A Question of trust?
by Simon Longstaff
Contents:
Introduction
Many managers think of ethics as a question of personal scruples, a confidential matter between individuals and their consciences. These executives are quick to describe any wrongdoing as an isolated incident, the work of a rogue employee. The thought that the company could bear any responsibility for an individual's misdeeds never enters their minds. Ethics, after all, has nothing to do with management.
In fact, ethics has everything to do with management. Rarely do the character flaws of a lone actor fully explain corporate misconduct. More typically, unethical business practice involves the tacit, if not explicit, co-operation of others and reflects the values, attitudes, beliefs, language, and behavioural patterns that define an organisations's operating culture. Ethics, then, is as much an organisational as a personal issue. Managers who fail to provide proper leadership and to institute systems that facilitate ethical conduct share responsibility with those who conceive, execute, and knowingly benefit from corporate misdeeds.
Lynn Sharp Paine, 1994, p.106
Harvard Business Review March-April 1994
What is ethics all about?
It is sometimes surprising that, for all the attention currently being paid to the subject of ‘ethics’, there is so little fundamental understanding of what ‘ethics’ is all about.
This lack of understanding seems to continue despite (or is it because of) the fact that dictionary definitions are offered on a regular and frequent basis. Such definitions usually tell the keen enquirer that ethics is the science of morals, or the study of ‘good’ and ‘evil’, ‘right’ and ‘wrong’. While such definitions must be taken as strictly correct, they seem to miss the opportunity to provide a slightly deeper understanding of the matter. That which follows may be a little idiosyncratic in its formulation. However, it provides a reasonable point of access for those who wish to come to grips with the practical aspect of ethics.
Some people hold the view that ‘ethics’ is first and foremost a realm of theory and arcane formulations. It is a matter of regret that some philosophers have reinforced this misconception. Others hold that ethics is the same as morality. Those holding this view sometimes make a further (strictly unrelated) claim. This is that morality is a personal (and therefore private) matter for individuals. While both general points are understandable, they are open to the challenge that they are based on a misunderstanding.
Ethics is a matter of practical concern
Plato records Socrates as having asked the fundamental question of ethics, "What ought one to do?". Whenever one seeks to answer that question, then one is operating in the ethical dimension. There are a number of things that should be noted about this question. The first thing to note relates to what Socrates did not ask! Socrates did not begin by asking questions such as, "What is good, what is evil?' or, "What is right, what is wrong?".
Rather, he asked an immensely practical question that confronts people whenever they have a decision to make, whenever they are in a position to exercise their capacity to choose. Socrates did not mark off a special area which was to be the terrain for ethical reflection.
Some people find it difficult to accept the generality of Socrates' question (and hence the field of ethical enquiry). This is specially so for members of professions which operate under what they call a Code of Ethics.
The difficulty arises because much of what is placed within such a Code is really better understood as rules of professional conduct; including rules of etiquette, rules to regulate competition and so on. These codes do contain (and invariably are based on) ethical principles. However, their traditional formulation and composition often tends to distort understanding of the fundamental character of the ethical dimension of life.
Ethics is not the same as morality
The other position that needs to be addressed is that which holds that ethics ‘is the same as morality’. The distinction can be demonstrated by using the analogy of a conversation. If one imagines that the field of ethics is a conversation that has arisen in order to answer the question, “What ought one to do?”, then moralities (and they are various) are voices in that conversation. Each voice belongs to a tradition or theory that offers a framework within which the question might be contemplated and answered. So there is a Christian voice, a Jewish voice, an Islamic voice, Buddhist voice, Hindu voice, Confucian voice and so on. Each voice has something distinctive to say - although they may all share certain things in common.
There are, in addition to the moralities that flow from the world's religions, the voices that represent the various attempts to found moral systems on the thinking of secular philosophers. Examples such as Utilitarianism and Kantian Formalism provide clear examples of philosophical theories that can give rise to moralities (so understood).
