Edgeology - Free business psychology articles

Ethics in Consultancy

Looking at the question

Companies, large and small have a problem.  When it comes to telling the public or their people about anything it is usually believed that they are engaging in clever public relations rather than telling the truth.  The same is true for national government or governmental agencies.  It is also true for supposedly worthy groups, such as scientists or doctors.

This cynicism is deep rooted and does not only operate at an organisational or group level.  It is true for individuals and work teams who may, for example, question their manager’s own interest within his or her communications or behaviours.  And indeed managers themselves talk about their own work-based ethical standards and the pressure exerted on these by their organisation - represented by their boss, senior management, shareholders or any of the other entities that constitute ‘The Organisation’. 

There is little difference for the external consultant.  Consultants talk of their company’s focus on the bottom line driving them to operate in ways that they may not normally wish.  Some consultancy cultures develop values that only recognise targets and results as counting in the business.  Consequently operating in an ethical manner, or providing support for colleagues to do likewise is likely to be unrecognised.  Some consultants may cite external forces, market pressure and competitor activity, claiming that they cause behaviours that challenge their own ethical position.  However, before consultants working as sole operators reward themselves too loudly, one should remember that they are not free of these pressures.  In a business world where their income wholly depends on their own activity, they, too, are subject to the challenges of securing assignments, meeting clients requirements, responding to competitor activity, and delivering solutions on budget which may create tension between their own ethical standards and the business demands.  And perhaps we should remember that this occurs in a sector not wholly free of externally perceived and generally accepted unethical practices.

Is the business world in which consultants operate becoming increasingly unethical?  It is hard to say whether there has been an increase in unethical business behaviour over the past few years, although it seems like it.  Part of this is because of increased public awareness of the subject, which causes more media reporting, causing increasing public awareness and interest.  It is also partly due to the repeated ethical conflicts we see in business activity from restructuring, with significant lay-offs, accompanied by high executive compensation, or ‘big bucks for fat cats’.  Or indeed, hidden multi-million dollar fraud, or the artificially high medicine prices to maintain profit at the expense of others’ illness and death.  We should not forget that this construct of ‘bad business’ moves through to literature, TV and film.  Business owners, senior executives and professionals (scientists and doctors of medicine) are often portrayed as the villains, the people engaged in bad practice.

The purpose of this chapter is three-fold.  It is about consulting beyond cynicism, it is about saying that we, as consultants, are equipped to address the variety of ethical problems and dilemmas that confront us.  And that we can do this whilst remaining true to our own standards.  It is also about recognising that the interest of society in business ethical matters is not just a passing passion but here to stay, it is a fixed element of the human condition.  Finally it is about recognising that being seen and known to operate in an ethical manner is not just good practice, it is also good for business in the 21st century.

Back to Basics on Business Ethics

Let’s just get back to some basics for a moment.  For some the term ‘Business Ethics’ is difficult and has led to many musings on the possibility and impossibility of its existence.  This is partly because the subject itself is seen to originate within the tension between moral philosophy and pragmatic managerialism.  Even if we move from possibility to reality there is still the challenge of being able to identify and agree on what constitutes unethical business behaviour.  And in the process of identification, where is our stance?  Does it exist in the highly persuasive arena of nostalgia informing values, or modernisation challenging our nostalgic and inherited value sets?

My purpose here is not to wander into the philosophical debate about what business ethics are, it is simply to recognise that the term is slippery and subject to much on-going discussion.  For some this discussion is rejected in the face of real world activity: “We are too busy worrying about real problems to take this academic sophistry seriously”.  It is a case of the ivory tower meets the law of the jungle!  So if we leave those questions to others, what are we left with?  This basic position is summed up in the assumption that business ethics is about human behaviour in the organisational context.  Within this definition, we have to see human behaviour as being consistent with norms and standards agreed by society.  For consultants this means managing and influencing our own and others’ ethical conduct within the business context.

