Ethical Problems and Managerial Decision Making - Research Paper Example

?Running Head: ETHICAL PROBLEMS AND MANAGERIAL DECISION MAKING Ethical Problems and Managerial Decision Making Ethical Problems and Managerial Decision Making Overview Nielsen (1996) referred to the interdependency between people and their environments when he stated, "our choices shape ourselves and our organizations" (p. 212). Many professions, such as the medical, legal, and accounting, have ethical standards to guide them. Others do not. Ethical dilemmas arise when two sets of values are in conflict, requiring individuals to choose between them. At some point in their careers, some managers will make or support decisions that are not in alignment with their own values (Elizer, 2000). Sometimes, making the right decision conflicts with the organization's goals. Conversely, resolving in favor of the organization may conflict with one's personal values. In recent years, both the Academy of Human Resource Development and the Academy of Management dedicated entire volumes of their journals to ethics and integrity (Veiga, 2004). The journals contain case studies about the ethical dilemmas professionals face and present guidelines for solutions. People in occupations without a formal set of ethical standards must rely on their own instincts, backgrounds, experience, and judgment to handle ethical dilemmas that arise in the course of their work lives. Leaders at various levels of organizations, large and small, face ethical dilemmas daily and must be prepared to make the right decisions for the organization and for themselves (Bass & Steidlmeier, 1999). There is a void in the empirical literature with respect to ethical decision-making because the literature on ethical decision-making has been based on hypothetical dilemmas instead of on actual situations. Decision Making Models When managers are faced with ethical dilemmas in their employing organizations, they are not always in control of the situation and often must consider other factors (e.g., employees, organizational risks, organizational pressure) in their decisions. Most of the ethical decision-making models have stemmed from the cognitive moral development theory of Kohlberg (1973). Two models that were introduced around the same time are those of Rest (1986) (Four-Component Model) and Trevino (1986) (Person-Situation Interactionist Model). Both Rest and Trevino expanded on the work of Kohlberg, and their models have been tested multiple times. Kohlberg, a social psychologist, was the first to expand Piaget's concept of stage development to include moral judgment. Moral judgment is a process of reflecting on one's values and choosing among them. Piaget, a Swiss biologist, was interested in how children reason. From his qualitative studies, he concluded that the ability to reason is age-related, and he identified cognitive stages ranging from infancy through adolescence. He studied moral judgment only in children under the age of 12 and held that cognition and affect develop separately, but in parallel ways, and that moral judgment is a cognitive process. Kohlberg's (1968) theory focuses on the moral reasoning process - how people decide which course of action to take when faced with an ethical dilemma. Using a research instrument that he developed, Kohlberg conducted a longitudinal study of 84 boys ages 10 to 16, following up at four-year intervals from 1956 to 1976. In the moral judgment interviews, Kohlberg presented the subjects with three dilemmas and asked the boys to tell what the resolution should be and why. The "why" is the determining factor for stage identification. People at different stages might reach the same conclusion, but Kohlberg was interested in the reasoning process. He was looking for consistency of reasoning across the issues. From his research, Kohlberg (1968) classified moral development into three levels, within which there are six stages, and concluded that there is a relationship between maturity of moral values and maturity of action in ethical dilemmas. He also concluded, like Piaget, that moral stages are the product of one's interactions with others, not something biological or neurological. The lower stages of development are based on rules, fairness, and concrete consequences - the way young children generally see things. Stages three and four are based on an approach from the perspective of a member of society - considering what others might think or expect. According to Kohlberg, many adults never develop beyond stage four. The latter stages - five and six -look beyond norms and societal laws. These areas of Kohlberg' s theory consider principles of rights and justice (Kohlberg, 1981). In applying Kohlberg's work, it is important to remember that the decision someone makes is not as important as the method he or she uses to make it. While some may consider Erikson's work similar to that of Kohlberg's, Erikson had a rather different view of ethical development (Hoare, 2006). He was very clear about the difference between moral and ethical "rules." According to Erikson, moral