That the terrain of decision making is mined with moral hazards has never been much in doubt. But the real question for executives is this: Just how can you make your conscience your guide? This author has suggestions and strong advice that, when taken, can help restore public confidence in business leaders.
If the contemporary business with its foundation of human assets is to survive, it will have to find better ways to protect people from the demands of the jobs it gives them. Neglecting the environment may drive away customers, but neglecting people’s lives may drive away key members of the workforce.
— Charles Handy
Excellence and competitiveness in a global economy are aspirations that we renounce at our peril. At the same time, there is a hazard associated with these aspirations that can threaten the ability of both individuals and organizations to achieve them ethically. Is this the choice: excellence or ethics, competitiveness or conscience? The answer to this question has never been more important for business decision making.
In this article, I describe the hazard and offer some suggestions for a preventative ethical response. I begin with two illustrations that represent the tragic side of decision making, but I am not suggesting that these cases are the norm in business. Still, in a July 2003 Zogby Poll of college seniors, 56 per cent of respondents agreed (41 per cent disagreed) with the proposition that “the only real difference between executives at Enron and those at most other big companies, is that those at Enron got caught.”
Two tragic events in 2003: An individual…and an organization.
The story of Andrew Fastow, ex-financial officer of Enron, is an intriguing one. Fastow was a corporate climber who saw in Enron CEO Jeffrey Skilling a “mentor” who could help him realize his dreams of achieving power and influence. In a New York Times article, David Barboza says that when Fastow was in high school he quarrelled with teachers about his grades, and that former Enron colleagues called him prickly and a bully. “Those who know Andrew S. Fastow, the man at the centre of the Enron scandal, say they often got the sense that he had something to prove,” writes Barboza. (New York Times, October 3, 2002). No one has alleged “evil intent” on Fastow’s part, but a “distortion of judgment” would seem to be an understatement in characterizing his behaviour.
On Feb. 1, 2003, the space shuttle Columbia disintegrated on re-entry after completing its mission, killing all seven astronauts aboard-an uncanny reminder of the 1986 NASA Challenger disaster. In its report into the disaster, the Columbia Accident Investigation Board (CAIB) observed that “there were echoes of Challenger in Columbia.”
And in the New York Times, David Sanger wrote:
The same keep-it-flying culture found to have disregarded ample evidence of a fatal flaw in the O-rings in the Challenger case failed again to heed warning signs that foam debris could cause deadly damage to the aging, fragile Columbia. (NYT, August 27, 2003).
The CAIB was very pointed in attributing the Columbia disaster to a persistent cultural malaise at NASA:
In the board’s view, NASA’s organizational culture and structure had as much to do with this accident as the external tank foam. Organizational culture refers to the values, norms, beliefs and practices that govern how an institution functions. At the most basic level, organizational culture defines the assumptions that employees make as they carry out their work. It is a powerful force that can persist through reorganizations and the reassignment of key personnel. (NYT).
NASA’s culture was obsessed with launching a critical section of the space station by Feb. 19, 2003. According to CAIB’s report, the date seemed “etched in stone,” and NASA employees had a sense of being “under the gun.” The intent was certainly not evil, and yet this is another tragic example of “distortion of judgment.” There was a common pattern at work in the conduct of both Andrew Fastow and NASA that may have been legal, but nevertheless had catastrophic results. The idea that there is a parallel between the decision-making dynamics of individuals and organizations is at least as old as Plato, and yet is rich in significance for modern business life.
Three symptoms of the hazard: Fixation, rationalization and detachment
The cases of Andrew Fastow and NASA typify the hazard associated with the pursuit of excellence and competitiveness: Most executives and managers have to confront the three important symptoms of the hazard: fixation, rationalization and detachment.
