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The one you don’t hear is the one coming to get you – why ethics standards alone are insufficient

July 26, 2011

NASA conducted a flight simulator experiment where commercial pilots were tested to see if they would notice distractions on a runway during simulated landings.  25% of the time, the trained pilots, knowing how to land (of course) didn’t see the distractions presented by the experiment, landing dead-center on top of them.  Untrained pilots, being a lot less blasé, noticed everything, including the distractions, avoiding them [Wikipedia].  This is a decent real-world definition of a situation called inattentual blindness, when people don’t see the obvious right in front of their noses.

In business, how many times have we said to ourselves, how come [insert company name’s CEO] didn’t see this coming or didn’t know about an ethics lapse, often eventually becoming a legal issue, such as falsified paperwork or ridiculously shoddy preventative maintenance leading to an expensive catastrophe and horrendous PR exposure affecting the share price?

When working with CEOs, we often hear about ethics.  Then we hear about these companies allowing supply chain abuses in 3rd world countries, or how Microsoft, CISCO and others readily comply with Chinese censorship and dissenter tracking and arrest infrastructures to gain access to that huge market.  By the way, this is not new. IBM tabulators and personnel ran the ‘IT’ backbone of the holocaust in a means to hedge their bet on who would win WWII and things turned out Ok for IBM.  I recently met a genial sales rep for a brass nozzle manufacturer whose products are designed for cleaning a variety of mining and other heavy equipment with less water.  His growth market however was in adapting these nozzles for crowd suppression water cannons in a variety of interesting places in the news.  Are these examples of unethical behavior on the part of a company?  Surprisingly, no because there are multiple parallel streams of ethics in any society, such as national ethics, business ethics, social ethics,   professional ethics, and so on.  Ethics are situational and geographical as in China, where Microsoft and CISCO’s actions are perfectly ethical.  So why do employees feel unsure of what to do, affecting their ability to execute without tomes upon tomes of detailed procedures, processes and rules, all of which limit creativity and initiative and cost a fortune to administer?

Employees may feel a company’s ethics in a particular country or situation is grinding against personal morality, causing a serious personal conflict, which can be overcome either by changing the company’s ethics (10% probability without an outside mandate to do so), leaving the company (10% in this economy) or just sucking it in and doing one’s job, hoping for the best (the remaining 80%).  After a short time, the 80% soldering through their ethics disconnect start to have reduced productivity.  LRN, a company focusing on ethical business cultures, recently published a study documenting how small ethical lapses undermine a company’s values in employee’s minds; over time, everyone does what they feel is expedient for a particular situation, rather than doing the right thing over the non-immediate term (note I didn’t say long-term since in business today, there isn’t a long-term). This is not a new human behavior pattern – when NYC was at its crime filled worst, the City began tracking even the smallest infractions, such as turnstile jumping in the subway system (among other leading indicators) – each small ‘lapse’ allowing a culture of ‘whatever’ to thrive, rapidly taking down entire neighborhoods such as the South Bronx and large parts of Brooklyn and Manhattan. They also discovered that people who commit even small offenses were more likely to ramp up and commit more serious crimes as part of the ‘whatever’.

Per the study, people spend an hour or less contemplating the ramifications on each ethical incident they encounter at work.  Best case for productivity – your workforce is detached from your ethics statements, thinks your pronouncements are just banner-speak and therefore let infractions slide without any thought or even thinking the hypocrisy is sort of funny or ironic.  Oddly, in  the ‘best’ case, they spend the hour doing an internal burn or feeling ‘used’. An hour spent thinking through their mis-alignment to your ethics is not much time, until you have a workforce of 5,000, 10,000 or 20,000 spending an hour each internalizing workplace unethical behavior.   Even worse, the study found 51% of American workers would not report the incident at all, or, most troubling, 31% would talk about it to someone on the outside, such as family or friends, posing the risk of an infraction going viral on social media. Only 26% would take it up the ladder past their immediate supervisor, which is not surprising given any sane person’s desire not to tick off their direct supervisor in this job-scarce economy.  The bottom line – you’re often managing in a fool’s paradise and for every cumulative 1900 hours spent by employees wrapping their head around a moral-ethical conflict, you’ve paid for a phantom employee.  5,000 employees taking 1 hour each, only 3X per year means you have 8 no-show employee equivalents, along with an ongoing reduction in productivity, most likely far exceeding this wasted 8 FTEs.

The solution is to restate your ethical code of conduct as morals – group values which will not change.  Morals are powerful; they define a group of people in a united cause, a society which can also be a company, transcending the situational ethics of multiple countries.  Morals allow us to see who is a member of our team or who isn’t.  It allows us to judge ourselves and others relative to our commonly accepted baseline.  They are the broad yet meaningful boundaries of behavior, allowing people to function in a broad spectrum inside those moral borders.  They embody both the spirit of a regulation (or law) as well as the letter.   In todays’ business climate, where responsiveness, efficiency and effectiveness are required for success, we can have a Code of Ethics, with either platitudes or exhaustive rules limiting behavior or a range of commonly held beliefs providing, as says ‘motivation based on ideas of right and wrong’.  Look at it this way – we all have an ethics statement stating we do not discriminate.  This can permit us to be a lousy employer equally to everyone.  The moral statement would be ‘every individual inherently deserves acceptance and self-dignity’.  Which is more powerful and easier to self-police? Which is a better motivator? Which will sound better in social media and attract the best employees?

Free-market economists will say that a moral company is weak, what a company needs to do is maximize profits.  It’s a canard for having no regulations, doing whatever they want, relying on a market correction.  Personally, I like knowing my pilot is sober, licensed and well rested, sitting in the cockpit of an inspected airplane.  Market corrections at 35,000 feet or on an operating table can be harsh.  Here’s the counter argument showing how a common set of moral values, with inherent self-policing by members, is the most profitable example.  Online dating sites are used by decent people looking for relationships as well as some nut-jobs and some downright creeps.  Each site has an internal function to protect their members as much as possible, but the most profitable dating sites focus on tight ethnic communities because they tend to have common morals and are self-policing, i.e. chat messages go around telling others to avoid a particular person.  Less internal monitoring (overhead) combined with self-policing results in a better reputation and a lower cost of new customer acquisition and longer retention – all key components to profitability.  In another example, a large company with a strong ethics statement on their website, in workspaces, virtually everywhere, recently had a specialized HR consultancy perform an employee attitude survey due to low productivity. The results came back not too surprising – 1 – the brand is good and 2 – the culture is venal.   At the televised town hall to present the results to all employees worldwide, the COO proudly stated finding #1, and about #2 said “they’re wrong, let’s move on”.  The daily manifestation is incredibly high politics, meetings to plan meetings and few if any important decisions made either at all or in a reasonable timeframe, mostly due to a combination of CYA and kicking it upstairs to provide political cover.  Ethics alone is not enough; the morality cannot be off-pitch to the workforce.

You can control people by limiting their activities (the E. German Stasi tried that – high overhead) or provide them the common understandings and reinforcements to do the right thing in all cases, which is the best preventative for the high cost of inattentual blindness. Every company has ethics posted in the lobby and cafeteria alongside the mandatory HR posters, but moral companies post higher profits.

Rich Eichen is the Founder and a Managing Principal of Return on Efficiency, LLC, who’s website is and is one of their senior turnaround leaders/CROs, Program Rescue and Interim Executives with over 25 years’ experience reshaping companies, Operations, IT/Systems Integration and key initiatives. He can be reached at




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