Ethics_and_Decision_Making

How far can organisations ensure that their decisions are ethical' Management is about decisions and effective decision making results from managing in an ethical manner Decision making is s process which enables an organisation to reach their set goals and follow or even change their mission statements depending and in accordance to the changing environment. “Management and managers are important in today’s world because what they do has an impact on everyone’s lives” (Cunliffe 2009) Therefore decision making plays a big role in any firm. Decision making is “A conscious process of making choices between one or more alternatives with the intention of moving toward some desired state of affairs “Bratton J (2007) For firms to operate smoothly decisions are made on every level of the organisational hierarchy such as the lower level employees would make small day to day reoccurring decisions i.e. ordering stock. As we go higher up the organisational hierarchy the decision making process becomes more intense and more complex decisions are made such as choosing the appropriate amount each department would be allocated for the year. Managers of firms need to make several decisions, most decisions made by managers are known as ‘strategic’ decision such as share price decisions and decisions based on mergers. On the other hand decision making and ethics work hand in hand because all firms need to ensure that their decisions are within their corporate social responsibility and that they act ethically. Business ethics has been defined as “Reflecting on and recommending concepts of right and wrong behaviour” Clegg et al (2008) Business ethics is seen to be the rules of the company which reflect the right or wrong conduct of the firm. A company which contradicts the idea of firms making decisions to be ethical or ensuring that their operations are ethical is Nike. Nike uses cheap labour in many third world companies to produce their goods; this is seen to be highly unethical by many individuals however this has never had a negative impact on the companies’ efficiency. Although they have been in the news and faced a lot of bad publicity Nike continues to use sweatshops. However to reduce the bad publicity ‘Nike has pledged to crack down on the amount of overtime done at factories it uses worldwide as part of efforts to improve working conditions.’ (bbc.com) According to Snell (2008) doing what is ethical can go against the business objectives and generated the ‘main objectives to business ethics’ model. Snell suggests that the company has psychological egotism which means they act in their own best interests which Nike is doing as they are a money making business (this can also be refereed to as interest utilitarianism Parfitt 1984), they have machiavellian concerns which means ‘the means justify the ends.’ With regards to Nike this once again is true as long as they meet their long term objectives of profit maximization they don’t care how they have got there. Furthermore the model states that as long as the company is acting legally ethics and morals does not matter, this once again is true for Nike as they make sure that the goods produced meet the legal quality control however they don’t pay much attention to the conditions in which the employees work. Robbins and Coulter state that decisions can either be ‘non- programmed’ or ‘programmed.’ Non programmed decisions are usually those that are poorly structured, creative and use discretion. This type of decision is usually made at the top level of the organisation. Programmed decisions on the other hand are repetitive decisions which are well structured, governed by strict rules and done at the lower level of the organisation. The more the decision is less programmed the less the chances lower level employees will be involved. An organization which had to make loads of quick non-programmed and programmed decisions was BP because of the oil spill incident. The coastguards in the early days of the event thought that they were dealing with a minor spill from the rig. They decided to spray dispersants over the shore which is a standard procedure when an oil spill occurs (programmed decision.) However when it became apparent that thousands of gallons of oil was leaking, at this stage it became clear that the BOP (valve) which had four different ways of closing failed to work caused the leak. Tony Hayward CEO of BP called in scientists and engineers to stop the leak. From this point forward all decisions made had a high level of uncertainty for success. For example at first scientist said it would be a quick solution to spray the dispersant directly onto the leak, however the long term effects of the spray were unknown. Crook and Slack (1991) demonstrate that every past decision has an effect on any future decision which is made. This is true for BP, as a result of such a high quantity of the dispersant being in the ocean, the environment got effected immensely. Which may have added to the $30 billion cost BP had to bear in putting things right. However at the time the decision was made something had to be done to get control over the major spill and the long term effects were not considered. This shows how poor decision making has a negative impact on what is ethically correct. Another example of past decisions which have affected future decisions is the recent MP scandal in the UK. It became apparent that many MP’s were misusing the public funds for own use such as claims and receipts made by MPs under their second homes allowance, and other expenses, over several years (bbc.com). One MP who did this was David Chaytor who made several claims; this was seen to be unethical as a result of this he faced imprisonment of 18 months as well as exclusion for the labour party (bbc.com). This goes to show that for the organisations and the government to operate fairly and effectively past actions which are seen to be unethical need to be dealt with ethically in the future. This is known as ‘egoism’ in ethics where individuals act in their own best interest and do not care about the interest of a greater number of people. Furthermore Buchanan and Huczynski, 2003 stated that decisions have a cause and effect relationship and established four different types of models