As with religions, there is much that is common to the approaches adopted by the philosophers in their attempts to answer Socrates' founding and persistent question. This is not the place to go into an analysis of ethical theories except to say that, in common with all such theories (whether sacred or secular in their origin), they fail to give an absolutely 'fool-proof' guide to behaviour. No ethical theory or morality (from the West) has found a way to answer Socrates' question in a way that totally avoids the countless ethical dilemmas that seem to be a persistent feature of what might be called the ‘ethical landscape’.
One simple example may suffice as an indication of the type of dilemma that might be encountered. Most people would agree (possibly for quite different reasons) that people ought to tell the truth. These same people will hold that one ought to avoid causing harm. But what happens when to tell the truth will cause another person harm? Each principle seems to be valid on its own account, but when put in combination with other values an irreconcilable tension may arise. This is not a trivial point. It tells of something that is absolutely crucial when trying to come to terms with the central question to be addressed by this paper. It is part of the argument that is to be advanced below that the shape and relationship between ethics education and training needs to address the apparently unavoidable phenomenon of the ethical dilemma.
A final point about ethics
Much of the above has been based on the discussion of what have been presented as either mistaken or incomplete conceptions of a field of inquiry called ‘ethics’. However, in all this discussion one crucial point has been left unsaid. This is that ethical considerations involve an essential social element. Whether one seeks to move from religious conviction, or from a position in which one seeks to generate consequences in which pleasure is maximised and pain minimised, or from the point of view in which other persons are seen as being members of the ‘kingdom of ends’, the result is the same - a consideration of ethical questions involves a consideration of the quality and nature of relationships with other people.
Integrity and an organisation's ethos
It should be noted that an inherent sense of the fundamental importance of relationships to ethics has been found to inform the way in which people assess an organisation's commitment to ethical principles. Research conducted by Australia's leading social researcher, Hugh Mackay, indicates that, in Australia at least, there is a great deal of cynicism about the degree to which statements of ethics are to be believed.
Mackay's research shows that people apply two simple tests of experience when seeking to determine the extent to which claims about an organisation's values are valid.
The first question to be asked by a person is:
How do members of this organisation treat me?
Am I treated as if I really matter? Is trouble taken to assess my individual needs and preferences? Or, am I treated according to some sort of stereotype?
The second question to be asked by a person is:
How do members of this organisation treat each other?
Do they treat each other with courtesy? Is there an air of mutual respect? Do people seem to be happy in their place of work? Or, is there evidence of low morale, of strained relationships and so on?
In short, people seem to take the common-sense approach that evidence of a selective application of principles indicates a lack of commitment to the values being espoused. In other words, there is a gap between that which is said and that which is done as a matter of course.
When a gap exists between the professed standards of an organisation and its actual behaviour, then the organisation's integrity is thrown open to question. This is not only troublesome because of a perception of double standards, it is also a matter of concern because of the effect of such a situation on the internal fabric of an organisation.
At the heart of the problem is the risk of creating what has been called a ‘values gap’. This is not just a matter of consistency, it also touches on the larger question of whether or not the organisation is keeping values-questions before it, and under review. A 'values gap' can occur at the level of the individual manager or it can affect the whole organisation. Andrall E. Pearson (1977) gives an account of the danger:
Managers need to ask the tough question: Do we have the right values for right now? And the place to begin is by honestly confronting the ‘values gap’ that has developed in most large companies, the pervasive difference between what the company says it stands for and what it actually delivers. The values gap is the largest source of cynicism and scepticism in the workplace today.
Bearing in mind Mackay's findings about the second leg of the 'reality-testing' engaged in by members of the public, it should be evident that a failure to mount a serious campaign to address the ethical climate of an organisation will risk double jeopardy. Not only will employees become cynical, accompanied by the real risk of an attendant reduction in morale (and productivity), the public will also conclude that the ethical standing of the organisation is like the Emperor's new clothes.
A serious commitment to managing the ethos of an organisation cannot be treated as an 'optional extra' - something on which time and other resources are spent after all the 'real work' has been done. Firstly, it has been argued that the ethical landscape is a necessary feature of the human condition. There is no option to withdraw, one can only amend one's response to the prevailing challenge of leading an ethical life. The second type of argument has been from prudence. It has been pointed out that a failure to take ethics seriously as a consistent element of one's endeavours is to court cynicism (and ultimately censure) from two of an organisation's most important stakeholders - the customers / clients and employees.
