Archive for the ‘MBA’ Category

MBA’s, Ethics, and the Facebook IPO

I’m an educator, so my natural bias is always to assume that yes, education matters. But it is in part because of this bias that it pains me when I see someone who is plainly overstating the case. And that’s the feeling I got when I read the Washington Post‘s Vivek Wadhwa asking, “Would the Facebook IPO have bombed if Mark Zuckerberg had an MBA?”

The answer — contrary to what Wadhwa argues — is “well, probably, yes!” The IPO almost certainly still would have bombed even if Facebook’s CEO had had an MBA. The fate of the company’s IPO depended a great deal on the way it was handled by Morgan Stanley, and on the appetite of institutional investors for the company’s stock. And that appetite depended a great deal on investors’ thinking on a lot of different questions, including things like whether Facebook still has room to grow or not. But there’s little readon to think that the educational pedigree of the CEO would have made much difference on its own.

It’s also worth pointing out that while Zuckerberg doesn’t have an MBA, he presumably has more than a few MBA’s working for him, and he certainly could afford to hire more. It’s pretty hard to make the case that the man himself having an MBA was utterly essential. So, while Wadhwa may well be right that having an MBA would mean that “Zuckerberg would have better understood the rules of corporate finance and capital markets,” it can hardly be argued that there was no one around with the relevant training to advise Zuckerberg on such matters.

Interestingly, Wadhwa twice mentions the importance of ethics in business, and rightly points to the ethics as being of central importance in an MBA education. But it’s far from clear just how Wadhwa thinks that is connected to the Facebook IPO having “bombed.”

Hopefully no one really thinks that getting an MBA is going to make you more ethical. If the ethics course you take during your MBA is a good one, it may do something to enrich and deepen the way you think about ethics, and to help you design and manage the kinds of systems that will help your employees act ethically. But even on the broadest and most inclusive understanding of the word “ethics,” there’s little reason to think that learning about ethics is going to make you better able to shepherd a company through an IPO. Nor is training in ethics any guarantee that individuals won’t engage in the kind of selective disclosure of information that is at the heart of the company’s post-IPO legal woes. The kind of ethics education that goes along with an MBA may well teach you more than you already knew about the nature of fiduciary duties and the importance of fostering trust, but an MBA-level ethics course is neither necessary, not sufficient, to make a business leader ethical.

Should We Teach Students About the “Social Impact” of Business?

As regular readers know, I’ve blogged a lot about the vocabulary we use to talk about ‘doing the right thing’ in business. Here’s another example of a term that some people seem to want to use to capture that entire topic: “Social Impact.”

See for example this piece, by NYU’s Paul Light, in the Washington Post: It’s time to require students to do good.

I’ll start by pointing out that the headline is inaccurate, though that’s likely not Light’s fault. (It’s more likely the fault of the newspaper’s headline writer. Hard to say.) At any rate, Light’s article isn’t about making students “do good;” it’s about teaching them courses about doing good. And that’s a very different thing.

Light points out that many business schools now offer courses on what he refers to broadly as the “social impact” of business. “Social impact,” he says, can variously be defined in terms of “social responsibility, innovation, engaged citizenship or plain old public service.” (Note that Light is in trouble here, already, implicitly assuming all of those terms are good things. For counter-examples, see my recent blog entry on unethical innovation.)

Anyway, Light says business schools are increasingly realizing that they need to teach students something about the social impact of business (and presumably, more specifically, about how to maximize positive social impact and minimize negative social impact.)

For what it’s worth, I should point out that many business ethics classes — presumably among the courses that Light sees as part of the trend — absolutely would not focus primarily on social impact. And that’s a good thing, because social impact is just one of the many ethical issues that arise in business. Courses on business ethics can cover a large range of issues, many of them not directly related to social impact:

  • product safety (which is mostly a concern to customers, who very often make up only a tiny segment of “society”)
  • employee health and safety
  • truth in advertising
  • the environment (which, depending on your philosophical views, may have ethical importance independent of society’s reliance on it).

Each of those topics has relatively little to do with social impact, and indeed there can be important tensions between, for example, what is good for employees and what is good for society.

