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Principles of Management

5.3 Ethical Principles and Responsible Decision-Making

Principles of Management5.3 Ethical Principles and Responsible Decision-Making
  1. Preface
  2. 1 Managing and Performing
    1. Introduction
    2. 1.1 What Do Managers Do?
    3. 1.2 The Roles Managers Play
    4. 1.3 Major Characteristics of the Manager's Job
    5. Key Terms
    6. Summary of Learning Outcomes
    7. Chapter Review Questions
    8. Management Skills Application Exercises
    9. Managerial Decision Exercises
    10. Critical Thinking Case
  3. 2 Managerial Decision-Making
    1. Introduction
    2. 2.1 Overview of Managerial Decision-Making
    3. 2.2 How the Brain Processes Information to Make Decisions: Reflective and Reactive Systems
    4. 2.3 Programmed and Nonprogrammed Decisions
    5. 2.4 Barriers to Effective Decision-Making
    6. 2.5 Improving the Quality of Decision-Making
    7. 2.6 Group Decision-Making
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  4. 3 The History of Management
    1. Introduction
    2. 3.1 The Early Origins of Management
    3. 3.2 The Italian Renaissance
    4. 3.3 The Industrial Revolution
    5. 3.4 Taylor-Made Management
    6. 3.5 Administrative and Bureaucratic Management
    7. 3.6 Human Relations Movement
    8. 3.7 Contingency and System Management
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Managerial Decision Exercises
  5. 4 External and Internal Organizational Environments and Corporate Culture
    1. Introduction
    2. 4.1 The Organization's External Environment
    3. 4.2 External Environments and Industries
    4. 4.3 Organizational Designs and Structures
    5. 4.4 The Internal Organization and External Environments
    6. 4.5 Corporate Cultures
    7. 4.6 Organizing for Change in the 21st Century
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  6. 5 Ethics, Corporate Responsibility, and Sustainability
    1. Introduction
    2. 5.1 Ethics and Business Ethics Defined
    3. 5.2 Dimensions of Ethics: The Individual Level
    4. 5.3 Ethical Principles and Responsible Decision-Making
    5. 5.4 Leadership: Ethics at the Organizational Level
    6. 5.5 Ethics, Corporate Culture, and Compliance
    7. 5.6 Corporate Social Responsibility (CSR)
    8. 5.7 Ethics around the Globe
    9. 5.8 Emerging Trends in Ethics, CSR, and Compliance
    10. Key Terms
    11. Summary of Learning Outcomes
    12. Chapter Review Questions
    13. Management Skills Application Exercises
    14. Managerial Decision Exercises
    15. Critical Thinking Case
  7. 6 International Management
    1. Introduction
    2. 6.1 Importance of International Management
    3. 6.2 Hofstede's Cultural Framework
    4. 6.3 The GLOBE Framework
    5. 6.4 Cultural Stereotyping and Social Institutions
    6. 6.5 Cross-Cultural Assignments
    7. 6.6 Strategies for Expanding Globally
    8. 6.7 The Necessity of Global Markets
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  8. 7 Entrepreneurship
    1. Introduction
    2. 7.1 Entrepreneurship
    3. 7.2 Characteristics of Successful Entrepreneurs
    4. 7.3 Small Business
    5. 7.4 Start Your Own Business
    6. 7.5 Managing a Small Business
    7. 7.6 The Large Impact of Small Business
    8. 7.7 The Small Business Administration
    9. 7.8 Trends in Entrepreneurship and Small-Business Ownership
    10. Key Terms
    11. Summary of Learning Outcomes
    12. Chapter Review Questions
    13. Management Skills Application Exercises
    14. Managerial Decision Exercises
    15. Critical Thinking Case
  9. 8 Strategic Analysis: Understanding a Firm’s Competitive Environment
    1. Introduction
    2. 8.1 Gaining Advantages by Understanding the Competitive Environment
    3. 8.2 Using SWOT for Strategic Analysis
    4. 8.3 A Firm's External Macro Environment: PESTEL
    5. 8.4 A Firm's Micro Environment: Porter's Five Forces
    6. 8.5 The Internal Environment
    7. 8.6 Competition, Strategy, and Competitive Advantage
    8. 8.7 Strategic Positioning
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  10. 9 The Strategic Management Process: Achieving and Sustaining Competitive Advantage
    1. Introduction
    2. 9.1 Strategic Management
    3. 9.2 Firm Vision and Mission
    4. 9.3 The Role of Strategic Analysis in Formulating a Strategy
    5. 9.4 Strategic Objectives and Levels of Strategy
    6. 9.5 Planning Firm Actions to Implement Strategies
    7. 9.6 Measuring and Evaluating Strategic Performance
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  11. 10 Organizational Structure and Change
    1. Introduction
    2. 10.1 Organizational Structures and Design
    3. 10.2 Organizational Change