Fixation. Bowen H. McCoy described this symptom in his essay “The Parable of the Sadhu,” in the Harvard Business Review, in which a group of mountain climbers in the Himalayas, intent on reaching the summit, face a painful decision. At 18,000 feet, they came upon an Indian holy man, a sadhu, who was lost and in serious danger of dying from exposure. The group had to decide whether to take the sadhu to safety or to continue toward the summit. (HBR, September/October, 1983; republished as an HBR classic, May 1997). McCoy described his passion and rationalization under stress, and the group’s decision to continue toward the summit. He pointed to his main “excuses,” but he knew they were not adequate:
I felt and continue to feel guilt about the sadhu. I had literally walked through a classic moral dilemma without fully thinking through the consequences. My excuses for my actions included a high adrenaline flow, a super-ordinate goal and a once-in-a-lifetime opportunity factors in the usual corporate situation, especially when one is under stress.
McCoy applied his parable to individual managers and their pursuit of goals, and to the leadership of groups. In his mountain-climbing experience, he saw a symptom of the ethical challenges in business life: Had we mountaineers been free of physical and mental stress caused by the effort and the high altitude, we might have treated the sadhu differently. Yet isn’t stress the real test of personal and corporate values? The instant decisions executives make under pressure reveal the most about personal and corporate character.
Like McCoy and his party, Andrew Fastow seems to have fixated on “superordinate goals” and lost his balance. Under stress, the decision makers at NASA also seem to have ignored values like honesty and concern for safety in favour of lesser values like security and efficiency. Their superordinate goals took on lives of their own, trumping other considerations. (The CAIB report specifically refers to “the intense pressure the program was under to stay on schedule, driven largely by the self-imposed requirement to complete the international space station.”)
Rationalization. Professors David Messick and Max Bazerman have explored another symptom of the hazard: rationalization. They point out that behaviour is easily rationalized by subtle distortions of judgment stemming from our views of ourselves, others and the world around us.
There is a tendency to reduce the number of possible consequences or outcomes to make the decision manageable. In extreme cases, all but one aspect of a decision will be suppressed, and the choice will be made solely on the basis of one “privileged feature.” Loyalty is often one of the privileged features of a decision-making situation. Some kinds of loyalty-like the loyalty of Andrew Fastow to Jeff Skilling, or the decision makers at NASA to cost controls and scheduling-cause people to lose their balance. Loyalty can be an excuse for selective perception and narrowed judgment. As Holman W. Jenkins Jr. noted in The Wall Street Journal: (WSJ, August 28, 2002).
As CEO, Jeff Skilling had set a goal of ridding Enron’s balance sheet of poorly performing or volatile assets. Did he decide at some point (well before his congressional testimony) that it would be better not to know exactly how Mr. Fastow, his protégé, was achieving his desired goal?
The CAIB investigation of NASA reviewed the history of foam strikes on the Orbiter so as to determine how managers “rationalized” the danger of repeated strikes on the space shuttle’s thermal protection system. The board concluded:
[Space Shuttle Program] management techniques unknowingly imposed barriers that kept at bay both engineering concerns and dissenting views, and ultimately helped create “blind spots” that prevented them from seeing the danger the foam strike posed.
Detachment. Several decades ago, psychoanalyst and author Michael Maccoby described a third symptom of the hazard in his insightful but disturbing book The Gamesman. He said “careerism” was an emotionally self-destructive affliction suffered by many successful executives, and offered his take on what lay beneath this condition:
Obsessed with winning, the gamesman views all of his actions in terms of whether they will help him succeed in his career. The individual’s sense of identity, integrity and self-determination is lost as he treats himself as an object whose worth is determined by its fluctuating market value. Careerism demands (emotional) detachment.
Maccoby believed that emotional detachment corroded integrity, and that it led to the disintegration of character because it did not allow for a proper balance among the traits of the “head” (e.g., initiative, cooperativeness, flexibility, coolness under stress) and traits of the “heart” (e .g., honesty, friendliness, compassion, generosity, idealism). In his view, managers needed to integrate qualities of the heart with qualities of the head, but the imperatives of running modern corporations often prevented this kind of wholeness.