But maybe Light doesn’t want courses in business ethics more generally; maybe he really does think it most important to focus on social impact, thereby ignoring the issues (like those noted above) that got the field of business ethics off the ground in the first place. Such a focus by business schools would be incredibly unfortunate, because it would leave business students radically unprepared to face the ethical challenges that they really will have to face on a daily basis in their professional lives. And even if courses on “social impact” do tackle a broader range of issues (including the ones listed above) the title of the course is going to mislead students into thinking that social impact really is the key issue after all.

Finally, I’m confused by the fact that Light views “social impact” as a skill:

Making social impact part of every student’s curriculum would send the signal that social impact is an essential skill….

What are we to make of this? Is social impact really a “skill”? Personally, I’m not sure how to make sense of that turn of phrase. I suppose we can read Light somewhat more charitably as meaning that an appreciation of the social impact of business, and an understanding of the key issues and how to respond to them, are essential parts of a sound business education. And surely he’s right. But we ought at least be clear on the fact that what we’re struggling with — and what we need students to struggle with — is the complexity of the role and impact of business in society. Calling it a skill misleadingly implies that we know what to do about it all, and now we just need to do it. If only life were so simple.

MBA Ethics Education Roundup

Back in November I did a 4-part series on ethics education for MBA students. I thought it might be a good idea to collect all of them, plus a couple other relevant blog entries, on a single blog entry. So here they are:

And see also these earlier blog entries by me:

MBA Ethics Education: Speaking Up

This is the fourth (and final?) installment in a series of postings on ethics education for MBA students.

The fourth element of MBA ethics education that I want to talk about is the willingness and ability to speak up.

Often one of the biggest barriers to doing the right thing lies in not knowing what to do or say in a hierarchical or group context. Think first of hierarchies. Pretty much all organizations are hierarchical in nature, with each individual answerable to, and performing tasks assigned by, someone in the layer above. In such contexts, when your performance evaluations (and maybe your very job) relies on your boss’s perceptions of you, it can be pretty tough to “speak truth to power,” as the saying goes, even when your conscience says you should. Next think of groups. Business involves a lot of teamwork — a lot of MBA education revolves around that fact — and on teams there can be pressure to conform, to go with the flow, to be a ‘team player.’ But more often than not, if something unethical is about to be done, and least one person on the team realizes that it’s wrong. The question in such cases is whether that one person will have what it takes to speak up. Part of MBA ethics education should be aimed at giving people what it takes to do so.

At a first approximation, I’d say that speaking up when you see something unethical (or maybe just something thoughtless, with potentially bad consequences) requires three things.

First, you need the understanding — the ethical sensitivity, if you will — to notice that something is wrong.

Second, you need to be motivated — you need to care, and you need the courage to act in the face of the pressures of hierarchy and teamwork. You need some understanding of just what your obligations really are. (Among other things, this requires a refusal to indulge in self-serving excuses.)

Third, you need the skills to actually formulate and voice an objection. You need to know things like how to express ethical doubts in a non-threatening way. You need to know how to seek out allies who might share your ethical qualms. And you need a vocabulary in which to express your concerns. In these regards, I highly recommend a book from which I’ve learned a lot, namely Mary Gentile’s recent book, Giving Voice to Values: How to Speak Your Mind When You Know What’s Right. It is a truly wise piece of writing, and “wise” is not a word I use very much.

None of this is intended to exaggerate the complexity of the simple act of raising one’s voice. But all the available evidence suggests that at least sometimes (and likely too often) it actually is difficult, in organizational settings, to speak up when we get the sense that something isn’t right. And (as discussed in a previous blog entry) it’s just not plausible to think that the people who fail to speak up are all somehow morally defective. Too often, bad things happen because good people don’t speak up. We need to make sure that MBA students (and, surely, others too) graduate with the skills to do so.

MBA Ethics Education: All Decisions are Ethics Decisions

This is the third in a series of blog entries on ethics education for MBA students (the first two are here and here).

One of the key challenges involved in teaching MBA students about ethics is to figure out just what the scope of the topic is. Just which issues are “ethical issues?”

As management guru Peter Drucker once pointed out, “there are no finance decisions, tax decisions, or marketing decisions; only business decisions.”* In other words, decisions that seem to be about a particular aspect of a business cannot (or at least should not) be made as if they have nothing to do with other aspects of the business. And decisions taken by people who are primarily responsible for one area (e.g., marketing) cannot be made as if they have no implications for the work of people in other areas — or as if those decisions could not benefit from input from those other areas. Likewise, the leaders of a company cannot plausibly delegate such decisions and thereby wash their hands of them. Delegation may be necessary, but it can never be complete. A tax decision or a product design decision is not “merely” a tax decision or a product design decision — it is a decision that can affect the fate of the company as a whole.