    4. 10.3 Managing Change
    5. Key Terms
    6. Summary of Learning Outcomes
    7. Chapter Review Questions
    8. Management Skills Application Exercises
    9. Managerial Decision Exercises
    10. Critical Thinking Case
  12. 11 Human Resource Management
    1. Introduction
    2. 11.1 An Introduction to Human Resource Management
    3. 11.2 Human Resource Management and Compliance
    4. 11.3 Performance Management
    5. 11.4 Influencing Employee Performance and Motivation
    6. 11.5 Building an Organization for the Future
    7. 11.6 Talent Development and Succession Planning
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  13. 12 Diversity in Organizations
    1. Introduction
    2. 12.1 An Introduction to Workplace Diversity
    3. 12.2 Diversity and the Workforce
    4. 12.3 Diversity and Its Impact on Companies
    5. 12.4 Challenges of Diversity
    6. 12.5 Key Diversity Theories
    7. 12.6 Benefits and Challenges of Workplace Diversity
    8. 12.7 Recommendations for Managing Diversity
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  14. 13 Leadership
    1. Introduction
    2. 13.1 The Nature of Leadership
    3. 13.2 The Leadership Process
    4. 13.3 Leader Emergence
    5. 13.4 The Trait Approach to Leadership
    6. 13.5 Behavioral Approaches to Leadership
    7. 13.6 Situational (Contingency) Approaches to Leadership
    8. 13.7 Substitutes for and Neutralizers of Leadership
    9. 13.8 Transformational, Visionary, and Charismatic Leadership
    10. 13.9 Leadership Needs in the 21st Century
    11. Key Terms
    12. Summary of Learning Outcomes
    13. Chapter Review Questions
    14. Management Skills Application Exercises
    15. Managerial Decision Exercises
    16. Critical Thinking Case
  15. 14 Work Motivation for Performance
    1. Introduction
    2. 14.1 Motivation: Direction and Intensity
    3. 14.2 Content Theories of Motivation
    4. 14.3 Process Theories of Motivation
    5. 14.4 Recent Research on Motivation Theories
    6. Key Terms
    7. Summary of Learning Outcomes
    8. Chapter Review Questions
    9. Management Skills Application Exercises
    10. Managerial Decision Exercises
    11. Critical Thinking Case
  16. 15 Managing Teams
    1. Introduction
    2. 15.1 Teamwork in the Workplace
    3. 15.2 Team Development Over Time
    4. 15.3 Things to Consider When Managing Teams
    5. 15.4 Opportunities and Challenges to Team Building
    6. 15.5 Team Diversity
    7. 15.6 Multicultural Teams
    8. Key Terms
    9. Summary of Learning Outcomes
    10. Chapter Review Questions
    11. Management Skills Application Exercises
    12. Managerial Decision Exercises
    13. Critical Thinking Case
  17. 16 Managerial Communication
    1. Introduction
    2. 16.1 The Process of Managerial Communication
    3. 16.2 Types of Communications in Organizations
    4. 16.3 Factors Affecting Communications and the Roles of Managers
    5. 16.4 Managerial Communication and Corporate Reputation
    6. 16.5 The Major Channels of Management Communication Are Talking, Listening, Reading, and Writing
    7. Key Terms
    8. Summary of Learning Outcomes
    9. Chapter Review Questions
    10. Management Skills Application Exercises
    11. Managerial Decision Exercises
    12. Critical Thinking Case
  18. 17 Organizational Planning and Controlling
    1. Introduction
    2. 17.1 Is Planning Important
    3. 17.2 The Planning Process
    4. 17.3 Types of Plans
    5. 17.4 Goals or Outcome Statements
    6. 17.5 Formal Organizational Planning in Practice
    7. 17.6 Employees' Responses to Planning
    8. 17.7 Management by Objectives: A Planning and Control Technique
    9. 17.8 The Control- and Involvement-Oriented Approaches to Planning and Controlling
    10. Key Terms
    11. Summary of Learning Outcomes
    12. Chapter Review Questions
    13. Management Skills Application Exercises
    14. Managerial Decision Exercises
    15. Critical Thinking Case
  19. 18 Management of Technology and Innovation
    1. Introduction
    2. 18.1 MTI—Its Importance Now and In the Future
    3. 18.2 Developing Technology and Innovation
    4. 18.3 External Sources of Technology and Innovation
    5. 18.4 Internal Sources of Technology and Innovation
    6. 18.5 Management Entrepreneurship Skills for Technology and Innovation
    7. 18.6 Skills Needed for MTI
    8. 18.7 Managing Now for Future Technology and Innovation
    9. Key Terms
    10. Summary of Learning Outcomes
    11. Chapter Review Questions
    12. Management Skills Application Exercises
    13. Managerial Decision Exercises
    14. Critical Thinking Case
  20. References
  21. Index
  1. What are major ethical principles that can be used by individuals and organizations?