Yet there are two further factors that must also be taken into account.
Ethics, complexity and change
Although change has been a constant feature of the human condition, modern societies now experience the phenomenon as a relentless process of such rapidity that even moments of consolidation are washed away by a tide whose volume seems to grow exponentially.
At present there seems to be no reason to believe that these circumstances will alter. Indeed, management expert, Peter Drucker, has stressed that an ability to manage change is going to be the defining characteristic of the successful organisation of the future. Even where change is designed to simplify structures and processes, its initial impact is to make lives more complicated. While such comments are widely accepted - even to the extent of being regarded as something of a truism, there is still a tendency to overlook some of the less obvious features of the change process. Amongst those features overlooked is the relationship between patterns of change and the ethical climate of organisations.
Technique and the search for certainty
One of the most common responses to the experience of change is to reinforce a core framework of certainty. If circumstances require a person (or a group) to be flexible in their response, then a firm foundation will provide for greater comfort (and success) than a base of shifting sands. Having said this, one should also acknowledge the existence of an almost habitual streak of conservatism that sees people favour the familiar (and therefore comfortable) over the novel.
While much of the change that takes place only ever affects the superstructure of experience, truly radical change takes place whenever it is of a kind that disturbs the foundations on which people rely for ultimate security. As such, radical change is characterised either by a direct attack on those foundations (as in the Enlightenment and Reformation) or indirectly (and usually unintentionally) as when the rate of change fails to allow for periods of consolidation and re-grounding. To use a physical analogy - in one case the river bank is deliberately undermined in order to change the direction of its flow, in the other a flood erodes the foundations. Particularly in the latter case, the eventual collapse of the foundations comes as a shock to many.
Some respond to the phenomenon of radical change by seeking to shore up the foundations. Others will seek a new framework on which to build a stable platform. As noted above, the best way to cope with change is to be anchored to a firm anchor point that allows for flexibility. Although both responses would seem to indicate stark alternatives (conservatism vs innovation), the difference is only superficial when compared to the common processes most likely employed by each group.
One way of combating change (and the increased level of uncertainty) is to place great weight on the application of processes that have been seen to be successful in the past. In earlier times this may have led to a resurgence in religious observance of various kinds (sacrifice, ritual, prayer etc.). In post-Enlightenment conditions of modernity, there is a greater tendency to look to the technological approach as being indicative of the most successful processes. After all, the application of technology (broadly construed) seems to have solved very many problems.
Technology is as much about a way of thinking as it is about particular devices and techniques. At its root, a technological approach to the world is one in which a kind of 'calculative rationality' is at work. Such a way of thinking supports a view of the world as a place to be controlled. It should be noted that the progenitors of this approach, people like Sir Francis Bacon, believed that all of nature (including man) would eventually be subject to the control of technique.
Quasi-technical approaches to the social world include the application of control mechanisms such as regulations and laws. Hence in times of uncertainty there is a tendency to look to technique as a way of reconstituting the foundations on which people rely for support. The most familiar response is therefore one in which people seek to address problems by increasing the mechanisms of surveillance and control.
In organisations this tendency is frequently manifested in a decision to provide a framework for certainty through the provision of a Code of Conduct (frequently mis-named as a Code of Ethics). While many codes are developed by people who sincerely believe that they can do all of the work expected of them, it should be noted that some are attracted to the process because of the perception that codes offer a relatively inexpensive ‘quick fix’. As Lynn Sharp Paine has noted:
... providing employees with a rule book will do little to address the problems underlying unlawful conduct. To foster a climate that encourages exemplary behaviour, corporations need a comprehensive approach that goes beyond the often punitive legal compliance stance...Those managers who define ethics as legal compliance are implicitly endorsing a code of moral mediocrity for their organisations
This is not to suggest that there is no role for Codes, nor is it being suggested that normal compliance based processes don't play an important role. Rather, attention is being drawn to the fact that these responses are inadequate if they are all that is done by way of response. This is especially evident when the ethical dimension of daily practice is taken into account. In part, this is because an ineliminable element of uncertainty is an obvious feature of human experience of the ethical dilemma. But of even greater significance is the fact that there is a limit to which quasi-technical solutions can be applied to the problem of managing change and complexity.