In a similar vein, it’s worth pointing out that there really is no clear distinction between “ethical” decisions in business and straightforward business decisions. Every decision made within or by a business affects someone. HR decisions have a clear ethical component, as do decisions about things like purchasing (recycled paper or no?) and waste disposal. A decision to allocate resources — money, time, authority — to one person or project is inevitably going to advantage some over others. Even design decisions privilege one view about what is beautiful or useful over others, and what kinds of tradeoffs to make between, for example, price and utility and simplicity. Those are ethical matters. Essentially if any individual or group is helped or harmed, if rights or privileges are at stake, then it is an ethical decision. As a result, it is hard to think of any decision made in business that has no ethical element to it. For this reason, it is wrong to think of “ethical” decisions as some quirky species of decisions. All business decisions are ethical decisions. Of course, it is true that some decisions will present themselves as “ethical” decisions because the stakes are so high, or because the values involved conflict so significantly. So it makes a kind of intuitive sense to call those kinds of decisions “ethical decisions.” But we shouldn’t be misled, by that shorthand way of speaking, into thinking that other decisions don’t have an ethical component.

The dilemma this poses for business education is this: should business students (MBA students in particular) be required to take a separate course in ethics, or should ethics somehow be made part of each of the courses that an MBA student takes? Both approaches have their downsides. On one hand, designating (and requiring) a course on ethics establishes the topic as a serious topic, one to be taught to MBA students alongside Finance and Marketing and Strategy and so on. But if you put ethics into a separate course, you risk ghettoizing the topic, and implicitly encourage professors in other disciplines to say things like, “Don’t worry about the ethics, here — you’ll learn that in your ethics course.” But there are risks inherent in the alternative strategy, too. If you try to weave a bit of ethics into every course, then ethics ends up being taught by profs who may not have any particular expertise in, or passion for, the topic. Indeed, ethics may get pushed to the end of the syllabus, and may have a tendency to fall off the agenda altogether when other topics take longer than expected.

Ideally, an MBA program should probably have both — a dedicated ethics class as well as a concern for ethics woven throughout the curriculum. Ultimately, an integrative approach is required. That means designing a curriculum that finds ways to weave ethics into classes on Accounting and Organizational Behaviour, but that likewise takes Accounting and OB seriously in the way it teaches ethics.

*Drucker is quoted in Roger L. Martin’s 2007 book, The Opposable Mind: How Successful Leaders Win Through Integrative Thinking, (p. 79). Martin is Dean of the Rotman School of Management.

MBA Ethics Education: Avoiding Excuses

This is the second in a series of blog postings on ethics education for MBA students.

We all want MBA students to leave school with a good chance of being able to do the right thing when the going gets tough. Sometimes, doing the right thing simply requires that we avoid the temptation to do the wrong thing. Positive role models are definitely a good thing, but we also need to understand why things sometimes go wrong.

We can gain insight into that by looking at why it is that people do bad things in the first place. The best short treatment of that topic that I know of, as it applies to Business Ethics, is a paper by my pal Joseph Heath.* Business seems to be, in Heath’s words, a “criminogenic” setting (i.e., a setting that seems to generate criminal behaviour, along with other forms of wrongdoing). If we want to improve ethical conduct in business, we need to understand what characteristics of the world of business are responsible for that pattern.

Heath points out that most of the “folk” theories of wrongdoing have long since been dispensed with by the experts who have spent the most time studying the topic, namely criminologists. Those folk theories hold that wrongdoing is caused 1) by defects of character, 2) by greed, or 3) by deviant values. But the available evidence just doesn’t support any of those explanations. That’s not to say that those things never play a role; it’s just to say that none of those 3 provides anything like a general explanation for wrongdoing. Instead, the existing criminological literature points to the fact that wrongdoers exhibit patterns of “neutralization” with regards to their crimes. That is, they describe their behaviour differently than an observer would. They define words differently, in order to attempt to rationalize their behaviour. In essence, what this allows them to do is to admit that they did the thing, without admitting that it was actually wrong.

