Beyond Compliance (Part 3): Operationalizing Ethics
A new vaping technology hits the market and your company is eager to embrace it. A cultivation practice that improves terpene content by increasing water consumption is rolled out and the industry is excited to put it to work. An automated budtender device has the potential to save your dispensary significant amounts of money while improving safety. A new trimming machine promises similar results in your cultivation facility, with only a marginal decrease in your product’s visual appeal.
Do these sound like ethical issues to you? If not, consider the challenge a leader has when considering whether or not to adopt a new technology without a long history of use in humans, the tradeoffs between improving the quality of a medical product and the resources it requires to grow, and the promise and perils of replacing human workers with automation. If you read either of the first two pieces in this series, you’ll recognize my point here — we are awash in ethical decisions all day, every day. In my first article, I talked about a framework for navigating ethical dilemmas like these (as a reminder – an ethical dilemma is any situation where we find our values in conflict). In this piece, I’d like to talk about how we embed ethical concepts into the operational structures that guide our day-to-day work. I’ll argue, as I usually do, that there are both moral and business cases for creating ethical businesses. The moral argument highlights the role of business in society, as well as its effect on individual organizational participants, such as employees. Business is arguably the most important organizing force for human activity as I write this here in 2020 and, as such, plays a significant role in our public and private lives. We can’t look at the activities of the industry as separate from and apart from society, except as an academic exercise.
On the operational side, it doesn’t take a business professor to understand how ethical blunders can cost a company. For instance, consider the examples of Volkswagen, Theranos, and Purdue Pharma. These quite public scandals resulted in two of the three (Theranos and Purdue) being dissolved, while Volkswagen recently reported that their emissions scandal has costs approaching $35 billion.
In all of these scandals, the issues spanned the company, with those in top leadership positions directly advancing scandalous behavior and/or establishing the ethical norms required for unethical behavior to flourish. Each also involved people throughout the organization. Reflecting on this, I think these two statements are true of organizations with ethical cultures and organizations marked by significant scandal both:
- It starts at the top
- It takes multiple actors to maintain
Let’s explore how each of these ideas play out in practice within organizations.
It starts at the top
We’ve all been there — we’re at work and are asked to do something that conflicts with our conscience. Consider the last time someone in a position of authority asked you to do something that didn’t feel right. What did you do?
There are a number of ways that we can conceptualize the role of an organizational leader with respect to their influence on an organization’s ethics. For certain roles and responsibilities, like the CEO and setting the organization’s overall agenda, this is pretty self-evident, but the effect of ethical leadership on employee decision-making manifests throughout an organization. When I consider this, my mind often goes to the Milgram experiments, which readers might be familiar with. In Milgram’s series of studies, he sought to explore the relationship between obedience to authority and personal conscience in an effort to understand the actions of individual Nazi soldiers who had participated in the Holocaust. These studies involved a person in a position of authority directing the research study participant to administer a set of progressively more painful electric shocks to another study participant (who was a confederate/knowing participant in the study who, out of sight, would make noises or scream as appropriate). No actual shocks were administered, but the research participant did not realize this. Approximately two-thirds of participants continued to obey the researcher’s instructions and administered the highest level of shock.
If it seems like a stretch to apply this kind of experiment to the relationship between employees and their employers, I’d ask you to consider companies like Purdue Pharma, Theranos, and Volkswagen — all organizations whose scandals involved numbers of employees doing as they were told. Milgram concluded that individuals are likely to follow orders from authority figures whose authority is deemed as having some legitimate moral or legal foundation.
When you couple this issue of obedience to authority with a managerial tendency to delegate unethical work to subordinates, you have a recipe for ethical mishaps. As a leader, ask yourself the following questions when directing the work of others or when delegating a task:
- Is this work I’d willingly do myself if asked / Does this work conflict with my values?
- Is handing this work off to another party likely to increase the chance of unethical behavior?
As a leader, it’s necessary to acknowledge that you’re responsible for the ethical implications of work done under your care by others.
