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The Good, the Bad and Your Business

The Good, the Bad and Your Business

Is ethical business decision making an oxymoron? Author Jeffrey Seglin talks about how to manage with a conscience.

The Good, the Bad and Your Business: Choosing Right When Ethical Dilemmas Pull You ApartBy Jeffrey L. Seglin John Wiley & Sons Inc., New York, US$27.95 March 2000 www.wiley.com In fall 1982, Johnson & Johnson faced a crisis when seven people from the Midwest died after ingesting cyanide-laced Tylenol capsules. News of the murders traveled quickly and caused nationwide panic. And although Johnson & Johnson was certain the tampering had not taken place at its plants, the company was nevertheless concerned with protecting its reputation and its most profitable brand of pain reliever.

Marketing experts predicted that the Tylenol name would be doomed. "I don't think they can ever sell another product under that name," advertising guru Jerry Della Femina told The New York Times soon after the ordeal.

Although unlikely to be held responsible, Johnson & Johnson's top management knew they needed to act quickly. In what was only later recognized as a stroke of marketing genius, the company decided to put customer safety first and profit second. Johnson & Johnson briefly halted all Tylenol advertising and eventually recalled more than 22 million bottles of capsules at a cost of approximately $100 million.

Such a move could hardly have been seen as acting in the best interests of the company's stockholders. But almost instantly, Johnson & Johnson was praised for its socially responsible actions. Shortly thereafter, Tylenol returned to the market in new tamperproof bottles, and today it's still one of the top-selling over-the-counter drugs in the country.

Have you and your managers talked about how to handle such a predicament? Author Jeffrey Seglin recommends you take the time to do so. And not just for the looming emergencies, but for everyday decision making as well. "Rather than thinking of ethics as the benchmark against which behavior is measured, for many people ethics has become something that always inflicts pain on a company or requires some hefty sacrifice," says Seglin.

By drawing a distinction between behavior based on a fear of litigation and behavior driven by ethics, Seglin demonstrates in The Good, the Bad and Your Business the importance of making tough business decisions with a clear sense of right and wrong. He talked with Contributing Editor Elaine Cummings from his office at Emerson College in Boston, where he teaches in the graduate department of writing, literature and publishing.

CIO: The premise of your book is that in business, we're constantly making decisions that affect three spheres: money (finance, sales and so on), people (our employees, our bosses and their families) and the common good (the society at large, including the environment and competitors). The challenge, you write, is to find the place where the needs of all three areas overlap. How realistic is it to claim that you can perfect this technique?

Seglin: The short answer is that you can't perfect it. In fact, it could very well be that the decisions you make about a situation or dilemma you're facing may differ from week to week or even day to day depending on the factors that are in play.

CIO: If it's a moving target and impossible to perfect, what's the point of trying?

Seglin: The point of trying is that the world of business, which was built on the belief that you checked your personal values when you entered the office door, has changed. A more enlightened view has taken hold that recognizes it's impossible to leave our personal values at home and not have them affect the way we do the things we do.

CIO: But then how do decisions ever get made? Isn't it always a game of trying to keep the needs of each constituency in balance?

Seglin: Part of what I write about in The Good, the Bad and Your Business is the need CEOs, CFOs, CIOs and other managers have to make important decisions with often incomplete information. In fact, I argue that it's more destructive to a business to be indecisive--for its managers to add layers of ambiguity to a situation that's already ambiguous, since no one knows exactly how a decision may play out. My point is that examining the effect various decisions might have on people, money and the common good can be a very effective way of making tough choices.

CIO: Don't legal and regulatory restrictions also help you make tough decisions?

Seglin: Well, perhaps. But making a choice--whether it's good or bad--based on legal reasoning or fear of litigation can lead to a whole smorgasbord of new problems. Let's take the example of giving references for former employees. The prevailing advice given by human resource departments and labor attorneys is that to avoid a potential lawsuit from a former employee, you should give only name, rank and serial number. Well, there are a few problems with this. First, as I point out in the book, the number of lawsuits against former employers for having given bad references is negligible. Secondly, this mind-set renders managers unable to give a good review for someone who did a great job, and conversely it prevents them from warning a colleague in the field of a potential disaster. Overall, the fear of litigation over giving references has resulted in behavior that penalizes both good employees and prospective employers. Managers are afraid of giving out frank references and suspect that they're not getting them from other managers, either.

CIO: What are you saying? To ignore legal advice?