Before turning to organizational and systems levels of ethics, we discuss classical ethical principles that are very relevant now and on which decisions can be and are made by individuals, organizations, and other stakeholders who choose principled, responsible ways of acting toward others.17

Ethical principles are different from values in that the former are considered as rules that are more permanent, universal, and unchanging, whereas values are subjective, even personal, and can change with time. Principles help inform and influence values. Some of the principles presented here date back to Plato, Socrates, and even earlier to ancient religious groups. These principles can be, and are, used in combination; different principles are also used in different situations.18 The principles that we will cover are utilitarianism, universalism, rights/legal, justice, virtue, common good, and ethical relativism approaches. As you read these, ask yourself which principles characterize and underlie your own values, beliefs, behaviors, and actions. It is helpful to ask and if not clear, perhaps identify the principles, you most often use now and those you aspire to use more, and why. Using one or more of these principles and ethical approaches intentionally can also help you examine choices and options before making a decision or solving an ethical dilemma. Becoming familiar with these principles, then, can help inform your moral decision process and help you observe the principles that a team, workgroup, or organization that you now participate in or will be joining may be using. Using creativity is also important when examining difficult moral decisions when sometimes it may seem that there are two “right” ways to act in a situation or perhaps no way seems morally right, which may also signal that not taking an action at that time may be needed, unless taking no action produces worse results.

Utilitarianism: A Consequentialist, “Ends Justifies Means” Approach

The utilitarianism principle basically holds that an action is morally right if it produces the greatest good for the greatest number of people. An action is morally right if the net benefits over costs are greatest for all affected compared with the net benefits of all other possible choices. This, as with all these principles and approaches, is broad in nature and seemingly rather abstract. At the same time, each one has a logic. When we present the specifics and facts of a situation, this and the other principles begin to make sense, although judgement is still required.

Some limitations of this principle suggest that it does not consider individuals, and there is no agreement on the definition of “good for all concerned.” In addition, it is difficult to measure “costs and benefits.” This is one of the most widely used principles by corporations, institutions, nations, and individuals, given the limitations that accompany it. Use of this principle generally applies when resources are scarce, there is a conflict in priorities, and no clear choice meets everyone’s needs—that is, a zero-sum decision is imminent

Universalism: A Duty-Based Approach

Universalism is a principle that considers the welfare and risks of all parties when considering policy decisions and outcomes. Also needs of individuals involved in a decision are identified as well as the choices they have and the information they need to protect their welfare. This principle involves taking human beings, their needs, and their values seriously. It is not only a method to make a decision; it is a way of incorporating a humane consideration of and for individuals and groups when deciding a course of action. As some have asked, “What is a human life worth?”