Side constraints and their limitations
One of the most commonly used tools for managing relatively complex systems has been to set in place what might be termed 'side constraints' designed to regulate systems. Most typically, such constraints have operated (and have been modified) through the use of feedback loops.
Although very successful in their traditional operation, the use of side constraints depends on the system generating enough 'energy' to power their operation in a cost-effective fashion. The amount of 'energy' needed to operate side constraints increases with complexity. This is, in part, because added complexity brings an increase in the number of operations to be monitored and therefore the elasticity of the system. However, there is a further increase in cost when the increase in complexity is accompanied by a concomitant growth in the extent to which each part of the system is affected by another. Such is the case in society.
Professor Cliff Hooker, of the University of Newcastle in Australia, has developed a thought experiment in which the point becomes evident when imagining the damage able to be done by a person wielding a pair of bolt cutters in 1994, with a high level of complexity when compared to, say, 1794.
In earlier centuries the individual vandal could cause only local damage. If side restraints (like the law) failed then the overall damage to the system would be localised. Today it is possible for one person to wreak havoc by damaging key elements in a society's technological infrastructure. Vast numbers of people can be adversely affected - as occurred in Tasmania's capital city, Hobart, when a person (armed with bolt cutters!) managed to close down a large part of the city's phone system for three days. The same can be true in terms of non-physical damage. Mass communication makes whole societies susceptible to the enervating effects of graphic reports of tragedy.
Hooker (a former physicist and now professor of philosophy) has argued that when a system achieves levels of complexity such that it requires an unsustainable amount of 'energy' in order to run its side constraints then it is liable to collapse. There is, however, a strategy that calls for internal controls (self-discipline) to augment the work done by the side constraints. And this, of course, is where ethics can play such a vital role in an organisation.
Change can adversely affect the maintenance of a core culture
As noted above, periods of sustained change are likely to threaten the foundations of an organisation's core values. While this may be readily acknowledged, it is not uncommon for the mechanisms involved in this process to be overlooked. For example, it is not simply that values come to be challenged. Of equal importance is the fact that shared practices are also threatened. The type of shared practices placed under threat are not just those routinely observed as being a normal part of the daily business of an organisation.
There are also less obvious practices more clearly linked to the maintenance of values and the formation of an organisation's ethos. A good example of this relates to the maintenance of trust within an organisation. As will be argued below, a climate of trust can only be sustained if the relevant practices (of trusting) are practiced throughout the organisation.
Change must be seen to be in support of a worthwhile end
Whereas there is a natural tendency for people to prefer the certainties of established patterns and rhythms, resistance to change can become an immovable force whenever it is believed that change is being pursued either for its own sake or in support of an unworthy end. The worth of a particular end is directly related to the types of values held to be of importance in an organisation. The effective management of an organisation's ethos is therefore a precondition for efficient and effective processes of change. As in the case of the 'values gap' referred to above, it is critical that all of the signals point in the same direction.
Unfortunately, apart from foregoing the positive effect of facilitating change, failure to close the perceived 'values gap' is also likely to stimulate a loss of faith in the integrity of the organisation. One result of this is a drop in morale. Another is a concurrent weakening of those internal controls that would otherwise be required to augment the already weakened side-constraints.
The importance of trust
It is easy to see why trust is important in functional terms. As the AMP Professor of Management at the Australian Graduate School of Management, Jeremy Davis, has observed when considering the importance of a world with trust:
... in some sense we are contrasting a world in which the notion of "my word is my bond", a world of high trust, with a world which is purely caveat emptor, which implies very low trustworthy organisations. And the thing that I think economists teach us which bears on our morality is that the first is likely to be a much more productive society in any economic sense, because the entire deadweight loss of inspection, of protection, of insurance and of contracting is held to a minimum.
