MBA@UNC Global Immersion: Chapel Hill Day One

Ethical Leadership with Professor Jeff Edwards

Dr. Jeff Edwards is an award-winning teacher and researcher. His research and teaching focuses on individual and organizational change, person-organization fit, stress and coping in organizations, and strategies that jointly promote employee well-being and corporate competitiveness. He also conducts methodological work concerning the design, measurement, and analysis of research in organizations.

Professor Edwards led students through the ethical and moral aspects of leadership. Students learned how to apply ethical principles to leadership situations they will likely encounter at some point during their career.

 

Business Ethics: An Oxymoron?

During the first part of this session there was a conversation around the tensions between business and ethics. Professor Edwards began the session with a brief overview of important terms related to business ethics.

  • Morality: The implicit and explicit norms about what is right and wrong held by individuals, groups, and societies.
  • Ethics: The study and application of morality to evaluate situations, reason through options, and make decisions.
  • Business ethics: A form of professional ethics that applies moral reasoning to business activities and the people and organizations involved.

He then dove into examples of both clear and subtle ethical issues in the workplace.

  • Clear ethical issues in the workplace include:
    • Theft
    • Fraud
    • Cover-ups
    • Harassment
    • Abuse
    • Whistle-blowing
  • Subtle ethical issues in the workplace include:
    • Fairness
    • Respect
    • Dignity
    • Integrity
    • Privacy
    • Secrecy

Professor Edwards made it clear what business ethics is not. While business ethics overlaps with many of the following areas, it is distinctly different than law, philosophy, and charity.

    • Law: Business ethics overlaps with the law, in that laws are based on right and wrong. However, asking what is ethical goes beyond determining what is legal.
      • There are laws that have no apparent bearing on what is right or wrong. For example, it is illegal to plow a field with an elephant in North Carolina.
    • Philosophy: Business ethics draws from philosophy. However, it maintains a clear focus on practical application.
    • Charity: Business ethics encourages us to do what is right while striving for business competitiveness and survival.

Ethical business practices are important to workers. A recent LRN Ethics Survey found that 94 percent of workers say it is “critical” or “important” that the company they work for is ethical. And 82 percent said they would prefer to be paid less but work for a company with ethical business practices than receive higher pay at a company with questionable ethics.

Transitioning into an opportunity for more personal testimonials, Professor Edwards organized students into groups to stage a dialogue between Milton Friedman and John Mackey. For context, Friedman believes the social responsibility of a business is to maximize profits. Mackey believes you must put customers ahead of investors.

 

Focus on Outcomes: The Utilitarian Approach to Ethical Decision-Making

The second part of this session focused on the fundamentals of utilitarianism with an example of utilitarianism in action: the Ford Pinto case.

Professor Edwards kicked off the second part of this session with a description of the utilitarian approach as being captured by the phrase, “the ends justify the means.” When do we use ends to justify means?

  • Speeding to get to work on time
  • Faking a headache to avoid a date
  • Laughing at a joke that isn’t funny
  • Hiding a product flaw to land a sale
  • Flattering a recruiter to get an offer
  • Stealing food to feed your children
  • Shooting an intruder to protect your family

There are key questions raised by the utilitarian approach, which include:

  • Who are the stakeholders affected by the decisions?
  • What are the utilities of the stakeholders? What outcomes do they want?
  • How will our decision affect the outcomes desired by each stakeholder?
  • How should we weight the stakeholders and prioritize their utilities?
  • How can we integrate this information?

To provide a relatable real-world example, Professor Edwards talked about utilitarianism in relation to the Ford Pinto case. In 1971, Ford introduced the Pinto as a fuel-efficient subcompact car that would compete with foreign imports. Early crash tests showed that, when the Pinto was struck from behind at 20 mph or more, the gas tank could break open. The gas spilling in and around the car would often ignite, setting the car on fire. Given this situation, students were asked, “If you are the recall coordinator at Ford, what would you recommend, and how would you reach your decision?”

After some discussion about their own personal takes on the Ford Pinto case, students were brought together again to learn about Ford’s approach: a cost-benefit analysis.

Ford could modify the gas tank at a cost of $11 per unit for 12.5 million units that would solve the issue. The modification was estimated to avoid 180 deaths, 180 injuries, and 2,100 burned vehicles. At the time, the government valued a human life at $200,000, insurance companies valued a serious burn injury at $67,000, and the property damage per Pinto was $700.

This is what the cost-benefit analysis looked like:

  • Cost: $137 million
    • $11 per unit x 12.5 million units
  • Benefits: $49.15
    • $200,000 per death x 180 deaths
    • $67,000 per injury x 180 injuries
    • $700 per vehicle x 2,100 vehicles
  • Benefit-Cost = ($87.85 million)

Ford concluded that it was in the best interests of all stakeholders to keep the original design. As a result, Pinto fires claimed approximately 60 lives and caused more than 120 injuries from 1971-1980. In 1978, the Pintos were recalled.

Professor Edwards wrapped up this section on utilitarianism with a series of key take-aways:

  • According to the utilitarian approach, morally good actions are those that bring the greatest benefit and least harm to the most people, including you.
  • Key steps for the utilitarian approach:
    • Identify the stakeholders
    • Determine their utilities, or preferences
    • Evaluate your options in light of the stakeholders and their utilities
    • Choose the option that maximizes the benefit and minimizes the harm for all

 

Focus on Actions: The Formalist Approach to Ethical Decision-Making

In the third part of this session, Professor Edwards taught about the fundamentals of formalism, moral dilemmas that engage formalism, combining utilitarianism and formalism, and offered an example of formalism in action: September 11.

