How Ethics Affect The Managerial Decision Making Process – Some Real Life Examples

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During the course of a decision making process, a manager does not only encounter financial, strategic, technical,  logical and personnel issues but, quite frequently, ethical issues too. Many times these ethical issues may come overtly or covertly interwoven with the other issues. If a manager thinks that he can make workable and “purely business like” decisions by sidelining ethics, he is most likely to encounter problems, if not immediately, at least in the long run.

Principles and ethics get inbuilt into the psyche of every person based on upbringing, education, cultural background etc. So, naturally, what is considered unethical by one manager could be considered a “non issue” by another manager. As a consequence of this reality, In a business scenario, managers with sound ethical principles are frequently confronted with moral dilemmas, if their judgment on what is ethical conflicts with those who are higher up in the managerial ladder.

One thing widely observed in business scenario is that  people tend to “look the other way” when confronted with ethical issues, if the short term stakes are high and too hard to lose.  But if any evil consequence of this “looking the other way” rises its ugly head later, every one runs to find a scapegoat!

We can site lots of real life examples on how ethical and moral issues confront the decision making process in an organization.

Example 1

A company quotes for supply of certain items of very high order value to a defense department against a tender. The company’s quoted price is the lowest, but the end buyers threaten to place the order on the next higher bidder by citing technical issues. For the company, it is too big an order to lose and the sales manager insists on paying bribe to the key decision-maker in the defense department, who has been known to be corrupt. Whether the top management, whose officially declared policy is “no encouragement to corruptive trade practices”, should loosen their ethical stand is the crucial decision-making issue now.

In case the management decides to stick to the ethical stand, the best possible action could be to redouble their efforts to technically convince the end-customer. This effort should be aimed perhaps at higher levels of management, with a thrust  that their supplies will not in any way be technically unsound in comparison with the competitor; subtle signals that as a matter of principle,

they will not try to grab the order by unethical means, should also be conveyed. This the company will have to do with a clear understanding that there is quite a scope for losing the order and be prepared for it.

Surprisingly, sometimes, taking such an ethically right stand will have the potential to win the order too, provided there are cleaner persons up in the ladder of the buyer organization, who are aware of and also against the corruptive practices existing at the operating level.

Example 2

A branch Manger working  under the Regional General Manager is extremely smart in taking care of top company officials who visit the branch from the head office for inspection/ interaction. He knows the personal whims, fancies and weaknesses of such visiting Vice Presidents and he goes all out in spending company money and resources in satiating their personal needs and luxuries. Naturally, this branch manager is always in the good books of top management.

However, when the Regional General Manager, who is a “clean person” with highly evolved ethical principles visits the branch, he feels exasperated at the machinations of the branch manager. Routine auditing of accounts reveals large scale diversion of funds to “unacceptable channels” and the branch manager himself is found to be swindling money on account of his closeness with Vice Presidents. In fact, the company is losing money and profitability on account of the nefarious activities of the branch manager. Whether the Regional General Manager should initiate disciplinary action against the manager is the ethical decision making question before him.

In this case, the best course of action that the Regional General Manager can do is to put all facts and figures black and white in paper and make his recommendation to take disciplinary action against the Branch Manager to the top echelons of management. Even if the Regional Manager has adequate powers to take action at his own level, it will not be prudent for him to exercise that power. This way, he can avoid receiving any criticism or condemnation from higher-ups who could be hand in glove with the branch manager.

But if the Regional Manger prefers to keep mum and sweep the dirt under the carpet to avoid any embarrassing repercussions, his silence will definitely be unethical. It will have every potential to damage the organization in due course.

Example 3

A branch Manager was so efficient, smart and hard working that he took over a loss making branch and within 2 years, he converted it to a profit making one. His managerial prowess was very obvious and the higher management feels his services are needed at much elevated level for the benefit of the organization.

He gets promoted as a Regional Manager and also gets shifted to the regional head quarters. In his new office, he comes across a beautiful female clerk and he gets instantly infatuated on her. In his newly found position, power and perquisites, this person feels he is unassailable in his stature. So, he makes calculated moves to sexually harass the woman. She was already  married and is a woman of high moral standards. She is a bold woman too,  who, when confronted with a problem, does not take a flight but would rather fight. With the help of supportive colleagues, she takes up the issue strongly with the top management.

Whether to deliver justice to the affected woman or to protect the Regional manager, who is highly efficient and an invaluable human resource for the management, is the crucial decision making question involving ethics now.

This is one typical case where any unethical stand by top management to stand by the erring Regional Manager will do lot of damage to the organization. Employee level co-operation and respect will be lost.  Rumor mongering will become wide spread. Powerful managers will get tempted to play dirty games, based on the precedence set in this case.

We can go on citing several such examples. Invariably, when ethics are involved,  the decision making leads mostly to a question of making a short term benefit over a long term set back. People with a firm grounding on ethics and principles will always prefer to accept a short term loss rather than a potential long term damage to the organization.

Related reading: Understanding  the managerial decision making process in detail


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