The following are the “techniques of neutralization” that Heath gleans from the criminological literature:

  • Denial of responsibility — e.g., “I had no choice!”;
  • Denial of injury — e.g., “No one really got hurt anyway”;
  • Denial of the victim — e.g., “They just got what they deserved.”;
  • Condemning the condemners — e.g., “Those who accuse me are just out to get me.”;
  • Appeal to higher loyalties — e.g., “I have a family to support!”;
  • “Everyone else is doing it;”
  • Claim to entitlement — e.g., “I built this company, I can do what I want!”

The final section of Heath’s paper deals briefly with business ethics education. He argues that what we know about the genesis of wrongdoing has clear implications for what we teach in business ethics classes. The techniques of neutralization are psychologically attractive, but in most cases they are logically faulty. So we need to teach business students to recognize them, and to recognize why they are faulty. (I’ve got lots to say on how to do that, but I’ll leave it for another time.)

Even more important, perhaps, Heath nods to the role of managers as designers. (See also yesterday’s blog entry, “MBA Ethics Education: Designing the Designers”.) The fact that managers are involved in the design of the work environments they manage implies that they need to be taught how to incorporate an understanding of the significance of techniques of neutralization into their design choices. They need the tools with which to build work environments in which certain kinds of excuses, in other words, are psychologically unattractive and socially unacceptable.
*See Joseph Heath’s “Business Ethics and Moral Motivation: A Criminological Perspective,” Journal of Business Ethics 83:4, 2008. Here’s the abstract.

MBA Ethics Education: Designing the Designers

As a Visiting Scholar at the Rotman School of Management (more specifically at the Clarkson Centre for Business Ethics and Board Effectiveness), I’ve been thinking a lot lately about how we educate tomorrow’s business leaders. This is the first of a series of blog entries on that topic.

Clearly, what we need to teach future managers (especially MBA students) about ethics depends crucially on what we understand the role of managers to be. And with regard to management ethics, we should carefully distinguish two very different educational needs, rooted in managers’ two very different roles.

One role managers play is that of decision-maker, and so the first issue to consider with regard to managerial ethics concerns the ethical behaviour of managers themselves. In this regard, business schools are in the business of educating decision-makers. Such being the case, it makes sense to teach MBA students about various ethical theories, about what can be learned from various scandals, about social expectations with regard to business, and so on. We want to instill in MBA students that doing the right thing matters, and give them the skills to figure out what that requires of them. (Relatedly: I blogged recently about the MBA Oath and the question of professionalizing management.)

The other role played by managers is that of a designer: managers essentially are tasked with designing organizations (or parts of organizations — teams, branches, functional units, and so on). And so the other key ethical issue with regard to managers is whether they will have the skills to design business units that make it easier, rather than harder, for subordinates to act ethically. MBA students, then, need to be taught about the ethically-salient elements of organizational design. They need to be taught, for example, about the kinds of incentive structures and the kinds of organizational cultures that foster rather than frustrate, good ethical decision-making, so that they can try to design such structures and cultures in the workplace.

But it’s worth noting that even individual ethical decision-making (and not just the design of decision-making contexts) itself involves design. As Caroline Whitbeck points out (in an excellent article* that I recently taught to my Business Ethics class), there is a very strong analogy to be made between ethical decision-making and the kind of design thinking that engineers engage in. Ethical decision-making, like engineering design, involves an attempt to solve a problem, in order to achieve certain objectives, taking into consideration a set of constraints. And it involves attempting to find a good solution, in a situation in which there may be multiple adequate solutions, no clear best solution, but many clearly unacceptable ones. Ethical decision-making, in other words, is precisely not like a multiple-choice exam question. Real ethical questions are very seldom of the form “Should we choose option A or option B?” More often, the question is “what options are feasible?” And, “what would those options look like, in practice?” And, “what series of steps will that option include, and what will happen if we do X and so-and-so does Y in response?” Ethical decision-making is a design process.

So, whether we are thinking about training MBAs to make particular decisions, or training them to build the contexts in which particular decisions are to be made, business schools are in the business of designing designers. The question, then, is not just which ethical principles ought to be used as the building materials of good decisions, but what ethical principles ought to govern the design process itself.
*Caroline Whitbeck “Ethics as Design: Doing Justice to Moral Problems” (from Hastings Centre Report, Vol. 26, No. 3, 1996).

Management Ethics & Oaths Without Professionalization

Here’s a piece I wrote as part of a debate on the MBA Oath, in a recent Canadian Business magazine: The MBA oath helps remind graduates of their ethical obligations.

