What the Harvard Business School. Knows About Ethics

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What the Harvard Business School Knows About Ethics Management must consider the impact of every business policy and business action upon society.

1 What the Harvard Business School Knows About Ethics Management must consider the impact of every business policy and business action upon society. It has to consider when the action is likely to promote the public good, to advance the basic beliefs of our society, and to contribute to its stability, strength and harmony. Peter F. Drucker, The Practice of Management, p

2 Outstanding organizations cannot be created in a sea of distrust. - Thomas R. Piper, Can Ethics Be Taught? (Boston: Harvard Business School, 1993), p. 2 What the Harvard Business School Knows About Ethics 2

3 Today s Game Plan? introduce yourself? check your knowledge of HBS? discover HBS s beginnings? evolution of HBS s interest in ethics? review HBS s case method? tackle a case? what part of ethics does HBS emphasize?? what HBS has discovered about ethics Introduce yourself to the people at your table 3

4 Why the question? Because association professionals tend to read and respond to articles in the Harvard Business Review. Because the Harvard Business School leads the nation in its commitment to the study of ethics and organizations. To answer the question, I reviewed more than 300 articles, books and multimedia presentations from the Harvard Business School Here s what I found: 4

5 Harvard spends more time analyzing behavior than it does prescribing it. About six of every ten Harvard Business School publications on ethics describes how people behaved rather than judging their behavior. So Harvard knows how we behave and it follows trends in the behavior of individuals and their organizations. Harvard s kind of ethics 9% of Harvard s products show how to comply with society s new (legal) demands 17% of Harvard s products show how an individual can become more ethical in his or her behavior 74% of Harvard s products address an organization s need to obey the unenforceable 5

6 ought self comply How it all started Harvard College founded Harvard Business School (HBS) founded with 59 students 1916 First required ethics course 1927 HBS moved to the Boston side of the Charles River 1965 First women admitted to HBS MBA program 2005 HBS refuses to be ranked 6

7 Rosabeth Moss Kanter Michael Bloomberg Elaine Chao Stephen Covey Chris Cox H. John Heinz III Fred Haise Robert S. McNamara William Proxmire Mitt Romney Meg Whitman George W. Bush Jeffrey Skilling Famous Alumni The evolution of thinking about ethics at Harvard Business School 1915 Social Factors in Business Enterprise 1940 Human Problems of Administration 1959 Business, Society and the Individual 1972 Law and the Corporate Manager 1979 Power and Influence 1986 Moral & Social Inquiry Through Fiction 1991 Moral Dilemmas of Management 1995 Managing for Organizational Integrity 1998 The Moral Leader 7

8 The Case Method Every week, Harvard MBA students pore over fourteen or so cases, which usually include a range of financial and other supporting data. After spending a couple of hours studying each case on their own, and conducting quantitative analyses as appropriate, they test their thinking before class in small study groups. First-year sections of about ninety students share an amphitheatre-style classroom, designed expressly for the case method, for about four hours a day for the entire year. By working together daily on a wide array of real cases, they not only learn the lessons of business and management, but they often forge relationships that last a lifetime. 8

9 Almost inevitably, class begins with a "cold call," a provocative question the professor poses to one specific student to open the case and ignite the thinking of the section as a whole. In the course of a year, every MBA student is cold-called at least once, and you never know when it will be your turn a powerful incentive to come to class prepared. From the springboard of this opening question and the response, the class collectively dives into a riveting eighty minutes of analysis, argument, insight, and passionate persuasion. In more traditional classrooms, practically the only voice you hear is the professor's. HBS professors aren't soloists, but rather conductors who every day orchestrate a stimulating rapidfire discussion, playing off all ninety minds in the room to analyze and synthesize the situation. Since 50 percent of each student's grade depends on class participation, everyone is inspired to contribute. 9

lesson. Increasingly, professors also enrich their teaching through technology, using everything from real-time simulations of dynamic inventory management to live video tours of the factory floor.