What do we mean by the formalist approach? Professor Edwards said formalism focuses on the extent to which our actions themselves can be considered ethical. The term is rooted in deontology, which comes from the Greek "deon" meaning duty. Formalists decide what is right based on broad, universal ethical principles that involve the inherent nature of our actions, regardless of their outcomes. An example of formalism is the Golden Rule.

Based on our upbringing, culture, and other experiences, we all learn formalist ethical principles about actions that are inherently good and bad. These principles become the do’s and don’ts by which we try to live.

According to Professor Edwards, formalist principles are rooted in the major philosophies and religions of the world. Some of these principles describe what we should strive to avoid, including: adultery, envy, gluttony, murder, lying, and theft. The principles we strive to uphold, on the other hand, provide a structure for thinking about ethics in formalist terms. Examples of these principles are beneficence, compassion, honesty, humility, and fairness.

There are key questions raised by the formalist approach, which include:

  • Which universal moral principles are relevant to the actions I am considering?
  • How should the principles be prioritized in this situation? Are some principles deemed more important than others?
  • Are some of the principles in conflict with one another?
  • To what extent will the relevant moral principles be fulfilled by my actions?

Professor Edwards went on to discuss the moral dilemmas that highlight formalist principles, such as:

  • If a student submits work that is not theirs, should other students tell the professor?
  • If a client of a consulting firm lies to their customers about their product, should the consulting firm sever the client relationship?

To provide an example of formalism in action, Professor Edwards used September 11. When terrorists flew airliners into the World Trade Center and the Pentagon, taking thousands of lives, airline traffic came to a halt, he said. As a result, airlines were confronted with tough decisions:

  • Should tickets be refunded for customers who are afraid to fly?
  • Should routes be reduced or canceled?
  • Should labor costs be cut by reducing salaries, cutting bonuses, or layoffs?

While most airlines refused to offer refunds, reduced routes, and cut bonuses, Southwest Airlines took a different approach. Jim Parker, CEO of Southwest Airlines, took the following actions:

  • Southwest customers received full refunds with no questions asked.
  • Southwest returned to full service by September 14, 2001.
  • Southwest maintained salaries, paid bonuses as promised, and kept all employees.
  • Southwest stayed profitable and reached a market cap greater than all other U.S. airlines combined.

 

Executing Strategy Through People with Professor Dave Roberts

Professor Dave Roberts has spent more than 25 years helping organizations improve their performance in sales, sales consulting and sales management. He joined UNC Kenan-Flagler to build a sales discipline curriculum that complements the finance and marketing areas. Now, UNC Kenan-Flagler is one of the few top business schools to offer sales as an area of study. Professor Roberts helps his clients optimize their sales effectiveness and achieve business results. His clients include Avaya, EDS, IBM, Microsoft, Nortel, Sun Microsystems and UnitedHealth Group.

 

The Problem with Strategy

According to Professor Roberts, the problem with strategy for most companies is that it does not get done. Fewer than one in 10 companies can consistently achieve the full potential of their strategy. This is the impact of a strategy-execution gap:

  • 95 percent of employees do not understand company strategy.
  • 50 percent of an average employee’s time is spent on non-productive work.
  • 50 percent more likely to have employee turnover.

It is important to understand that there are three leadership roles in any one workplace, all of which are essential to executing on strategy.

  • Architects: The architect creates and communicates the strategy.
  • Translators: The translator creates meaning and aligns actions.
  • Doers: The doer executes.

 

Why Won’t They…? 

In the second section of this session, Professor Roberts explained that there are four types of people in the world:

  • Ability: easy or difficult
  • Motivation: self or internal

The easiest people to work with are those who want to and can do their assigned job. They compile 10-15 percent of the workplace, and they need to be trained. Then there are the people who can do it, but do not want to do their assigned job. They compile 30-35 percent of the workplace, and they need external motivators: the stick and the carrot. There are also the people who want to do it, but find it a little bit difficult to do their assigned job. They compile 30-35 percent of the workplace, and they need to be coached. Lastly, there are the people who can not do it and do not want to do their assigned job. They compile 10 percent of the team, and they need to either be reassigned or need to be let go.

 

Coaching

People try to coach results, but you cannot coach results. However, you can coach behaviors, said Professor Roberts.

When coaching, most managers start off by making complementary, positive comments about an employee’s progress. They say, “you are a real contributor to the team,” or something along those lines, with a slobbering amount of butter. Managers then relay negative aspects of an employee’s work. Lastly, they transition into feedback to guide an employee on what next steps they should take to be better workers. This is not effective coaching.

Constructive coaching of behaviors takes into account three things: feel, keep, and change. There are three questions you should ask an employee when sitting down to talk about progress:

  • How do you feel your assignment went?
  • Out of everything you did, what would you keep next time?
  • What would you change?

After asking those three questions, transition into making personal statements that confirm what your employee said. They end up being perceived as complementary statements. Start off your statements with:

  • I feel…
  • I suggest…
  • I would change…

Lastly, agree on next area of focus with your employee. This will lead to self-coaching.

 

The Impact of Change

When change happens, understand that the transition will not be easy for everyone. Your people will feel awkward, and that is a natural response to change. Take into account these five normal reactions to change when your company goes through a transition:

  • There is a limit to how much change we can take on.
  • We focus on what we are losing, not on what we are gaining.
  • We do not feel we have enough resources.
  • We feel “alone.”
  • We revert back to “type” when the stimulus is removed.