Maccoby had identified a central risk of business life, namely that it is not only the mental health of business professionals that is at risk but their moral integrity as well. Integrity is a kind of wholeness or balance that prevents individuals from bypassing the qualities of the heart or anesthetizing their humanity in the face of strong temptations to do so. Maccoby saw integrity as demanding balance and participation by the whole person in decisions and actions.
Fastow appears to have suffered from Maccoby’s sense of detachment, projecting a dual persona. Reported David Barboza:
[Enron colleagues] say that during angry bouts, he was known to leave profanity-laced messages on the voice mail of colleagues. He could also be charming and generous, former colleagues said. He would reward employees with vacation travel when they met goals, for example, and defended them in Enron’s competitive culture.
Apparently, Fastow viewed his business behaviour as a kind of “game” whose logic was very different from “real life,” a game with characters out of the movies:
Mr. Fastow became adept at creating complex partnerships to finance new projects. He worked on a series of partnerships-including one called Joint Energy Development Investment Inc., known by its acronym, Jedi, and one of several partnerships named for Star Wars characters.
As for NASA, the CAIB report described decision making during the flight of the Columbia as both “separated” – walled-off from concerned engineers – and “detached”:
A tile expert told managers during frequent consultations that strike damage was only a maintenance-level concern and that on-orbit imaging of potential wing damage was not necessary. Mission management welcomed this opinion and sought no others. This constant reinforcement of managers’ pre-existing beliefs added another block to the wall between decision makers and concerned engineers. Another factor that enabled mission management’s detachment from the concerns of their own engineers is rooted in the culture of NASA itself…. When asked by investigators why they were not more vocal about their concerns, debris-assessment team members opined that by raising contrary points of view about shuttle mission safety, they would be singled out for possible ridicule by their peers and managers.
This commentary represents a cultural analogue to detachment in personal decision making. Writing in the New York Times, John Schwartz and Matthew Wald said, “[T]here was rising pressure to play down risk and to place success-measured in terms of things like on-time launching of components for the space station-over safety.”
Convergence of the three symptoms
These three symptoms-fixation or singleness of purpose under stress, rationalization and detachment-form a pattern. Each is discernible in the stories of Andrew Fastow and the NASA disasters. Fastow was driven by a singleness of purpose: namely, personal ambition and personal stress.
In many ways, Fastow possessed the traits that Ron Daniel, former managing director of McKinsey & Co., seemed to think were important to his organization.” The real competition out there isn’t for clients, it’s for people.…And we look to hire people who are first, very smart; second, insecure and thus driven by their insecurity; and third, competitive. Put together 3,000 of these egocentric, task-oriented, achievement-oriented people, and it produces an atmosphere of something less than humility. Yes, it’s elitist. But don’t you think there has to be room somewhere in this politically correct world for something like this?” (Fortune, November 1, 1993).
Fastow also had a mentor who reinforced his drive; he rationalized his behaviour, engaging in selective perception about context and consequences; and he possessed detachment, allowing him to repeat his activities over a considerable period of time.
NASA’s singleness of purpose surrounding scheduling was equally clear, creating stresses that led to rationalizations. Once described as “an enlightened alliance between science and democratic tradition,” NASA appears to have switched to selective perception in the face of safety warnings. (David E. Sanger wrote: “To those who remember the Challenger investigation, it was an echo of the suppressed memorandums that the commission uncovered, when engineers sent out urgent warnings that it was too cold to launch the Challenger, and were ignored. ‘It’s the same damn thing,’ said Gen. Donald Kutyna of the Air Force, retired, a gadfly on the Challenger panel along with the physicist Richard Feynman. ‘They didn’t learn a thing. We had nine Orings fail, and they flew. These guys had seven pieces of foam hit, and it still flew.'”)