10 It's commonplace at HBS for your professor to be the author of the case under discussion. It's also not unusual for the actual case protagonist to participate in the class or arrive via live video to answer questions and explain how things finally turned out a powerful adjunct to the lesson. Increasingly, professors also enrich their teaching through technology, using everything from real-time simulations of dynamic inventory management to live video tours of the factory floor. Class rarely ends with a tidy solution to the protagonist's dilemma, but more often with a deep appreciation of the complex factors at play, a clear idea of how to apply appropriate techniques to analyze and assess the problem, and new insights into how to deal with the untidy uncertainties of real business. 10

11 Ready for a case? You are at home. It s evening. Someone knocks on your door. It s somebody who works for you, he s worked with you for a number of years. He says, I m really sorry to bother you at home, but I ve got some really fabulous news. This individual lives just a couple miles away. And he says, I wanted you to be one of the first to know. My wife and I have been looking for a home and we really think we have found the house of our dreams. It s really expensive, we are going to have to take some money out of the kids college funds, but this is just a fabulous home, and you know you are my boss, and you are the best boss I ve ever had... I m sure many of you have had this experience. The best boss I can even imagine having. 11

12 So you nod politely and in the back of your mind you know that there is a layoff coming and that this individual s name is on that list. By buying this house, he s not only putting himself on the brink of financial calamity, he s going to be taking a plunge over it. Now what do you do? You know the layoff is coming. As a corporate officer, you have a duty of confidentiality to the corporation. You re not supposed to disclose the coming layoffs piecemeal to your friends. That s supposed to be announced when everything is set up legally, when the HR work is done, at a point in time that senior executives decide. 12

13 But this person is a friend. You owe this person a lot. Surely you have an obligation, I think, to help them out. And what if the person happens to go a little bit further and says, Do you think I ought to do this? And of course what you re thinking is You re crazy if you do this. And you are supposed to tell the truth, right? This is not a right versus wrong situation. You ve got three obligations here: to your friend, to the truth, and the duty of confidentiality to your organization. 1. Appoint a reporter for your table. 2. Think this through the We ve found a house dilemma. 3. Develop a position your table can support. 4. What approach should you (the boss) take? 5. Explain how your group arrived at its decision. 13

Here s HBS Professor Joseph Badaracco s take on the case Badaracco is John Shad Professor of Business Ethics at HBS A Rhodes scholar, Badaracco earned his MBA

14 Here s HBS Professor Joseph Badaracco s take on the case Badaracco is John Shad Professor of Business Ethics at HBS A Rhodes scholar, Badaracco earned his MBA and DBA from Harvard. He is Harvard s brightest light in the area of business ethics with five books to his credit. The most recent is Questions of Character. 14

15 Badaracco comments on the We ve Found A House Case The easy way out of that situation is, don t look for wiggle room, stick to the rules. And remember, we had three rules you could apply. You had the rule of the duty of confidentiality. And so what do you say to your friend? Great. That s fabulous, congratulations. I wish you and your family the best. And you try to paste a smile on your face that doesn t look too fake, because you know you re helping to send him over the precipice. Or, you say, simple rule, tell the truth. So you blurt out the truth. And you swear this person to confidence, of course. And you hope that the old piece of advice that says, Best friends only tell their own best friends doesn t come into play. And you haven t violated confidentiality, and you re not going to get in trouble for it. OK? 15

16 Or you say, This is my friend. Friends have to help friends. There s going to be a layoff and your name is on it. I would argue that in a case like that, following the rules is hardly leadership, barely ethical. You ve got to find a way to have a little bit of wiggle room. Following the rules in a world full of rules, and oft-conflicting rules, can be a cop out. 16

17 So Harvard s Badaracco is saying: in a complicated situation, recognize your conflicted loyalties and look for a creative solution that allows you to show respect for all of them even if you have to bend the rules. What Harvard knows about ethics 1. Because the rules sometimes run counter to one another (creating a right versus right ethical dilemma ) sometimes it s right to bend the rules. Read Badaracco s Defining Moments for more rule bending. What else can the Harvard Business School tell us about ethics? 17

18 After reviewing more than 1,700 articles and books on ethics, I have identified 25 Harvard Business School ethical discoveries and I ll very briefly share them with you now. To make this interesting try to guess what else HBS might have learned. Using a marker, write your guess on a post-it. As soon as a matching HBS discovery is revealed, get up, walk to the sticky wall and place your post-it note beneath it. Do this without delay as the program continues. You do not have to use exactly the same words but the idea should be the same. 18

19 For example to match Discovery No. 1 you might have written: simple rule-following doesn t work 2. Mixed motives are okay. That s because life presents us with more than one value at a time. We might be a) loyal to our employer, b) loyal to a friend, c) and loyal to the truth all at the same time. That creates mixed motives. 19

20 3. Ethics and reality must mix. Only by dealing with reality can sound ethical decisions be made. 4. The chance of making an ethical decision is directly proportional to our ability to buy time. Life is messy and it presents us with situations that take a while to figure out. Take time to imagine all the angles to the problem and all the possibilities. 20