rules are based on actions and consequences, whereas ethical rules are based on a love of ideals, a higher good, and generative care for others. Moral development begins with the family or social unit that imprints values which later become conscience. Erikson, who did not consider the terms moral and ethical as both synonyms and antonyms, held that nearly all adults are moral, while only some are ethical. He described ethical behavior as principled behavior - not judging and expecting nothing in return (Coles, 2000). Erikson held that ethical adults actively display their values by upholding their belief systems and acting accordingly. Erikson linked an individual's life stage with other generations through the virtue of care, the concern (a responsibility) for other generations (Hoare, 2002). A major difference between Kohlberg's and Erikson's concepts is that Kohlberg's moral development studies were focused on what people said they would do, whereas Erikson's work focused on choice and action. Kohlberg's work was vulnerable to criticism for several reasons, one being that he studied mostly males. Gilligan (1993), a colleague of Kohlberg's, argued that he may have missed fundamental gender issues by comparing moral judgment scores of males and females without considering context or cultural norms. In particular, the principle of justice is found predominantly in men, while the principle of care is found predominantly in women - who are then scored at a lower Kohlberg stage. Gilligan suggested that Kohlberg's theory ignores justice and care development in the two genders. She could not fit women's research onto Kohlberg's map. Her argument was that the care response to moral conflicts resolves through dialogue, questioning, and listening so as to understand perspectives, while the Kohlberg morality of justice resolves through the application of rules and principles with a logical hierarchy. While Gilligan's research found differences between the responses of men and women when they were faced with ethical dilemmas, her theory has been tested many times with mixed results - some supporting her thought, and others suggesting that factors other than gender (e.g., context, location, intensity, self-interest) come into play. Another limitation of Kohlberg's work is that he stopped at cognition and verbal expression, rather than linking his theory to actual behavior (Trevino, 1986). A student of Kohlberg's, Rest (1986) also believed that, because Kohlberg used only three hypothetical dilemmas in his research, his theory was limited, focusing on justice and ignoring emotional aspects. Rest (1986) suggested that Piaget's and Kohlberg' s theories were incomplete because neither included all four components (recognize ethical issue, make ethical judgment, place ethical values higher than other values, act on ethical intentions). According to Rest, previous cognitive development research focused on making an ethical judgment, but not on the other components. He postulated complicated interactions between the components that make the ethical decision-making process seem less of a conscious effort. Furthermore, the fourth component (action) is an essential ingredient in the process. Such "action" is an essential ingredient, in that in Erikson's concept that ethical action follows from insights into dilemmas and the necessity for behaving responsibly (Hoare, 2002). Further, this component lends itself to qualitative study and, while Rest did not intend a linear flow, the design of the interview process leads to understanding the decision-making experience sequentially. Trevino's (1986) early work links the stage of persons' cognitive moral development with individual moderators (e.g., ego strength, field dependence, and locus of control) and situational moderators (e.g., immediate job context, organizational culture, and characteristics of the work) as determinants of ethical or unethical behavior. However, much of her later work (Brown & Trevino, 2002; Trevifio, Hartman, & Brown, 2000) focuses on the individual and situational factors instead of cognitive moral development stage. Trevino still finds Kohlberg's work relevant, but her research indicates that, among managers in organizations, moderating factors, rather than persons' cognitive moral development stage are primary determinants of ethical behavior. Factors that Trevifio has identified as moderating the relationship between intent and ethical behavior are individual (ego strength, locus of control) and situational (job context, organizational culture, characteristics of work, and ethical work climate). Studies have shown that intention, which is based on beliefs and attitudes about behavior, is a predictor of behavior (Ajzen, 1991). As Hoare (2002) found in examining Erikson's unpublished papers', persons cannot divide their lives into compartments, nor can they tolerate for extended periods of time those situations that require them to act in ways that are ethically onerous. As managers describe their experiences, they use descriptors that can be can be grouped into themes that