In the article, I express the view that the MBA Oath, in its current incarnation, is “not a revolutionary thing, not a perfect thing, [but] definitely a good thing.” The real thrust of my defence of the Oath is that most of the criticisms of it are simply off-base. Critics either expect too much of a simple oath, or conversely underestimate the value of having people stand up and say “I promise.”

My conclusion:

But overall, the main problem with the MBA oath isn’t really a problem with the oath at all — it’s a problem with people’s expectations. Dismissive critics say that no oath will solve the deep and abiding moral problems that beset the world of business. That’s surely true, but no one could seriously have thought otherwise. It’s trite, but also true, to say that the world of business is increasingly complex. The ethical demands on business are higher than ever. In particular, business executives are called upon with increasing regularity to account for their actions and their policies, and to justify them to an increasing range of stakeholders. Add to that the enormous, lingering cultural rift regarding the proper role of corporations and markets. The MBA oath is of course not going to solve all of the ethical challenges that arise in such a context. Nor is it going to ensure that none of its signatories ever crosses the line into regrettable or disreputable or even disgraceful behaviour. But if given half a chance, the MBA oath might just turn out to play a small but not insignificant role in keeping the discussion alive.

Now, I do think there are some valid criticisms of the MBA Oath. One kind of criticism has to do with its content. I think, for example, that the Oath needs to be more clear regarding the balancing of the interests of various stakeholders. Note also that the current version of the Oath has MBA’s swearing not to engage in “business practices harmful to society”, a category so broa and contentious as to provide practically zero moral guidance.

But another set of criticisms has to do not with the Oath’s content, but with the its goals. At least some supporters of the Oath liken it to the Hippocratic Oath, and look to the day when Management can take its place alongside professions like Medicine, law, Accounting, and others. That, I think, is a mistake.

To see why, you can begin with this very recent piece by Ben W. Heineman, Jr., on his Harvard Business Review Blog: Management as a Profession: A Business Lawyer’s Critique.

Heineman’s focus isn’t on the question of oaths, but (as the title implies) on the question of professionalism more generally. He suggests that people who promote ethics in management by analogy to the professions misunderstand the nature of professionalism — and in particular, misunderstand his own profession, law. Heineman agrees that business schools face serious ethical questions. But, he says:

…these significant questions for business schools can be addressed without putting them in a context of the imperfect and potentially misleading analogy to legal professionalism

Another view on the question of professionalism is provided by Roger Martin (Dean of the Rotman School of Management), on his Harvard Business Review Blog: Management Is Not a Profession — But It Can Be Taught.

Martin points out two key characteristics of “the professions,” as those are traditionally understood. One is information asymmetry — basically, professionals like physicians and lawyers know stuff that their patients or clients generally do not. For example, I can of course look up basic facts of anatomy on Wikipedia, but it takes a trained dermatologist to tell me if that little bump is a harmless cyst or a potentially-deadly carcinoma.

The other element of professionalism that Martin points to is regulation. Information asymmetry is a problem in lots of industries, but only in some cases does it result in professionalization:

[When such a service]…is delivered by an identifiable individual practitioner, it tends to become a regulated profession. Doctors are regulated professionals because if they screw up, people die….

So, failure by identifiable individuals, says Martin, is the key:

The higher the cost of failure, the more likely the individual practice in question is to become a regulated profession.

That, he says, is why managers are unlikely every to be professionals in the narrow sense. For managers…

…[f]ailure is seen as the product of a team of managers doing a poor job in concert, rather than the product of one manager. Of course, CEOs get singled out for disproportionate blame. But the question is not whether being a CEO should be a profession but rather whether management should be a profession.

Of course, none of this is to say that managers can’t be expected to behave “like professionals” or to “conduct themselves in a professional manner,” in the looser sense of the word “professional.” The information asymmetry that exists between corporate managers and (for example) the company’s shareholders is very considerable, and it ought to be seen as bringing real responsibilities. The same goes for most front-line workers; lacking high-level business education and lacking direct access to the company’s books, they are left to trust senior managers to keep the company solvent in order to maintain job security. Being a manager may not make you a professional, but it is an awful lot like being a professional, in ethically-important ways. It is in that looser sense that the MBA Oath ought to be understood as seeking to instill in MBAs a sense of professionalism.

(p.s. I blogged about this back in May of 2009: Harvard Students Take Ethics Pledge.)

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