The effects of leadership on culture are often more indirect than this, with leaders exhibiting their ethical stances through their behavior as much as through directive. Consider, for example, the behavior you reward as a manager. Focusing on the outcomes of decision-making, as opposed to the decision-making itself, might result in profitable results in the short-term, but cost a company in the long term. Anyone who has ever worked on a sales team or managed a sales team knows the conflict that comes from encouraging revenue goals without focusing on the sales process itself. Depending on the kind of sale, this can result in returns, cancellations, or overall dissatisfaction with products despite a team hitting its numbers quarter over quarter. As a leader, shift your questions and focus to those behaviors that consistently bring in long-term, sustainable results. This lets your team know that it’s not simply the outcome of their actions that are important, but their actions themselves. If your performance management system is focused on outcomes alone, you run the risk of achieving those outcomes through actions that don’t align with your values. Bake your values into the performance management system by shifting some of your focus on outcomes to the underlying behaviors that you want to get you there.
This shift away from a narrow focus on outcomes and profit is something we’re witnessing across organizations. Increasingly, businesses are shifting their focus from profit-maximization to value-maximization. That said, this is still a long way off from becoming the dominant way of thinking in the industry. In considering decisions through the lens of value-maximization, a leader considers the result of their actions on three outcomes, referred to collectively as the “3 Ps”. These are outlined below with a question you can use when considering a decision.
- People – How does my decision affect key stakeholders, including patients, employees, vendors, and the community within which we operate?
- Planet – How will my decision affect the planet, including the physical resources that our company requires to be sustainable long term?
- Profit – This one should be pretty familiar, as it embodies the dominant mode of business thinking. How will my decision affect profits?
Because ethical mishaps often occur because of an overly narrow focus on this last outcome, profit, I’d suggest broadening the outcomes one considers when making a decision.
Organizational Values and Codes of Ethics
Although ethical cultures start at the top, they don’t end there. As a leader, you won’t always be around and need to be able to trust that your team will behave in ways that comport with your organizational values. For this reason, a written, clearly stated set of core organizational values can guide decision-making in complex or morally ambiguous circumstances. For instance, a company whose stated values include integrity would expect its employees to be honest when interacting with each other and consumers, even in a situation where such honesty will reduce revenue. Similarly, a code of ethics specifies the ethical obligations an organization’s member has and outlines specific types of conduct that is deemed unethical.
Does your organization have stated core values and a code of ethics? If so, where did they come from? While our values are often set as part of our strategic planning process, it’s not uncommon for our codes of conduct to come into our organizations through legal counsel or through compliance vendors in some boilerplate format (who doesn’t love a game of code of ethics Madlib, I ask…). Although it’s certainly a good practice to require that such statements be reviewed and understood by employees, such as through an annual compliance training, I think that most of the failures of explicitly stated organizational values and template-derived codes of ethics are the lack of ownership we as organizational stakeholders have in them. Volkswagen’s Code of Conduct, for instance, did little to prevent its scandal and so I think it’s reasonable to ask whether or not these codes are effective. As they are used currently, they are often ineffective.
Considering this and the importance of ethical behavior to the longevity of our businesses, an exercise that I’ve found useful in the past is to bring a team together to create its own code. For a newer business, this can be a really meaningful exercise, bringing your team into an explicit conversation about the behaviors they see as ethical. You may also find that there are particular kinds of ethical challenges present in your part of the industry or in the particular kind of work you do, requiring more detail than contained in a more generic code. Whenever possible, bring real, industry-relevant examples into these discussions so that employees can see the ethical concept being practiced or violated. A cultivation facility with a stated commitment to transparency, for instance, would likely have public-facing information highlighting the substances used in cultivation that we could point our team to. On the other hand, we could highlight the ethical and safety issues in this case of a Michigan facility where an employee had been licking pre-rolls to seal them.
If you have an existing code of ethics, a similar kind of activity can still be useful, with team members creating a code collectively and comparing it to the existing code. This exercise can be used to identify deficiencies in your current code while establishing shared ownership over the expectations the team agrees with. The same kind of practice can be used to train employees on organizational values, creating buy-in for them through their exploration.
Bringing it together
As a leader, you help to establish the ethical norms of your organization but can go beyond your own actions by creating structures and systems that influence team members to make more ethical decisions. Although formal policies and procedures are necessary, it’s also necessary to bring ethical ideas to life by (1) living them as a leader and (2) engaging your team in a constructive, meaning-making dialog about ethical principles and how they manifest in your particular operational environment. In our industry, we have an opportunity to build these ideas into our way of doing business from the ground up — but it takes all of us, every day, striving to be just a little bit better.
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Chase Cookson, DBA is an educator and cannabis industry commentator advancing issues of business ethics, corporate social responsibility, and sustainability. Want to continue the conversation? Reach him at chase@missourijuana.org