help to understand their decision-making process. The Individual as an Actor in a Larger Context Jackall (1988) was referring to managers looking to others for cues before making decisions when he said, "Looking up and looking around becomes particularly crucial when managers face what they call gut decisions" (p. 77). Researchers and theorists have tried to prove that ethical actions in business result from personal interactions within the system. People seldom act in a vacuum; rather, they act as part of some larger social system. Jackall held that the need for survival in an organization shapes an individual's moral consciousness. He studied "how bureaucracy…shaped moral consciousness and [he] stayed to study managers' rules for survival and success in the corporation because these goals proved to be uppermost in their minds" (p. 3). He defined occupational ethics as "the moral rules-in-use that managers construct to guide their behavior at work" (p. 4). Parsons (1971), a social action theorist, considered the individual as an actor in a social system, with different contexts of interactions based on various roles he or she played. Whatever the role (e.g., personal, family, occupational), it is governed by the specific values and norms that are accepted in the context. The General Theory of Action, as introduced by Parsons, asserts that an actor is a system of action, and action is a relationship between systems. Situation is a matter of perspective and actors' expectations of what should be done. Organizational norms are considered rules or standards of behavior. Ethical standards and cultural standards provide the actor with a set of rules and definitions with which to make an informed choice or decision. Parsons's theory of action can be applied to individuals in organizations. As Nielsen (1996) found in his 25 years of ethics research, sometimes the cause of ethical problems is not the individual, but biased traditions, systems, and environments within which the individual works. Individuals learn morality as children and develop ethics later as adults. Social values guide the identity of adolescents, who look to their peers for affirmation of their actions. Harvey (1988) held that people ("phrogs" - as he refers to those who simply go along for the sake of going along) often act based on their perceptions of what is happening rather than on what may actually be occurring in the organization. Making Choices Choosing one course of action generally requires foregoing another (Simon, 1957). Sometimes, individuals make unconscious choices in the decision process. At other times, the decision process is very deliberate as people weigh the alternatives. Decisions involve selecting a goal and the actions relevant to it, sometimes using value judgments and sometimes relying on factual judgments. Simon discussed the decision­ making process as one of choice and action, and as a matter of compromise. The theory of autonomous consequential choice was built on the assumption that action stems from choice, which is based on appraisal of consequences and value (March, 1996). Ongoing ambiguities result from the limitations of available information, and individuals must often use their judgment to "guess about future consequences of current actions" (Cyert & March, 1963, p. 226). While March and his colleagues focused on the organizational level of analysis, they did look at decisions in organizations from a behavioral standpoint, introducing the concepts of organizational expectations, individual goals, communication (or lack thereof), and choice as important variables in the process of decision-making. Mintzberg and Westley (2001) argued that decision-making is not always a rational process of defining, diagnosing, designing, and deciding. Because decision­ making is often beyond conscious thought, they suggested three new methods of making decisions: "thinking first," "seeing first," and "doing first." Thinking first follows the rational decision-making model described above. Seeing first implies vision - the ability to see what others may not. Doing first follows Weick's (1979) enactment-selection­ retention method, which involves trying various things, finding out what works best, and repeating successful behaviors. Each approach has a particular situation in which it works best. Thinking first works when there is a clear issue to be decided in a structured context. Seeing first works best when creative solutions are necessary, and doing first works best in complex, confusing situations. When faced with ethical dilemmas in organizations, managers often do not have the benefit of being able to follow the rational decision­ making process and must act based on whatever information is available at the time. Threading the Literature Together Within their employing organizations, individuals do not have the luxury of making decisions in a vacuum. Instead, they are actors in the context of a larger social system (Parsons, 1971). As actors in the larger system, individuals are subject to interactions based on the roles they assume and the expectations