As to detachment, one NASA observer remarked that the organization’s “conflicting goals, roles and expectations produced an almost schizoid character.” The CAIB report spoke of the “cultural fence” that “impairs open communications between mission managers and working engineers.” And despite stringent safety standards, the agency seems to have been more concerned with meeting deadlines than with safety issues. If this is true, NASA’s culture could be described as emotionally detached from concern with operating safety.
The kinship among these symptoms stems from the fact that they reinforce one another-in other words, fixation calls for rationalization, and the iteration of these two symptoms eventually leads to detachment. Together, these symptoms point to a syndrome that I call teleopathy.
Teleopathy combines the Greek roots for “goal” and “disease.” (“teleo” meaning “goal, target, purpose” and “pathos” meaning “disease, sickness.” I originally used the term in my Harvard Business School classroom, and later in published articles. The term subsequently appeared in Blackwell’s Encyclopedic Dictionary of Business Ethics:
teleopathy, n., the unbalanced pursuit of purpose in either individuals or organizations. This mindset or condition is a key stimulus to which ethics is a practical response. The principal symptoms of teleopathy are fixation, rationalization and detachment.
If there were manuals for character disorders in ethics as there are for physical and emotional disorders, teleopathy would be as central in its manual as heart disease and depression are in theirs. The metaphor of “heart disease” introduced by Michael Maccoby may be particularly appropriate. In the language of contemporary poet David Whyte: “We can have fire in our approach only if our heart is in the work, and it is hard to put our heart in the work when most of what we feel is stress. The very act of slowing into our own more natural rhythms may seem like a heart-stopping prospect, but there are some elegant lessons in the very reasons a heart may stop or start.” (David Whyte, The Heart Aroused: Poetry and the Preservation of the Soul in Corporate America; Doubleday, 1994).
Teleopathy values certain limited objectives as supreme-to the exclusion not only of larger ends but also of moral considerations about means, obligations and duties. In its most extreme form, teleopathy amounts to the suspension of ethical awareness as a practical force in the decision-making process. It replaces the call of conscience with the call of other decision criteria: winning the game, achieving the objective, following the rules laid down by some goal-oriented framework independent of ethical reflection.
This unbalanced pursuit of purpose can take different forms. It can be rooted in the desires, goals or objectives of a decision maker apart from any role that the decision maker plays in an organization or in society, as when an individual or group seeks wealth, power, status or survival. Or it can manifest itself indirectly in the form of loyalty to the requirements of a role or function such as breadwinner, doctor, or employer. In such cases, the purposes involved are implied in the background-supporting a family, healing the sick, keeping a company going (or growing). But they are purposes nonetheless, and can be pursued with or without balance.
Teleopathy affects perception, reasoning and action-the way an agent sees (or does not see) the world, and the way an agent responds to what he or she sees in deciding what to do. In his widely read book Into Thin Air, Jon Krakauer writes about “summit fever” in a way that clearly suggests teleopathy:
Mountaineering tends to draw men and women not easily deflected from their goals. By this late stage in the expedition we had all been subjected to levels of misery and peril that would have sent more balanced individuals packing for home long ago. To get this far one had to have an uncommonly obdurate personality. Unfortunately, the sort of individual who is programmed to ignore personal distress and keep pushing for the top is frequently programmed to disregard signs of grave and imminent danger as well. This forms the nub of a dilemma that every Everest climber eventually comes up against: in order to succeed you must be exceedingly driven, but if you’re too driven you’re likely to die. Above 26,000 feet, moreover, the line between appropriate zeal and reckless summit fever becomes grievously thin. Thus the slopes of Everest are littered with corpses. (Jon Krakauer, Into thin Air: A Personal Account of the Mt. Everest Disaster, New York, Anchor-Doubleday, 1997).
When teleopathy governs decision making, the selection of goals and the means chosen to pursue them tend to be myopic. The natural and social environments tend to be seen as resources or playing fields. The voices of those whose stake is high but whose power is low tends not to be heard.