In short this is about individuals recognising issues, making judgements and decisions (based on generally agreed standards and norms) and then behaving ethically.  This would be simple, were it not for a variety of factors that can make it difficult to distinguish between right and wrong.  We have already mentioned, in passing, the divide between the philosopher and the business realist, and also the tension between nostalgia and the challenge of the now, and a short reflection on the ethical decision-making diagram will reveal some of the other problematical factors.  I do not intend to dwell on them here, but as they serve to inform many of the behaviours in which consultants engage and the decisions needing to be taken, a brief consideration is of value.

 

Our Philosophical Platform

This forms the background to the diagram, in a sense the ‘white of the page’.  There are, broadly speaking, three types of moral theory, these are duty-based, consequentialist and virtue based.  Duty-based theory assumes that there are certain ways in which we should or should not behave; it is therefore our duty to behave in these ways regardless of the consequences.  In a business context this approach can cause us to ask questions.  For example, from a Christian perspective (which is duty –based), man was created in the image of God.  This suggests an inherent dignity in every person that must be respected as an act of duty.  What then happens when organizations require people to carry out work of no purpose, or that is dangerous or alienating, or damages their self esteem? 

Consequentialism puts this around the other way.  Here right or wrong is determined not by the intention of the actor or actors but by the consequence.  The duty-based approach sees lies or white-lies as wrong, but what happens when they deliver a new sale, keep people in jobs, cover a mistake that a client might find unsettling?  Utilitararianism (a consequentialist approach) is based on the assumption that the right action in any circumstance is the one producing the greatest overall happiness.  In business terms this translates into the belief that delivering against promises is seen as good practice.  However, the same approach allows us to calculate the probable happiness outcome whether the promise was broken or kept.  So a large client organization that has paid an invoice twice will hardly notice the (small to them) loss whilst to the consultant who receives the double payment, gains a windfall and the balance on the happiness scale. 

Virtue theory focuses on character.  For an individual we would be interested in how he or she spent life and how he or she intends to continue.  It is about cultivating the virtues to flourish as a person.  It has increasingly become the approach most applied to business situations to help people (managers in particular) to make sense of the wide range of ethical dilemmas they confront.  At an organizational level the assumption is that business is a social activity whose purpose is to provide essential and desirable goods and services to make life easier.  Consequently, sacrificing profit for reasons of social or environmental responsibility is what business should be about – enriching society and enriching shareholders.  It is also about how the organization operates internally.  Investing in employees’ on-going development or investing in becoming a caring organization might be seen as ‘theft’ from the other approaches, but here is seen as laudable.

Professional Standards and Codes of Conduct

Whilst many organizations attempt to shape employees behaviours through formal written structures such as a vision, mission statement and corporate values, there are also some who produce codes of ethical conduct.  There are some differences of opinion as to the effectiveness of such codes.  Some claim that their existence does indeed reduce the frequency with which unethical behaviour exists.  However, since the nature of these statements varies so much, it is hard to define what exactly is meant by a ‘formal’ code.  Furthermore, there are questions as to whether employees actually read - let alone understand - such documents.  And finally, there is good evidence that their existence can cause, rather than alleviate, ethical problems.  This is particularly the case where organizations espouse one approved type of behaviour and actually demonstrate another.  For example, the case where an organization highlights the virtue of co-operative working within the ethical code, but rewards people on the basis of individual performance. 

Professional bodies also have codes of conduct.  This is true for the variety of bodies and societies of which consultants are likely to be members.  Leaving aside the question of who reads them (let alone who remembers their content) there are other questions relating to purpose.  So, on the question of purpose, are such codes created for the purpose of public relations and enhancing the significance of the society in the eyes of the general public?  Do they exist to create a professional elite, or do they provide their membership with an additional marketing tool to allay the fears of actual or potential clients?  It is, of course, possible that the purpose of the code is to benefit clients and protect the profession from the abuse of unethical practitioners.