placed upon them as a result of those roles. As managers with decision-making authority, they often have broad considerations (e.g., subordinates, other stakeholders, family, personal reputation) in the decision-making process. As Harvey (1988) suggested, their perceptions could lead them to be "phrogs," going along for the sake of getting along. However, when faced when ethical dilemmas in organizations, managers often face difficult choices. Because of the dynamics in many organizations, decision-making is not often a rational, linear process, as argued by decision theorists (March, 1996; Mintzberg & Westley, 2001; Simon, 1957). As Weick (1979) posited, sometimes individuals must try various things to find out what works best and repeat successful behaviors. Erikson held that ethical adults are insightful and will reflect on past developmental experiences to guide future behavior. Most of the previous research on ethical decision ­making in organizations has been grounded in Kohlberg's (1984) cognitive moral development theory. Kohlberg held that that moral judgment is a cognitive process and he conducted his research using hypothetical dilemmas. His student, Rest (1986) built upon Kohlberg's theory to develop a linear four-step model of ethical decision-making. These two men made great strides in the field of ethical decision theory, but there are limitations to their contributions. Kohlberg's research focused mostly on males (boys) and his stages ignored emotional aspects. Rest included action in his four-component model, yet he also used only hypothetical dilemmas in his research. Both Rest and Erikson (1964) asserted that morality is socially-constructed, but Erikson raised ethics to a higher level to include principles, maturity, and commitment (Hoare, 2002). Two studies based on the work of Kohlberg (1984) and Rest (1986) were those of Trevino (1986) and Jones (l991). These works have led the way for the majority of continued ethical decision-making research. Trevino has conducted a number of ethical decision-making studies over the three decades and Jones's construct of moral intensity has been one of the most studied constructs in ethical decision-making (O'Fallon & Butterfield, 2005). Both of these researchers considered factors other than cognitive moral development as part of the ethical decision-making process (e.g., situational, moral intensity, organizational, individual). Victor and Cullen (1993) introduced the concept of ethical climate as a perception of accepted ethical behavior in organizations. As stated above, one's perception of an organization's ethical climate guides decision-making in an ethical dilemma. This work is important because it provides a foundation for viewing the ethical climate through three ethical constructs (egoism, benevolence, and principle) and through three loci of analysis (individual, organizational, and society at large). There are parallels between ethical climate theory and Erikson's concepts of care and principle, which are both evident in the moral, ethical adult. Like previous theories, Ajzen and Fishbein's (1991) theory of planned behavior is linear and includes perception as that which is key in ethical climate theory. Beliefs about outcomes of actions, beliefs about what others will think, and perception of behavioral control are predictors of intention to act. If an individual believes that the outcome will be good, others think he or she should perform the act, and that he or she has the capability to act, then the intention will be positive and action will follow. However, if any of the perceptions are negative, the intention will change and the resulting action will be different. Conclusion In this paper, two theoretical bodies of literature have been reviewed. The first concerns the moral and ethical development theories of Erikson, Kohlberg, Rest, Trevino and Jones (1991), and the subsequent ethical decision-making research that has been based on their work. The second body of literature briefly discussed the theory of planned behavior developed by Ajzen and Fishbein (1991). Very few studies have been conducted linking moral development theory to the theory of planned behavior, possibly because the theory of planned behavior was not developed with this purpose in mind. Organizations are dynamic and complex and the ethical decision-making process in organizations is neither rational nor linear. All of the theories discussed in this paper have merits, but none seem to stand on their own in a dynamic organization. Although, elements of these theories can be used to develop a blended, overarching theory of ethical decision-making in organizations. References Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Process, 50, 179-211. Bass, B. M., & Steidlmeier, P. (1999). Ethics, character, and authentic transformational leadership behavior. Leadership Quarterly, 10(2), 181-217. Brown, M. E., Trevino, L. K., & Harrison, D. A. (2004). Ethical leadership: A social learning perspective for construct development and testing. 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