Seglin: Not at all. But legal advice is just that. It's the lawyer's job to give you carefully thought-out ways to avoid litigation at all costs. Sometimes though, doing the right thing outweighs the perceived risk of litigation. Here's an example. There's a dirty little belief among managers that hiring a minority employee is just opening oneself to trouble, since it's assumed to be harder to get rid of a minority employee if he or she doesn't work out. Well, for one thing, there's little in the way of statistics to support this. For another, it forces managers to make abhorrent decisions about hires based on unfounded fears. If anything, the real fear is of having to fire anybody for any reason since most of us hate the task.

CIO: In the digital economy, the rules are still being written. How do you behave in a world with nascent rules?

Seglin: The biggest challenge in an environment where the rules are still being formed is to disclose as much as possible. For example, if your company has been sued, and all of the past year's e-mail from every employee within the company has been subpoenaed as evidence of your company's consistent pattern of bad-mouthing a former vendor or partner, then you'd think the smart thing to do, regardless of whether you won or lost the account, would be to let your employees know that experiences like this one are precisely the reason you instituted an e-mail policy that warned them against using e-mail for inappropriate or nonbusiness dealings. An example of a frivolous lawsuit that cost the company valuable time is a lot more understandable as a reason than using the "I'm the boss, that's why" explanation. Many companies though would rather not disclose their own embarrassing mistakes to their employees.

CIO: Why is it that businesspeople have such a hard time conceiving of and discussing the ethical dimensions of their work?

Seglin: Because they assume that for something to be ethical, it has to cause pain to the business and its people. There's the example of a class of MBA students who were asked to comment on the ethical decision making by the leaders of Johnson & Johnson when they pulled millions of dollars' worth of Tylenol off the shelves in the early 1980s after some capsules laced with cyanide caused deaths. Many of the students argued that it wasn't an ethical decision at all since Johnson & Johnson ended up getting great goodwill as a result of the way it handled the situation. The students believed that without pain and suffering, the case wasn't really about ethics.

CIO: So what would be your response to that thinking?

Seglin: Well, using the same example of the Tylenol situation, I'd say it's crucial to remember that although the public responded positively to the company's actions and the brand survived and flourished, J&J's executives still had to make a lot of tough decisions in a brief, horrible period of time. It was clearly an example of ethical decision making.

CIO: Doesn't your recommendation about considering the consequences of behavior on the outside world (others, the environment) remove ethics from its proper sphere--namely, being true to your own internal value system? After all, isn't intent the foundation of our legal system's means of ascribing right and wrong?

Seglin: If your own value system allows you to cause harm to others, then it's inappropriate behavior. That's why I believe you need to weigh how your decisions will affect all of the constituencies involved. People like to think that they can feel good about a particularly grueling decision if they can sleep at night or look at themselves in the mirror after making the decision, or by gauging whether they'd feel OK reading about their decision on the front page of The Wall Street Journal. Well, that may work for people whose internal values are respectful of others. But as Joe Badaracco, who teaches ethics at Harvard Business School, points out, if Mother Teresa had a few sleepless nights and Adolf Hitler slept soundly, it'd say more about their respective internal values than it would about the rightness or wrongness of their decisions.

Want to share your thoughts on an ethical dilemma you've faced? Contact Contributing Editor Elaine Cummings at cummings@cio.com. Author Jeffrey Seglin can be reached at jseglin@post.harvard.edu.

DO THE RIGHT THING

An excerpt from Seglin's The Good, the Bad and Your Business on the nature of ambiguity in business ethics In an increasingly complex business world, there's a tendency among people to want unambiguous answers to what can only be ambiguous situations. I was reminded of this in a seminar I conducted for graduate students of Harvard Business School and Harvard Divinity School to discuss the language of ethics in business, or, more specifically, how people in business talk about the ethical decisions they make.

At each session, we focused on a different case study and talked about the decisions the various characters in the case made about the ethical dilemmas they faced. What was particularly heartening to me was that here was a group of graduate students as far apart from one another on the physical campus of Harvard as you could possibly be and, you'd think, as far apart philosophically about what's right and wrong in business behavior. But that wasn't the case. The business school students took as much issue with questionable behavior as the divinity school students did. The wonderful part about the discussions was that these people from different parts of the academic world with vastly different vocational goals brought passion and insight to the exploration of how people in business make difficult choices when facing the needs of competing constituencies. They recognized the difficulty of the decision-making process that occurs when tough choices need to get made that cut across academic lines.

But more than once, when it became clear that no matter what choice a character in one of the cases made, he or she would be giving short shrift to the needs of some group--the customers perhaps, or the environment, or maybe the employees--a student in the seminar would blurt out, "There must be rules for this sort of thing; just tell us the rules."

The rest of the class would then pounce, saying what the blurter undoubtedly knew--namely, that there are no universal answers that address all of the tough decisions that get made in business day in and day out, regardless of the scope and scale. Sure, there are some regulations and laws that govern how we behave. And certainly, some industries have rigorous codes of ethics that govern what's acceptable and what's not acceptable behavior....

