by William Wilhelm
In my last column I discussed the unethical practice of “wardrobing” (buying an outfit or other non-consumable product, wearing or using it, and then returning it for a full refund). When challenged, wardrobers will often defend their actions with the argument that “everyone is doing it,” and they will actually believe that that rationalization is sufficient to justify their actions.
A psychological influence to dispense with thorough rational analysis is known as a heuristic – preconceived notions or ways of thinking about unknowns. Heuristics serve as guides in the investigation or solution of a problem. The danger of heuristics in ethical decision making is that they can desensitize us to important ethical questions.
The heuristic that resulted in the rationalization by the wardrober in this example is called the theory of social proof wherein clues as to proper behavior are taken from the actions of others. We all no doubt tried to employ the social proof heuristic on our parents when we were younger, most likely with little success. But when employed by adults, it can be a powerful rationalization used to justify bad behavior.
One of the most powerful heuristics in business is obedience to authority. All of us tend to follow authority. As a result, we are much more likely to get involved in unethical behavior when influenced to do so by an authority figure – whether we are aware that the behavior is ethical or not. This blind obedience can be reinforced by the false consensus effect, the tendency to believe that others are honest. It is often difficult for subordinates who trust and are loyal to their superiors to think of them as less than honest. Subordinates who fall prey to these two heuristics can unwittingly become involved in unethical behavior. They may have felt that they were “just obeying orders” – the classic good Nazi defense. That defense did not work for the war criminals at Nuremberg and it does not work in courts of law today.
The Importance of Context
Would you prefer to buy a bag of potato chips that are 75% fat free or chips that are labeled 25% fat? In fact, these two bags are identical, but it is the framing of the message that motivates our likely response – to purchase the bag labeled 75% fat free. Framing can have a profound effect on ethical decision making as well because it establishes the context in which truths are articulated and understood. Framing effects have many implications in marketing communication to customers as well as management communications to stakeholder groups within and outside a company. A CEO who frames his or her responsibilities solely in terms of maximizing shareholder value may neglect other stakeholder interests such as those of the employees, suppliers, customers and the community.
We’ve all no doubt heard of or used the adage “slippery slope.” This heuristic, called process refers to a process of decision making that engages a person in making a series of smaller incremental decisions that can lead eventually to a more significant outcome that may involve unanticipated unethical results. Reinforced by the social proof heuristic (“everyone is doing it”), an employee may at first participate in a singular incident of petty theft of company property. They may then support another employee involved in petty theft by making false statements about inventory shrinkage. Incidents of petty theft may increase in frequency and in value. Eventually, major thievery may result. The employee who looks the other way when another employee is engaged in company theft is also on the slippery slope process.
Another heuristic that can be dangerous to companies developing new products and their eventual customers is sunk costs and the related phenomenon called escalation of commitment. Managers may fight to maintain a new product in which much has been invested even after safety issues related to customer use have been detected. The Ford Pinto is a classic example of how sunk costs in a dangerous product resulted not in the product being recalled and fixed, but an escalated commitment to continue to sell the product while increasing the expenditures in lobbying against revised safety legislation in the automotive industry. The costs in human life, human suffering, and also to Ford’s reputation and bottom line were all devastating. The drug industry is particularly susceptible to this heuristic because of the huge sums of capital required in new drug development leading up to final approval. Witness the debacles of the Dalkon Shield, Fen Phen, and Vioxx to name a few.
Justifying Irrational Behavior
Cognitive dissonance is the psychological tendency that interferes with rational processing of information that is counter to our existing beliefs. Once someone has taken a position on an issue they tend to cognitively screen out new evidence that contradicts their position. Related to the confirmation bias in which we seek out evidence that supports our position, the interplay of these psychological manifestations can lead to what can appear as foolhardy or dishonest positions about complex ethical issues. Could the effects of cognitive dissonance and confirmation bias been instrumental in the downfall of one of the largest U.S. accounting firms, Arthur Andersen in their dogged support of the unethical practices of their client Enron? The evidence would seem to suggest as much.
Loss aversion is a more persuasive heuristic in decision making than the prospect of gain. This irrational behavior in decision making was first uncovered in the work of Daniel Kahneman for which he won the 2002 Nobel Prize in Economics. People detest losses more than they enjoy gains, about twice as much. Loss aversion is interrelated with the endowment effect, the notion that we value things and attach ourselves to them more than we valued them to begin with. When we own something we begin to value it more than other people do. As Dan Ariely points out in his excellent best seller, Predictably Irrational, “In many transactions why does the owner believe that his possession is worth more than the potential owner is willing to pay? There’s an old saying, ‘One man’s ceiling is another man’s floor.’”
In summary, heuristics can lead people to make irrational decisions and, when combined with personal biases such as the self-serving bias, can result in quite negative outcomes. As shown in example at the beginning of this article about the power of the social proof heuristic, these insidious influences can lead to unethical choices. By becoming aware of these influences we can help minimize their effects. Forewarned is forearmed.
Dr. Williiam Wilhelm teaches busines ethics and social responsiblity management courses at the Scott College of Business at Indiana State University. Reach him at wwilhelm@indstate.edu
|