What holds good for markets, in general, also applies in the case of companies and other organisations. Untrustworthy organisations must carry the cost of dealing with other parties who will look to relatively expensive means for securing arrangements. Organisations with a low level of internal trust have the additional burden of substituting structures of control for the substance of voluntary compliance.
At a superficial level, it may seem cheaper to run an enterprise according to strict and fairly rigid lines of command. However, such an approach must include a kind of 'opportunity cost' associated with an absence of open communications and an attendant failure to harness the full value capable of being generated by a workforce that believes itself to be trusted in the management of the enterprise
While a high-trust environment helps to improve the functions of an organisation, it is also an important factor in supporting a general climate for ethical behaviour.
As observed in an article published in Fortune in 1992:
Successful enterprises are inevitably based on a network of trust binding management, employees, shareholders, lenders, suppliers and customers - akin to the network that Japanese call keiretsu. When companies slip into shoddy practices, these crucial relationships start to deteriorate. ... Eventually a kind of moral rot can set in, turning off employees with higher personal standards and stifling innovation throughout the company. ... "People in these situations feel frightened, constrained. They are not in the proper frame of mind to take prudent risks".
There can be little doubt that steps need to be taken to develop the organisation's ethos so that all personnel see themselves as sharing in the responsibility of projecting the Movement's values. The positive effect of such a policy have been noted in other arena. As an American manufacturer in The Asian Wall Street Journal reported:
Our highly moral policy had a marvellously beneficial effect on our employees. Because they implemented the policy, they had cause to feel proud of the company simply because they could feel proud of themselves. It added to the creation of mutual trust.
So it can be seen that the link between trust and ethics is akin to a two-way street. This suggests that strategies designed to address the ethical foundations of the Movement will need to be based on a commitment to see affiliated credit unions as forming a kind of community engaged in a worthwhile activity. As Hugh Mackay has noted:
If we accept that disintegrating communities kill off our moral sensitivities, it is clear that an urgent priority is to rebuild our sense of being a community. In the workplace, in the retail environment, in the neighbourhood at large, the challenge is to find new ways of putting people back into closer personal contact with each other.
The current surge of interest in ethics is a necessary reaction to our growing realisation of what has happened to us, but there is a real danger of putting the cart before the horse. Unless we feel like members of a community, our capacity to respond to the philosophical arguments in favour of ethics will remain severely limited.
The getting of wisdom
Failure to articulate deeper ethical principles can lead to some most unfortunate outcomes. For example, there are companies that have spent a fortune on developing sophisticated ‘ethics’ programmes. In some cases, the process has been almost copy-book in its facilitation. Underlying principles have been identified, the interests of stakeholders taken into account and a core set of proscribed and prescribed behaviours have been defined. Compliance officers have been appointed and every new employee inducted into the ethos of the company. Yet, some of these companies have found themselves convicted before the courts of the land and public opinion, for having engaged in grossly unethical behaviour.
At first glance this would seem to be mystifying.
The majority of people who find themselves in difficulties coping with the ethical dimension of life are those who are locked into patterns of custom and practice. Although a pattern of virtuous behaviour may seem to be entirely preferable to any other, one needs to be aware of the fact that being ethical as a matter of habit is a poor substitute for living a life based on authentic commitments generated through a combination of experience and reflection.
What holds for individuals also holds for organisations. What is needed is a kind of practical wisdom built on the foundation of virtues such as courage (and, in particular, moral courage, justice, benevolence, temperance, fortitude, charity and so on).
Indeed, it seems to me that as current management theory propounds the advantages of the knowledge based companies and industries, I can see the next wave of insight drawing attention to the indispensability of the wisdom base
Wisdom based organisations will not walk blindly into ethical death-traps. This is not because the ethical landscape will become any more easy to traverse; it will still be a place of greys rather than blacks and whites; a place full of the boggy terrain of conflicting principles and ethical dilemmas.
However, an orientation towards wisdom instead of mere knowledge will make people alive to the limitations of technique as a way of securing certainty in this inherently uncertain domain of human being. Hence my concern that we see the value of codes in their proper context.
discuss this articleDr Simon Longstaff is Executive Director of St James Ethics Centre.
This article was first published in 1994.
© St James Ethics Centre