I believe that teleopathy-both in individuals and in organized groups-is fundamental to our concerns about business ethics. Teleopathy does not always take the form of unethical behaviour, but in the vicinity of most unethical behaviour we are likely to find teleopathy in one or another of its forms. It is the principal hazard that a personal and a corporate conscience must focus on and address.
Avoiding the hazard
To avoid this hazard, we must avoid the causes that give rise to its symptoms. And to avoid these causes, we need new initiatives both in corporate executive education and in university business school education.
From fixation to perspective. How do we avoid fixation without suppressing the virtues with which it can be confused (such as courage, determination and perseverance)? We must understand that the goals and objectives that we set for ourselves and our organizations are part of a larger mission, the common good. We need perspective. And perspective comes from habits of thoughtful reflection. Professional lives steeped in reflection are less vulnerable to fanaticism and misplaced devotion. Jim Loehr and Tony Schwartz, senior consultants at LGE Performance Systems, make the following observation:
The inclination for busy executives is to live in a perpetual state of triage, doing whatever seems most immediately pressing, while losing sight of any bigger picture. Rituals that give people the opportunity to pause and look inside include meditation, journal writing, prayer and service to others. Each of these activities can also serve as a source of recovery-a way to break the linearity of relentless goal-oriented activity. (Harvard Business Review, January 2001).
The recovery of perspective is ultimately the role that business ethics plays in the curricula of business schools and in executive decision making. Loehr and Schwartz argue that, ultimately, effective performance has a built-in moral component: “On the playing field or in the boardroom, high performance depends as much on how people renew and recover energy as on how they expend it, on how they manage their lives as much as on how they manage their work. When people feel strong and resilient-physically, mentally, emotionally and spiritually-they perform better, with more passion, for longer. They win, their families win, and the corporations that employ them win.”
From rationalization to frankness. Avoiding rationalization takes practice-practice in telling the truth when exaggeration or denial appear attractive. Accepting that hypocrisy is part of the human condition-individual and organizational-allows us to address the gaps between our walk and our talk. This kind of honesty comes alive in candid conversations with trusted friends and workplace colleagues. It is alive in organizations that encourage constructive cultural criticism rather than blind allegiance.
In my work with a number of organizations, the need to counteract rationalization has led to an interactive exercise that invariably yields practical insight to executives. I invite participants to look at their organization after reflecting on the difference between “aspirational values” and the concrete ways in which values are communicated daily in the workplace through incentives and sanctions. The signs on the train platforms in the London Underground warn: “Mind the gap!” Figuratively speaking, this warning applies as well to the relationship between aspirational values and values-in-action.
Each participant is asked to reflect on a grid as it applies in his or her own situation. Then small groups (six to eight persons each) are asked to discuss and identify for the large group the most significant examples of gaps between aspirational values and values-in-action. I make it clear that this is not an exercise in corporate “gossip” and that the purpose is to learn a certain kind of discernment that all effective leaders must develop.
Executives are “given permission” to find hypocrisy gaps as well as bridges for those gaps. This exercise is usually carried out in the presence of a senior leader who might be able to explain certain apparent anomalies or to address them in a practical way once they have been identified.
In his recent book Authentic Leadership, former Medtronic CEO Bill George comments that identifying this kind of information is critical: “Values begin with telling the truth, internally and externally,” he writes. “Integrity must run deep in the fabric of an organization’s culture. It guides the everyday actions of employees and is central to its business conduct. Transparency is an integral part of integrity. The truth, both successes and failures, must be shared openly with the outside world….When the company’s leaders become role models for its values, the impact on the entire organization is tremendous. The trust of the leadership is earned through practising the company’s values every day, not just by espousing them. But when leaders preach one thing and practice another, commitment is quickly lost and employees become doubly cynical.” (Authentic Leadership, Bill George, Jossey-Bass, San Francisco, 2003).