21 5. Sound ethical decision-making is selective. Ethical people try to calculate what is attainable. They let the lost causes go by. To be effective, you have to have leverage. One must preserve one s own standing before trying to help another to his feet. Consider candidate Lincoln s refusal to denounce slavery categorically. A man who has no position in society can t even get a dog to bark at him. - Machiavelli 6. Ethics sometimes involves agonizingly difficult tradeoffs. - John Akes, IBM Chair 21

22 7. Ethical behavior builds trust, a basic requirement for a organizations to grow. Outstanding organizations cannot be created in a sea of distrust. Thomas Piper, Professor, Harvard Business School 8. Ethics cannot be reduced to legal or compliance or to a mathematical formula. Instead, ethics is obedience to the unenforceable something compelling yet beyond science and the law. (The phase was coined by Lord John Moulton, d ) 22

23 9. Ethics is essential for a profession. A profession must be attached to a purpose, and that purpose to other people. - A. Bartlett Giamatti See also: The Ethics of Professionalism by Ashish Nandi in HBS Faculty Seminar Series 23

24 10. We are not ethically full formed at age 20 or 30. In fact, we can learn to be better ethical decision makers throughout our lives. It takes time to develop tough-minded individuals with the courage to act. - Thomas Piper, Can Ethics Be Taught? (Boston, Harvard Business School, 1993) p No one can be ethically neutral. To decide not to decide is in itself a decision. 24

25 12.The markets don t always point us in the ethically correct direction. Thomas Piper, Can Ethics Be Taught? (Boston, Harvard Business School), p Organizational context (or culture) affects individual behaviors. Thomas Piper, (HBS), p. 8 25

26 14. Our models of human nature affect our choices and our behaviors. 15. We can be right organizationally and economically and yet wrong ethically. 26

27 16. Ethical decision-making requires more than a code of conduct. 17. A sound ethical decision-maker recognizes that sometimes systems, not people, cause harm and injustice. (This is a lesson that most students have not learned by the time they enroll in the Harvard Business School according to Sharon Daloz Parks in Piper, Can Ethics Be Taught? (HBS), pp ) 27

28 18. Ethics applies to more than personal (one-on-one) relationships. This is another lesson that most entering HBS students have not learned. 19. Conflict and failure have the power to cause people to rethink who they are and what they believe in. This makes them more mature ethical decisionmakers. (This is another dimension that most entering HBS students do not have.) 28

29 20. Ethics can be thought of as a game with a peculiar language, set of images and metaphors. A single set of images, words and metaphors can limit one s ethical range. For example, There can only be one winner. 21. Compassion is a value that is often ignored in business settings. (Entering HBS students tend to lack compassion.) 29

30 22. Ethics is learned from a mentoring community more than from a single mentor. - Parks, pp Ethics is not a compartment of life but a a dimension of every compartment. - Piper, p. 82 "Once the rockets are up, who cares where they come down? That's not my department," says Wernher von Braun. - Tom Lehrer 30

31 24.There are opportunity costs to ethics. While I am weighing the ethical dimensions of my decision, I could be using another kind of decision-making analysis. 31

32 25. Ethics is as much a temperament as a set of principles. When the ethical temperament is present, people can lead quietly. What usually matters are careful, thoughtful, small, practical efforts by people working far from the limelight. In short, quiet leadership is what moves and changes the world. 32

In other words, Harvard knows that we don t need another hero. HBS Ethical Discoveries in a Nutshell: Knowing the best, most ethical course of action is sometimes but often quite hard.

33 In other words, Harvard knows that we don t need another hero. HBS Ethical Discoveries in a Nutshell: Knowing the best, most ethical course of action is sometimes but often quite hard. When it s easy, do the right thing. When it s hard, think it through, be realistic, be imaginative. Bend the rules if necessary. If there s time, use those you trust as a sounding board. Take a stand when and where you can. Don t be afraid to take risks. Courage counts. 33

34 What has Harvard missed? What ethical principles are you still holding in your hand? Let s see what Harvard missed. The Harvard Business School knows that careful, thoughtful, practical persons can change the world for the better. We know that you fit that profile. It s up to you! Gary Davis Board Solutions 34

35 What we need are quiet, experienced, compassionate leaders who understand the complexities of life. What we need is YOU! Summing up: ask yourself What have I heard today that is new for me? What do I need more time to think about? What have I learned today that I should implement? How will I put my discovery into action when I get home? 35

36 Have a great conference! To obtain a electronic file copy of this presentation, send an to gwdavis@insightbb.com Gary Davis 36

Copyright 1998, 2001 by Franklin Covey Co. All rights reserved.

Character First An interview with Stephen R. Covey From Executive Excellence Magazine Copyright 1998, 2001 by Franklin Covey Co. All rights reserved. For personal use only. Even the very best structure,