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How to harmonize management and ethics in today’s gilded age

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In today’s Gilded Age something strange is happening: the outflow of writing about ethics in business. Entrepreneurs claim to associate profit with a moral purpose. MIT Sloan review Writes about the need to “foster moral conduct.” The Drucker Forum It forces organizations to deliver “core performance” and hire leaders who have an ethical role. Harvard Business Review Talk about “creating a moral company.” The question is whether these methods are adequate to address the ethical questions related to greed built into the organization’s purpose.

1. Creating Mental Safety

A high-profile approach to nurturing business policies focuses on psychological safety. Business school professor Amy Edmondson defines it as “a shared belief that team members are safe for mutual risk-taking”, creating a sense of security, where employees are reluctant to speak their minds, thus creating the possibility of recognizing ethics. Errors, maintenance can be resolved later.

But while this approach can help at the team level or at the lower levels of the organization, can it address the ethical shortcomings of the organization, especially when the purpose of the organization is morally questionable? Creating mental safety has begun to discuss difficult issues, but heavy lifting is still ahead.

2. Building an ethical company through training

On the contrary, by Isaac Smith and Maryam Kouchaki Harvard Business Review Recommend systematic training across the organization to help workers build a moral character and develop into moral persons. This may include “hands-on training in ethical dilemmas, encouraging staff to speak up when moral grievances occur, conducting pre- and post-mortem examinations with initiatives with ethical entities, and promoting volunteer work and guidance in ethics.” Yet if the overall goal of the organization is characterized by greed, staff will see that ethical issues are at the top, and cynicism is inevitable.

3. Hiring managers with a moral character

Management guru, Raymond Hoffman writes on the Drucker Forum blog that today’s managers do not deliver “core performance” with high quality integrity. “Whether we look at metrics like employee engagement, innovation performance, corporate transformation success rates or financial performance, the picture remains the same.”

The root cause, according to Hoffman, is that today’s business leaders lack a “non-negotiable need for leadership” role. Hoffman concludes that today’s “so-called heroes have it.”

The solution Hoffman suggests is to “ensure men and women [of character] Run our organizations. ”However, Hoffman does not provide any guidance on how organizations run by current leaders have the necessary expertise and courage.

Because organizations are stronger than individuals, today’s leaders seem to have the imperative to repeat their own leadership in their new hires: they look for candidates like themselves. These issues point to the need to go beyond individual leaders and rethink the organization.

4. Adding value to all stakeholders

The Business Roundtable came close to the core of big business’s central moral problem when it backed away previous support for its goal of increasing shareholder value. In August 2019, CEOs of hundreds of large firms at the Business Roundtable (BRT) formally abandoned their support for increasing shareholder value.

At the same time, BRT has failed to offer a viable replacement. “Companies must not only serve their shareholders, but also deliver value to their customers, invest in employees, deal with suppliers fairly and support the communities in which they operate,” the BRT declared.

“But all the stakeholders are essential,” said Raghuram G, professor of finance at Wharton School. Rajan says, “Then there is none.” While maximizing shareholder value is still entrenched in most corporations’ processes, these firms have continued to do so, with increasing shareholder value.

What went wrong

The key to problem solving is not just “what” to tackle the “why” and “how” of the organization’s behavior.

1. Start with getting the ‘Y’ right

The moral business is for humans to co-create value for other humans. Staff working in small self-organizing teams can have direct vision for customers using the firm’s products and services. When organizations adopt this smarter workflow, they can change direction more quickly, attract more finance, acquire better skills and use them more effectively, win customers faster, create better workplaces, and do their part in meeting social and environmental goals. Produce more easily, and more long-term shareholder value.

When I first saw the organizations that were operating in this way about fifteen years ago, there was a very different feeling to these workplaces. They were more excited, more committed, and enjoying their work.

The reason is easy to understand. It’s not just moral. It’s also very effective. People do what they do best in the service of making others happy. When they can do something useful with others who like to do the same thing, the group gets better. By working on small wheels, everyone can see the outcome of what is being done. When communications are interactive and everyone is open about what is going on, problems are resolved. Innovation happens. Customers are surprised to find that hidden desires are also being fulfilled.

Consumer importance is not a new idea. It emerged in 1954 from the work of Peter Drucker: “There is only one valid definition of business purpose: to create customers.” For the next half century, organizations largely ignored Drucker’s idea. But in the 21st century, the idea began for several reasons. First, the power in the market shifted from seller to buyer. Second, attention to the hidden needs of customers is essential to performance. Third, consumers now have options for which firms to obey. Fourth, creating value for customers is not morally good: it uplifts staff and partners and executives, happiness in the workplace.

There are different formulations of the same basic idea. “Co-create value with customers” “Love your customers like you” “Zero gap for customers.”

Companies that follow the importance of customers such as Amazon, Apple, and Microsoft are the most valuable companies on the planet. He got the “why” of business right.

2. Don’t forget how

Yet these winning organizations are far from perfect. The “why” of Amazon’s business is correct, but the “how” of it has made major mistakes. As Jean-Louis Barsoux and colleagues wrote in the Harvard Business Review: “Take Amazon. In its determination to be a” consumer obsession, “it was blind to the needs of another sector: its merchants. Restricted their ability to customize and limited their access to payment options.

Executive compensation remains another key area of ​​“how” in the best organizations. From 1978 to 2013, CEO compensation increased by an astonishing 937%, while general worker compensation increased by a meager 10%. The problem is exacerbated during the epidemic.

3. Don’t get lost in the “what”

Greed in today’s affairs represents a serious moral problem. But appealing to managers to establish a culture of psychological safety, or to set up an ethics committee, or to have ethics training classes to build an ethical company, hire managers who have more character and integrity to risk losing the “what ifs” of company behavior. Central moral issues are the “why” and “how”. Organizations must be aligned with all three.

And also read:

The epidemic of increasing shareholder value is still raging

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