Multicultural Differences

Just what do societies or cultures ethically agree upon?  Within a single society grouping culture has been defined as the way a group of people solve its problems.  For a variety of reasons (historical, geographic, climatic, economic, etc) cultures have produced specific solutions for specific problems.  This is true at an international level, between the United Kingdom and the United States, or between Germany and Japan; and at a national level, between London and Liverpool, or New York and San Francisco.  Similarly, such cultural differences occur in other groupings: religious, racial, North/South divide or even sporting allegiance.  In the business context these differences call for the awareness that they exist and the desire for knowledge so that they can be understood.  And within this there is a decision.  As a multinational we might claim that our managers, employees and business practices are exposing ‘these people’ to Western Values so that they might think differently and benefit from greater independence and new business opportunities.  Or we might wish to adhere to a belief that local culture should be understood so that we do not violate its ethical norms, but show respect for it and work with it - not against it.  This is the debate between cultural imperialism and cultural relativism, and whilst it may seem to operate at a higher level than the usual consultancy assignment it is not unknown.  Clients, for example, may wish to develop and implement global value sets, or to align the European offices with the values already developed and living in Chicago.

Cross-cultural differences in ethical attitudes toward decision-making amongst managers and consultants is not well understood.  It is understood, however, that real cultural differences exist between collectivism and individualism, and on uncertainty avoidance, which in turn inform the ethical decisions taken by individuals.  It is also interesting to note that ethical differences between different national groups are less than expected and that managers tend to see other national management groupings as less ethical than themselves.

Organizational Cultural Differences

Organizations differ in culture.  This is true within sectors, across internal divisions, and across national boundaries for multinationals. There is some evidence to suggest that one such dimension is cultural strength.  In strong cultures the norms and standards that shape behaviour are known by all (or at least most).  The strength of this may even transcend the national boundaries crossed by the organization.  Weak cultures, on the other hand, allow subgroups to develop their own norms and standards, creating significantly different ways of behaving or thinking about things across departments and divisions.  It is important to recognise that where an organization is on this continuum does not indicate ‘good or bad’, but it is important to recognise that these differences exist and that they will inform the ethical decision-making of individual employees.  It also indicates one of the factors that must be read by both internal and external consultants if they are to operate effectively making the appropriate decisions within such contexts.

It should also be recognised that other organizational features inform the ethical norms – ‘the way we do things around here’.  These features include leadership, structure (authority and responsibility), and the internal systems, such as selection or reward. 

To these formal features we also need to include the informal aspects of the organization which may be less visible but certainly no less powerful.  These include the symbolic individuals within the organization who represent role models and from whom other employees learn how to behave.  Increasingly, the evidence concerning organizational myth and story is demonstrating the power of such discourse in maintaining and shaping culture for both existing employees and newcomers.  Usually at the heart of each story sits the moral that expresses an actual corporate value, and often how this conflicts with espoused values.

Different People, Different Decisions

People are different.  In the decision making process an individual needs to be aware that a moral dilemma exists before being able to make a judgement.  This does not happen automatically and different people will identify different situations as having, or not having, an ethical dimension.  It seems that moral awareness can be increased through a variety of signalling activities.  These fall into three categories: an individual feels that others will be harmed by something; if he or she believes that colleagues will see the ethical dilemma in an issue; or if the issue is framed or described by words that have moral properties (integrity, cheating, lying, etc).  For both managers and consultants this is a useful fact.  It provides ways of signalling moral issues to a client and so encourages them into open forum so that the issues may be addressed before they become a significant problem.

Awareness is just the first step toward acting.  Between awareness and action is the decision of how to act.  There is a variety of moral development and decision-making theories but here we will simply register that a cognitive process takes place that enables an individual to process the data and head to a decision.  We also have to recognise that this process is not a well trod path that always leads to the same destination.  Initially people will check the terrain, to see what the cues around them indicate?  And in this section we have considered some of these cues, including the philosophical platform, the cultural context, the organizational values and systems, role models and standards and norms.  These factors will influence the final decision and are of fundamental importance.

As a consultant these factors will inform our decision making processes, which reinforces the importance of being morally aware.  Also, as a consultant we should be aware that we ourselves are one of these factors.  For our clients and those with whom we work we will have the ability, because of our role and status, to influence moral judgements and ethical behaviours.

