cultures
are consensus-oriented, Japanese managers tend to seek consensus
much more than Dutch managers (Noorderhaven, 2007). Additionally,
American managers tend to value quick decision making, while
Chinese managers are more reflective and take their time to make
important decisions—especially when they involve some sort of
potential conflict.
Another example of how decision-making styles may differ across
cultures is the style used in Japan called nemawashi. Nemawashi refers to building consensus
within a group before a decision is made. Japanese decision makers
talk to parties whose support is needed beforehand, explain the
subject, address their concerns, and build their support. Using
this method clearly takes time and may lead to slower decision
making. However, because all parties important to the decision will
give their stamp of approval before the decision is made, this
technique leads to a quicker implementation of the final decision
once it is decided.
Key Takeaways
Asking yourself some key questions can help you determine if a
decision you are considering is ethical. A decision being legal
does not automatically make it ethical. Unethical decisions can
lead to business failures for a variety of reasons. Different
cultures have different styles of decision making. In countries
with a collectivist orientation, a high value is placed on building
consensus. Some national cultures value quick decision making,
whereas others believe in taking time to arrive at a decision.
Taking national culture into account is important in effective
cross-cultural business interactions.
Exercises
- How can you assess if you are making ethical decisions or
not?
- Have you seen examples of ethical or unethical decisions being
made? Describe what you observed.
- Have you seen examples of national culture affecting decision
making?
- What advice surrounding decision making would you give to
someone who will be managing a new division of a company in another
culture?
- What can go wrong when cultural factors are ignored?
References
Manning, J. (2008, March 27). Chase mortgage memo pushes “Cheats
& Tricks.” The Oregonian. Retrieved
November 1, 2008, from
www.oregonlive.com/business/i...ushes_che.html.
Noorderhaven, N. G. (2007). Comprehensiveness versus pragmatism:
Consensus at the Japanese-Dutch interface. Journal of Management Studies, 44, 1349–1370.