In business, we're all searching for a comfortable way to navigate these decisions. By comfortable, I don't mean complacent. Business is a dynamic, fast-paced thing, and we can hardly stand idly by hoping that the answers to our dilemmas will be revealed to us in a puff of smoke or a revelatory strike. That's why trying to come to an understanding of how to talk about ethics in a meaningful way is so critical to the operation of a business. We need to be able to understand the context we're operating in and to make decisions fully informed with a clear sense of right and wrong, so we can weigh out the tough decisions we need to make to stay honed for competition.

The comfort we're looking for is that place where we can continue to stay a lean, mean, profit machine, but at the same time do it with an understanding of what we stand for in the way we make choices and decisions. Contrary to some popular thinking, being ethical in business and generating profits do not need to be mutually exclusive actions....

Comfort does not equal complacency. Nor does the search for it translate into poor performance.... If you buy into the argument that the only responsibility of a business is to its stockholders and that paying attention to areas outside of this will result in a lesser-performing company, the research of two Harvard Business School professors suggests just the opposite. John Kotter and James Heskett studied the performance of 207 large firms over an 11-year period. They wrote of their findings:

Corporate culture can have a significant impact on a firm's long-term economic performance. We found that firms with cultures that emphasized all the key managerial constituencies (customers, stockholders and employees) and leadership from managers at all levels outperformed firms that did not have those cultural traits by a huge margin. Over an 11-year period, the former increased revenues by an average of 682 percent versus 166 percent for the latter, expanded their workforces by 282 percent versus 36 percent, grew their stock prices by 901 percent versus 74 percent, and improved their net incomes by 756 percent versus 1 percent. -John P. Kotter and James L. Heskett, Corporate Culture and Performance (The Free Press, 1992) [Our search is for] a comfort level among the conflicting spheres of business we operate in. While there are overlaps in these spheres, I've divided the exploration into three areas of business that we all commonly deal with. The first is money, the second is people, and the third is the common good, which includes all of those areas that we don't traditionally think of as part of the economic bottom-line business function but which we have to factor into our decision making all the time. How do you manage all of these issues in the context of how you run or do your business?

The money and people aspects of managing a business are pretty obvious--they are the critical ingredients to all successful businesses. While we need to make them on a regular basis, these decisions are often loaded with moral ambiguity, packed with the stuff about which ethical decisions are made.

The money decisions are the difficult decisions company owners and managers must make when faced with trying to keep cash flow strong enough to keep a company running. Shortages of cash can make the most honest of us consider behavior we never would have anticipated.

The people issues deal with issues directly involving people in the workplace, whether it be deciding how far to go to help a troubled employee, what stance if any to have on romantic relationships between coworkers, how and what to communicate to the rest of the workforce when an employee is fired, and how employees pass between personal and business lives when the line grows constantly blurrier.

The third part--the common good--includes such things as where we draw the line between posturing and lying, if and how we legitimize spying on competitors, and how our operations affect the environment.

Obviously, our dealings with these three spheres are not so cleanly segregated in our day-to-day business lives. They overlap--decisions we make about money often involve people, and those we make about issues relating to the common good frequently touch on the other two as well. What comforts us in one area may not do so in another.

It would be nice and clean if we could think of the three areas as interlocking circles--as in a classic Venn diagram. And it would be neater still if we could say that the area of comfort we're searching for is that small area where all three circles overlap. But alas, it's just not that simple. Finding that comfort level is finding a spot that shifts and mutates moment to moment, decision to decision....

But there's no universal code of ethics that governs how everyone should behave and everything should be done in the business world.... Business is too vast, too wide in scope, too all-encompassing to come up with a magic list that spells out what should and shouldn't be done in every situation....

There are times where it certainly would be nice to have a list, a guide, something to fall back on when you get embroiled in those nasty choices that make you wonder about your own behavior.

Who wouldn't want to be able to pull out a code of ethics and work down the list:

Did I steal? Check.

Did I lie? Check.

Did I kill someone in the process of making payroll? Check.

But one of the sad byproducts of overreliance on industry codes or governmental regulations is that it frees up people caught in the heat of a decision from having to think through the implications of their actions.

That's where the real work gets done, the hard thinking, the coming to terms with the implications of your actions. When you make choices solely on what the law will and won't allow, you free yourself from taking any moral responsibility for your actions. And what fun is that? It's like spending your life as an automaton waiting to be told how to behave, how to make the tough choices that define you, the way you do business, and the way you live your life.

Excerpted with permission of the publisher John Wiley & Sons Inc. From The Good, the Bad and Your Business. Copyright 2000 by Jeffrey L. Seglin.

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