Research

How to do right when things go wrong

When making ethical decisions in times of crisis, consider three things: ethical fading; how to test your quandary; and the lessons of behavioural ethics

During crises and times of increasing uncertainty, there is pressure to make critical, speedy decisions that will shape the lives of many and the future of organisations. We have seen many examples of organisations moving quickly to lay-off staff or close operations. Some of these decisions can be damaging to firms’ reputations. The inconsistency of the CEO praising the importance of its performers for the success of Disney resorts at an annual meeting in March 2020 and then sacking 100,000 of them 8 weeks later has severely dented its brand. In the UK, the Britannia Hotel suffered criticism when it sacked workers and evicted them from their accommodation during the early phase of COVID-19, leaving them homeless and vulnerable. While this was later said to be and ‘administrative error’ the reputational damage had been done.  

Uncertainty is often twinned with speed and the product can sometimes be poor decisions. Yet organisations seeking to make consistent and coherent decisions face a veritable flood of ethical decision-making models to choose from. Since 2010, over 200,000 articles about ethical decision-making in peer-reviewed publications alone. Remarkably, few of these acknowledge behavioural ethical theory such as the distorting factors of ethical fading, cognitive bias and blind spots. So here are some key principles that can be used in making decisions in complex situations shaped by uncertainty and the perceived need for fast action.

Avoid ethical fading – identify the ethical dilemmas and issues that are at stake

Ethical fading is the inability to see that one is facing an ethical dilemma and occurs during cognitive overload. Think of how a global insurer recently sought to exclude COVID-19 as a cause for death, so repeating the same actions taken previously in changing definitions of breast cancer and stroke to disallow the beneficiaries any life insurance. When this was exposed at a royal commission, the leaders said they had not even thought of the issue as an ethical one. Less than two years later the same insurer was found to be again seeking to exclude beneficiaries.

Such behaviour is a textbook sign of ethical fading, a powerful cognitive ‘condition’ whereby the ethics of an issue are pushed out. An example of this is the decision taken by Volkswagen (VW) in Europe enter the US market for its diesel cars. Internal growth targets and incentives, it was argued, provided the context within which tampering with the car’s emissions figures became possible. The pollution caused by diesels was secondary to the growth needs of VW. As the testimony of the President of VW Group of America before a subcommittee of the House Committee on Energy and Commerce in 2015 makes clear, the failure of leaders to deal with relatively foreseeable consequences meant a path to falsification was opened up.

A key means of avoiding ethical fading is to ask explicitly − in any given context ─ what ethical issues are at stake. This unfades the ethical issues and slows down the cognitive functions. The challenge for organizations is how to embed these questions into on-going strategic decision-making. One means is to institutionalise them through ethical committees.

Test dilemmas against a variety of normative frameworks

Use more than one form of ethical reasoning to test potential decisions. Classically ‘for profit’ businesses use consequentialist thinking, undertaking cost-benefit analysis and testing the unintended consequences of decisions. Yet consequentialism has its limitations, not least of which is to ignore the rights of certain groups or the needs of a minority. Individuals with mental illnesses traditionally need higher cost care. Health systems institutionalise throughput measures that privilege service to patients at lower cost which can negatively impact those with mental illnesses. To avoid these pitfalls, it is important to factor in alternate ways of making ethical decisions around issues of rights.

Deontological ethics – expressed most cogently by Immanuel Kant – is a second approach which sets out certain universal principles that should never be violated no matter how they might benefit an organisation. These include slavery, plagiarism and bribery. Deontology states that one can never use people as a means to an end. Making choices not to treat people in intensive care and aged care facilities as happened in Italy during the COVID-19 pandemic would not be tolerated in Kant’s schema. The third approach is called virtue ethics, named after Aristotle’s tests about whether an action is in line with the purpose of an organisation. Virtue ethics proposes that we asks what kind of organisation and society we are if take a certain option. The recent surge in interest in purpose driven business reflects this approach. Following Aristotle’s own logic, ‘for purpose companies’ align ethics around their purpose rather than simply shareholder value.

A competing view to Aristotle which has characterised ethical decision-making in many domains such as international relations is the natural law approach. This approach acknowledges the intent behind an act and whether one’s decision-making is reasonable. Natural law has multiple reasonableness tests such as whether the action infringes certain promises the organisation has made, including whether it breaches the rights of others, or contravenes the common good or values. It is noteworthy that a BCG report found that 92 per cent of professional investors would prioritise key business capabilities over its commitment to environmental, social and governance objectives (ESG).

This is at odds with natural law thinking which insists organisations, being moral agents, keep their promises and do not arbitrarily breach the common good (the environment). There is no right ethical framework, of course but leaders should be aware of the limitations of each and draw on at least two in making decisions.

 

Take on board the insights of behavioural ethics

Usually most ethical decision-making is based on normative reasoning. The insights of moral psychology, however, are increasingly vital to decision-making, because they focus on what people do. This branch of ethics can also help avoid negative outcomes.  If we first attend to the world of biases, we can see that many decisions are driven by unconscious biases where the drivers of the decision are hidden beneath a veneer of rationalised thinking and justification. Decisions about gender equity are classically caught up in this.  It is always wise to check whether similar decisions in the past have changed anything before going down the same path.

Other biases including anchoring bias where a team distorts their decision-making by framing an issue in a constricting way. For instance, if one regards Artificial Intelligence as a productivity tool alone, it is hard to reach any other conclusion than to use such technologies to cut jobs. However, if the framing shifts to AI as a route to addressing climate change, providing services to lower income groups or developing green business models, new horizons open up. We need to be continually aware that self-interest is always at work – often masquerading as a principle. In times of COVID-19 and its economic fall-out, organisations need to be sensitive to these conscious biases and render them open to discussion. This leads to much better and more ethical decision-making.

In conclusion, organisations need to adopt at least two ethical frameworks to make mission critical decisions and one of these should draw upon the insights of behavioural ethics. They should also ensure that these practices are institutionalised through ethical committees with independent appointees.

To learn more about the Consulting and Coaching for Change Programme at the Saïd Business School, of which Marc Thompson is Academic Director,  visit its web page.