Cooper, Santora, and Sarros wrote, “Universalism is the outward expression of leadership character and is made manifest by respectfulness for others, fairness, cooperativeness, compassion, spiritual respect, and humility.” Corporate leaders in the “World’s Most Ethical Companies” strive to set a “tone at the top” to exemplify and embody universal principles in their business practices.19 Howard Schultz, founder of Starbucks; cofounder Jim Sinegal at Costco; Sheryl Sandberg, chief operating officer of Facebook; and Ursula M. Burns, previous chairperson and CEO of Xerox have demonstrated setting effective ethical tones at the top of organizations.

Limitations here also show that using this principle may not always prove realistic or practical in all situations. In addition, using this principle can require sacrifice of human life—that is, giving one’s life to help or save others—which may seem contrary to the principle. The film The Post, based on fact, portrays how the daughter of the founder of the famed newspaper, the Washington Post, inherited the role of CEO and was forced to make a decision between publishing a whistle-blowers’ classified government documents of then top-level generals and officials or keep silent and protect the newspaper. The classified documents contained information proving that generals and other top-level government administrators were lying to the public about the actual status of the United States in the Vietnam War. Those documents revealed that there were doubts the war could be won while thousands of young Americans continued to die fighting. The dilemma for the Washington Post’s then CEO centered on her having to choose between exposing the truth based on freedom of speech—which was the mission and foundation of the newspaper—or staying silent and suppressing the classified information. She chose, with the support of and pressure from her editorial staff, to release the classified documents to the public. The Supreme Court upheld her and her staff’s decision. A result was enflamed widespread public protests from American youth and others. President Johnson was pressured to resign, Secretary of State McNamara later apologized, and the war eventually ended with U.S. troops withdrawing. So, universalist ethical principles may present difficulties when used in complex situations, but such principles can also save lives, protect the integrity of a nation, and stop meaningless destruction.

Rights: A Moral and Legal Entitlement–Based Approach

This principle is grounded in both legal and moral rights. Legal rights are entitlements that are limited to a particular legal system and jurisdiction. In the United States, the Constitution and Declaration of Independence are the basis for citizens’ legal rights, for example, the right to life, liberty, and the pursuit of happiness and the right to freedom of speech. Moral (and human) rights, on the other hand, are universal and based on norms in every society, for example, the right not to be enslaved and the right to work.

To get a sense of individual rights in the workplace, log on to one of the “Best Companies to Work For” annual lists (http://fortune.com/best-companies/). Profiles of leaders and organizations’ policies, practices, perks, diversity, compensation, and other statistics regarding employee welfare and benefits can be reviewed. The “World’s Most Ethical Companies” also provides examples of workforce and workplace legal and moral rights. This principle, as with universalism, can always be used when individuals, groups, and nations are involved in decisions that may violate or harm such rights as life, liberty, the pursuit of happiness, and free speech.

Some limitations when using this principle are (1) it can be used to disguise and manipulate selfish and unjust political interests, (2) it is difficult to determine who deserves what when both parties are “right,” and (3) individuals can exaggerate certain entitlements at the expense of others. Still, the U.S. Constitution’s Bill of Rights, ratified in 1791, was designed as and remains the foundation of, which is based on freedom and justice to protect the basic rights of all.

Justice: Procedures, Compensation, and Retribution

This principle has at least four major components that are based on the tenets that (1) all individuals should be treated equally; (2) justice is served when all persons have equal opportunities and advantages (through their positions and offices) to society’s opportunities and burdens; (3) fair decision practices, procedures, and agreements among parties should be practiced; and (4) punishment is served to someone who has inflicted harm on another, and compensation is given to those for a past harm or injustice committed against them.

A simple way of summarizing this principle when examining a moral dilemma is to ask of a proposed action or decision: (1) Is it fair? (2) Is it right? (3) Who gets hurt? (4) Who has to pay for the consequences? (5) Do I/we want to assume responsibility for the consequences? It is interesting to reflect on how many corporate disasters and crises might have been prevented had the leaders and those involved taken such questions seriously before proceeding with decisions. For example, the following precautionary actions might have prevented the disaster: updating the equipment and machinery that failed in the BP and the Exxon Valdez oil crises and investment banks and lending institutions following rules not to sell subprime mortgages that could not and would not be paid, actions that led to the near collapse of the global economy.