Treading the Ethical Path

So far we have covered a considerable amount of ground and looked at the subject from different perspectives.  Hopefully, en route, we have identified a number of actions or different ways of thinking that will be of use in the future.  The key question still remains – “Is there a right way?”  How can a consultant operate using a consistent approach to deciding what is right and doing the right thing?  In this section we will outline an approach that will support ethical decision making for consultants operating in the business context.  The approach is outlined in the following diagram which is represented in a wheel partly to remind us that the process is not linear but also that it should be capable of iterative application – the more serious the decision the more times it may be appropriate to travel around the wheel.

Features of the Ethical Decision-Making Wheel

The Internal Voice

Whilst most of this approach is based on a rational process, a good place to start is within you.  When confronted with an issue, request, or consultancy problem, does it make you feel uneasy or uncomfortable?  It may not be possible to frame the reasons, but if it feels as though it is ringing the warning bells, then take note.  This means considering the issue in more detail and not simply avoiding the subject at this stage.

Fact Finding

Recognising that it is often impossible to gather all the available data relating to a particular situation is no reason for not making the attempt.  Frequently people move to the decision and the action without taking the time to gather the information.

Identify the Conflict

What are the ethical issues associated with the subject or the values that are held in conflict?  Usually there are a variety of issues that arise from a single subject, so do not be tempted to stop with the first that enters the mind.  A couple of useful activities that help this process are to use the three philosophical theories described in the ‘Philosophical Platform’ section and consider the subject from their perspective.  What does duty-based theory, consequentialism or virtue theory lead you to identify? 

Recognise the Actors

Actors include the parties affected by the decision, but also those making the decision, and indeed those who are otherwise involved as stakeholders.  Very often this process of actor recognition creates a complex web of relationships in which the identification of who benefits and who is harmed sheds more light on the issue.  Where the opportunity exists, it may be of some benefit to explore preferred options with the different groups involved.

Review Possible Outcomes

Having recognised the actors it is a useful activity to consider the outcome for each on the basis of different decisions.  This is partly drawn from the consequentialist theory and provides additional insight to the ethical dilemma.  This should be a prioritising activity that identifies the main positive and negative outcomes rather than every possible result.  In the business context it is also important to try to gain some idea of three other outcome elements: the duration of the outcomes’ impact, the result of a secret decision becoming known, and the meaning the decision will be given within the organization.

Consider Duty

Where do the duties lie?  This is drawn from the duty-based theory, and questions values or standards that cause a person to behave in a particular way.  Where does duty lie?

Personal Integrity

This is drawn from virtue theory, and asks questions about character at two levels.  First, there is the character of the community of consultants, of which you are a member, how would they respond to the dilemma with which you are faced?  What would happen if consultant colleagues heard about the decision you made; would you feel pleased or embarrassed?  And second, there is your own character.  How would you feel about yourself if you made this or that decision.  In the end, will people see you, and will you see yourself, as a person of integrity?

Check the Alternatives

How many potential actions are there in response to this case?  Is it possible to think more creatively?  What is the cost, in terms of harm and benefit, of inaction?  It may be an opportunity to talk the subject over with colleagues or with the client.

Is the Ethical Path Good for Business?

One way to attempt to measure this relationship has been to explore the link between socially responsible organizations and financial performance.  And it has to be said that the evidence is not clear.  Where the evidence seems positive this might be because financially secure organizations are able to devote more resource to social issues.  Or it may be that because of involvement in social issues, and the consequent building relationships with all stakeholders, an organization may enhance its financial performance.

Amongst the consultancy community it is clear that some practices and some sole operators market themselves on the basis of their ethical approach to work.  In this sense they build a character for themselves, akin to the virtue theory idea, which creates a positive market reputation and the recognition that they operate with integrity for the benefit of their clients.  We could question who the sub-groups are within the client organizations who receive this benefit but that would indicate a certain cynicism and miss a key point.  This is the belief amongst such consultancies and consultants that there is a need to distinguish themselves from the rest of the community on the basis of their ethical approach.

It is far better to consider the foundation of a good consultancy business in the 21st century as not being simply about the bottom line, but being about producing a quality of service and product that meets the needs of clients and shows a responsible approach to the community of stakeholders and society in general.

Sutton C (2002). Ethical Consulting; Is there a ‘Right’ way?  in Lee K (Ed) Consulting into the Future.  Hodder & Stoughton; London