Wednesday, July 25, 2007

Business and ethics: a disconnect

On of the advantages that I have over many people who teach business ethics (or similar type courses) is that I spent many years in business in positions ranging from hourly paid to Director of Operations. As would be expected, during this time I made many decisions that greatly impacted both people and organizations. I use some of these experiences to demonstrate that there is an ethical dimension to business that we cannot escape. In this post I am going to share two of them with you.

1) What to do with excess people? (This has been written up as parts of various papers I have had the good fortune to be published)

When I was hired as Director of Operations for a major manufacturing plant, I was faced with the dismal reality of losing business because of practices that had been allowed to develop under my predecessor. My main charge at the time was to keep the business from going back into bankruptcy. To that end, I needed a tool to play ‘what if’ games that I could utilize to help make decisions based on what was happening relative to certain key variables pertaining to how the business was functioning. I came up with an equation that demonstrated how many people I could afford to have employed given the value of these variables. The equation is:

P = X where X = (U x D x W)

P = people
U = units produced
D = sales dollar per unit
W = percent of D going to wages and benefits
R = burden rate of W per hour (this is the hourly cost per employee and includes hourly wage, insurance, workers compensation, vacation/sick days, etc.)

T = average number of hours worked per person to earn W

In my business ethics courses, I emphasize that my job is to balance this equation. This may seem obvious (it is), but the ethical implications are astounding. If we accept, as Socrates argues (by agreement) in Crito that that if are to be ethical we 1) should do no wrong and 2) that to cause harm is to do wrong, then the question is what do I do when one (or more) of the variables that affect P is changed for the worse and I can no longer economically sustain my currant level of employment? I ask my students to list the options available to me as a manager and to select the one that is best. I tell them that in one day (bloody Friday), I laid off ½ of the hourly employees and ½ of the salaried employees at the plant I was operating. I ask them to analyze what I did and if what I did was the morally correct thing to do.

I then modify the ‘game’ and have them imagine that there are two companies that are competing in the marketplace. Both companies are internally exactly the same and they each have 50% of the market share. I did ask them to explain what will happen in both companies if one of the companies (company A) has a fire that reduces their ability to produce by 50% and that this loss of production will last for 6 months. I break them into groups and have them play various roles associated with the stakeholders of each company. The results are very interesting. The truly depressing ethical downside of this is that regardless of what company A does, Company B can make a move that is morally defensible that will further harm company A. (I have published this in a paper and if you post you email address and request a copy I will be happy to send you one.)

I explain to my students that they have not lived until they have terminated someone and that person cries and begs for his job because he has no other options and you get up and lead him out of the building. We do not use the word ‘terminate’ lightly; we have “killed off” that person relative to the organization for whom he formally worked. As an aside, I argue that mangers should do their own firing/laying off and not pass that responsibility on to HR. To paraphrase Sartre, “you cannot mange effectively without being elbow deep in the blood of innocent people.”

2) Over the years I have become convinced that, as Michael suggested, business should be understood within a virtue ethics framework. Business is a formal structured way by which we can develop into the kind of persons we want to be and to find happiness in our lives. One of the key virtues is ‘respect for people’ (You can obviously get this from Kant and Buber also.) I explain to them that they really do have a virtue ethics framework already in place; we do differentiate in practice between people of good and bad character. I refer to this a ‘character in practice.’ I them tell them of an incident that occurred between me and a hourly employee who reported to me when I was a line supervisor. To make a long story short, this employee did not follow my orders and in front of all is co-workers I verbally abused him for @ 20 minutes. Work came to a standstill. I utilized language that would embarrass a longshoreman (it embarrasses me now when I think of what I used to say). Anyway, I completely humiliated this person to the point that he shoulders were slumped over in a submissive fashion and he was on the verge of tears. I then left for the day, but when I got home I phones him on the floor and let him have it again. Boy did I feel good! I had corrected a problem and handled the situation correctly. Or had I? I have my students discuss my action. No one has thought that what I did was morally permissible, even given the fact that the employee had potentially greatly harmed the organization by not following my orders. From their point of view (and now mine) I was exhibiting ‘bad’ character.

These, and other examples from my career, help me to bridge the belief that ethics has no place in business. Feel free to use them as you see fit.


  1. in the equation, the "T" should be under the "X" and the "R" should be under the (U x D x W). Sorry for this confusion.

  2. In my previous job, on a small branch campus of a religious university, I was elected to the Faculty Welfare Committee. There was a perception on the campus that certain faculty had been singled out for unfair treatment, including unwarranted dismissal, because of academic politics.

    Then we received a message from the Board of Trustees: for financial reasons, it would be necessary to reduce the number of faculty. They were concerned that this would be seen as an excuse for a purge, and so asked the Faculty Welfare Committee to recommend factors to take into consideration when deciding which faculty should go.

    So, although we weren't the ones who decided that some people had to lose their jobs, nor did we decide who should lose their jobs, we did have some involvement in the process. It was not as stressful as the situation you describe, but it was stressful enough.

    I sometimes encounter the idea that academics are cut off from the real world - but that isn't my experience. I work at another institution today, also a small branch campus, and every semester when I look at enrolment figures, I'm aware that my livelihood is on the line. I wonder how other teachers feel about sharing real life experiences and dilemmas in ethics classes.

  3. Ben
    You ask a very interesting question regarding bringing in personal experiences into teaching. I think we should for the following reason. At times it seems that we think we should teach ethics in abstractions (the ever popular Person A) as if we do not need real people to relate theories to concrete problems. This misses the reality that people in our classes have already made significant moral decisions in their lives. I remember teaching a course in bioethics to nurses returning to school to complete their BSN degrees. I was discussing the ethics of surrogate motherhood in the abstract when one of the students raised her hand and told the class that her womb did not work and that she would deeply appreciate if one of the other women in the class would volunteer their womb so she could experience motherhood. No longer was the issue abstract; we had to deal with a real person asking a real question of real people. In another class I was discussing Hume's argument on suicide and looked up to see @1/2 of the class crying. It turns out that one of their classmates had committed suicide the previous week. Again, the problem was not an abstraction. A third example: In some of my courses I ask students to do presentations. One of them asked if she could discuss her rape and the attitudes she faced when she told people she was raped? A final example; in one course I asked people to write about a lie they had told and why they told it (I no longer do this). I figured I would get the easy lies like making people feel good, or spending time with a friend instead of going to work. These types of lies I did get, but two students told me that they were being beaten by the husbands and lied to their friends to keep their husbands from beating their children. I really did not want to know this, but there they were.

    If ethics is about determining how we should live of lives, then we should recognize that our students are leading lives wherein they have faced some pretty serious issues and made some pretty significant decisions. We honor them, and ourselves, by recognizing this and by being willing to put our lives, or aspects of our lives, on the table so they see that we have also faced some serious moral issues (maybe even dilemmas) in our lives. As William James points out that all of us contributes to the moral life of the community through the decisions that we make and the actions we perform.

    Ben: I also appreciate the hardship that comes with knowing that you provided information that negatively affected people's lives. This is an important point to make in professional ethics. People who actually end up making decisions that harm people will do so based on the information given them by others. We need to make sure that that information is accurate and relevant.


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