which were the rational and political model which were said to have certain outcomes because of the decisions made and incremental and garbage can model which were said to have uncertain outcomes. The rational model was used by British Airways when the ash cloud crisis first broke out. They identified the problem and realised that it would be in their best interest to cancel some of their flights after the cloud began drifting south. This decision may have been based on the attempts to avoid a repeat of the near crash of a Boeing 747 in 1989, which flew above the above the ash cloud of an Alaskan volcano. This shows that BA took a socio- economic view and went beyond their duty of acting in an ethical manner, furthermore BA offered customers whose flights were cancelled a full refund or the option to rebook their flight on another day, as a result BA were loosing £20m daily (guardian.co.uk). These decisions show that BA were trying to act ethically towards their customers however it can be argued that these decisions were ‘programmed’ decisions because although the ash cloud was unforeseen the airline industry has been faced by many unpredictable circumstances which they have to quickly react upon such as the 9/11 terrorist bombings. On the other hand it can be argued in the case of Union Carbide the political model of decision making was used and is a effective illustration of bad decisions of the past have a awful effect on the future. As the Indian government was keen on the overseas inward investment they decided to act in an unethical manner and allow the plant to be built near a residential area. Moreover the leakage was said to be due to decisions about cost-cutting furthermore audit reports showed that major safety risks but nothing was done about this. This shows that the Indian government had an unethical interest of their own which was to take advantage of the foreign investment on the expense of the residents in the area. This shows that since ethics was the last thing that the American company and Indian government thought about their decisions were not effective and lead to an enormous disaster. On the other hand it can be argued that the American company took the classical view to social responsibility as their primary responsibility was to ensure they maximize profits for the shareholders for the firm and do this within the law which they did. To ensure that decisions are ethical companies tend to have contingency plans, Vroom V & Yetton PW (1973) contingency model which suggests that decisions can either be made with autocratic manner, consultative manner or in a group. With reference to BP it was clear that there was no contingency plan in place which could be used in a crisis, therefore Tony Hayward had to react quickly on the information he had available to him. Tony Hayward used the group approach where he shared the problem with a group of people from engineers to the employees all the way to the President of America to work together and come up with a solution. Although this meant that he would have to give up some of the control over the situation he put his faith on the expertise of the people he working with. This was because the ultimate aim was to stop the spill. Tony decided to make all the BP funds open to allow full access to any money needed to stop the leak. This shows that Tony also incorporated the ‘Administrative model’ (Simon 1960) as there was ‘bonded rationality’ in the decisions being made because Tony was relying heavily on what the media was reporting about the situation as well as ‘sacrificing’ because he decided to implement any plausible idea which might stop the spill. (Case Study) This shows that BPs response to the disaster they showed humane conduct by taking on a socio economic view (Lecture slides) which states that ‘manager’s responsibilities go beyond profits to include the well- being of the internal and external societies of the organisation.’ BP made all its resources available to stop the leak, they also ‘announced a $20bn....compensate victims of the oil spill’ (BBC) According to Clegg et al (2008) all firms should have a triple bottom line which acts in favour of the stakeholders. This triple bottom line states that the firm should first act in favour of the ‘people’ then ‘planet’ and finally profit. In response to the disaster it won’t be wrong to say that Tony Hayward did follow this triple bottom line principle thus being ethical. This contradicted the statement passed by an unnamed person saying “BP after all is in the business to make money, not to satisfy public concerns.” (BBC) According to Norman (2009) Business ethics as self-regulations model although BP didn’t not fully fulfil their legal duty by following the safety procedures on the rig, after the explosion they did fulfil their ethical duty. In fact they went beyond the compliance of their ethical duty which has been proved through them putting the people of America before the company’s profits. In my previous working environment which as in the finance department at the NHS the invoicing department had a legal duty of processing all the invoices and making sure that they go to the correct department so that the payments could be made, however as the NHS is a public company fraud is well known and therefore these employees would go beyond their ethical duty to make sure that the invoices are not fraudulent and that payments were being made to the correct accounts. This once again shows the relationship between effective decision making and ethics. However a company which has always acted in an ethical manner and ensured that all decisions are ethical is Body Shop. Body Shop ensures that all their products have not been animal tested and this has always been a important part of the organisation. As a result this has enabled the firm to operate smoothly as it gives the psyche of consumers the assurance that they are producing products which are manufactured in a morally correct way. With the stated examples, companies do try and manage their decisions in an ethical manner which in turn enables them to run more efficiently. Furthermore theories show that it is not necessary for firms to make sure that they are running in a ethical manner as long as they are basing their decisions within the law.