Limitations when using this principle involve the question of who decides who is right and wrong and who has been harmed in complex situations. This is especially the case when facts are not available and there is no objective external jurisdiction of the state or federal government. In addition, we are sometimes faced with the question, “Who has the moral authority to punish to pay compensation to whom?” Still, as with the other principles discussed here, justice stands as a necessary and invaluable building block of democracies and freedom.

Virtue Ethics: Character-Based Virtues

Virtue ethics is based on character traits such as being truthful, practical wisdom, happiness, flourishing, and well-being. It focuses on the type of person we ought to be, not on specific actions that should be taken. Grounded in good character, motives, and core values, the principle is best exemplified by those whose examples show the virtues to be emulated.

Basically, the possessor of good character is moral, acts morally, feels good, is happy, and flourishes. Altruism is also part of character-based virtue ethics. Practical wisdom, however, is often required to be virtuous.

This principle is related to universalism. Many leaders’ character and actions serve as examples of how character-based virtues work. For example, the famous Warren Buffett stands as an icon of good character who demonstrates trustworthy values and practical wisdom. Applying this principle is related to a “quick test” before acting or making a decision by asking, “What would my ‘best self’ do in this situation?” Others ask the question inserting someone they know or honor highly.

There are some limitations to this ethic. First, some individuals may disagree about who is virtuous in different situations and therefore would refuse to use that person’s character as a principle. Also, the issue arises, “Who defines virtuous, especially when a complex act or incident is involved that requires factual information and objective criteria to resolve?”

The Common Good

The common good is defined as “the sum of those conditions of social life which allow social groups and their individual members relatively thorough and ready access to their own fulfillment.” Decision makers must take into consideration the intent as well as the effects of their actions and decisions on the broader society and the common good of the many.20

Identifying and basing decisions on the common good requires us to make goals and take actions that take others, beyond ourselves and our self-interest, into account. Applying the common good principle can also be asked by a simple question: “How will this decision or action affect the broader physical, cultural, and social environment in which I, my family, my friends, and others have to live, breathe, and thrive in now, next week, and beyond?”

A major limitation when using this principle is, “Who determines what the common good is in situations where two or more parties differ over whose interests are violated?” In individualistic and capitalist societies, it is difficult in many cases for individuals to give up their interests and tangible goods for what may not benefit them or may even deprive them.

Ethical Relativism: A Self-Interest Approach

Ethical relativism is really not a “principle” to be followed or modeled. It is an orientation that many use quite frequently. Ethical relativism holds that people set their own moral standards for judging their actions. Only the individual’s self-interest and values are relevant for judging his or her behavior. Moreover, moral standards, according to this principle, vary from one culture to another. “When in Rome, do as the Romans do.”

Obvious limitations of relativism include following one’s blind spots or self-interests that can interfere with facts and reality. Followers of this principle can become absolutists and “true believers”—many times believing and following their own ideology and beliefs. Countries and cultures that follow this orientation can result in dictatorships and absolutist regimes that practice different forms of slavery and abuse to large numbers of people. For example, South Africa’s all-white National Party and government after 1948 implemented and enforced a policy of apartheid that consisted of racial segregation. That policy lasted until the 1990s, when several parties negotiated its demise—with the help of Nelson Mandela (www.history.com/topics/apartheid). Until that time, international firms doing business in South Africa were expected to abide by the apartheid policy and its underlying values. Many companies in the United States, Europe, and elsewhere were pressured in the 1980s and before by public interest groups whether or not to continue doing business or leave South Africa.

At the individual level, then, principles and values offer a source of stability and self-control while also affecting job satisfaction and performance. At the organizational level, principled and values-based leadership influences cultures that inspire and motivate ethical behavior and performance. The following section discusses how ethical leadership at the top and throughout organizations affects ethical actions and behaviors.21

Concept Check

  1. What are some ethical guidelines individuals and organizations can use to make ethical choices?
  2. Can being aware of the actual values you use to guide your actions make a difference in your choices?
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