Such messages from a CEO to the leaders and managers in an organization can have enormously salutary effects. Messages to the contrary, of course, can have pathological effects. In writing about former Enron CEO Kenneth Lay, Warren Bennis wrote that
Mr. Lay’s failing is not simply his myopia or cupidity or incompetence. It is his inability to create a company culture open to reality, one that does not discourage managers from delivering bad news. No organization can be honest with the public if it is not honest with itself. (New York Times, February 17, 2002).
From detachment to engagement. Avoiding what we have called detachment amounts to keeping the head and heart in healthy communication with one another. This can be achieved in two important ways.
- First, by emphasizing the mission of the company in human terms-offering reasons of the heart, not just the head, for what the company contributes in the larger scheme of things. Charles Handy seems to be gesturing toward this idea in a recent article:
We need to eat to live; food is a necessary condition of life. But if we lived mainly to eat, making food a sufficient or sole purpose of life, we would become gross. The purpose of a business, in other words, is not to make a profit, full stop. It is to make a profit so that the business can do something more or better. That “something” becomes the real justification for the business. Owners know this. Investors needn’t care. (“What’s a Business For?” Charles Handy, Harvard Business Review, December 2002).
- Second, by encouraging effective service to the community as a whole-in particular, service to the less advantaged. This service needs to come from the corporation itself, its senior leaders, and from rank and file employees. It is difficult to remain indifferent in the regular presence of human needs. It is not difficult to become indifferent if we distance ourselves from those needs.
In his analysis of the “knowledge worker” and the specialization that the knowledge organization brings with it, Peter Drucker asks a powerful rhetorical question: “In a society of organizations, each of the new institutions is concerned only with its own purpose and mission. It does not claim power over anything else. But it also does not assume responsibility for anything else. Who, then, is concerned with the common good?” (The Atlantic Monthly, November, 1994).
Drucker’s implication is that social awareness is not optional for private sector professionals-it is essential, and more needed in today’s knowledge economy than ever before. Jeffrey Garten, dean of the Yale School of Organization and Management, suggested in a recent book that the imperative of service is more intense for business leaders since 9/11 and Enron than ever before:
In the future, the most effective global CEOs will give more attention to the relationships between their companies and the societies in which they operate. These executives will think about corporate citizenship and social responsibility, not just as philanthropy and good public relations, but as an integral part of their business strategy. They should be careful not to over promise, but they should also not shy away from using their considerable energies and talents to invest in the full development of the society around them. (The Politics of Fortune: A New Agenda for Business Leaders, Harvard Business School Press, Boston, 2002).
Finally, let us return to Charles Handy, who makes a complementary point-that the needs of the balanced professional are as much a factor in this context as the needs of the community:
In the knowledge economy, sustainability must extend to the human as well as the environmental level. Many people have seen their ability to balance work with the rest of their lives deteriorate steadily as they fall victim to the stresses of the long-hours culture. An executive life, some worry, is becoming unsustainable in social terms.
The development of the heart is as much an obligation of corporations and universities as the development of the mind.
A challenge for cultures and curricula
Our reflections on Andrew Fastow and NASA revealed that a hazardous pattern was at play. This pattern manifests itself not only in the lives of individuals but also-and not coincidentally-in the cultures of organizations. We have identified its symptoms and we have given it a name, teleopathy.
The Enron catastrophe and the NASA Columbia disaster would not have happened in the absence of teleopathy. Unless executive development programs and business schools embrace a new agenda, we can expect more tragic scandals and further erosion of society’s confidence in the business system.
By their very nature, the demands of professional life foster intensity in the individual and the collective achievement of goals and objectives. Without countervailing cultural influences, such intensity can become insanity. Fixation, rationalization and detachment must be met, respectively, by perspective, frankness and engagement, both in the lives of executives and in the lives of corporations. These are the elements of conscience, and conscience is our primary check on the unbalanced pursuit of goals and purposes.