Saturday, January 14, 2006

Ethical Management

Ethical Management is a form of management that is concerned not only with the technical, financial and legal aspects of a business, but also recognises and manages the values that operate at the heart of any enterprise. These values affect everyone in the organisation and all of those with which it has some association. In point of fact, there is no such thing as a value-free organisation. The values adopted by an organisation can be for good or for ill. That is, they can contribute to the organisation's ability to achieve its objectives or they can act as a hindrance. Given that values shape an organisation's 'climate' or 'culture', it is important that they be identified and managed in the best interests of the organisation and the people that it is there to serve.
One of the key objectives of ethical management is to create the conditions and competencies through which an organisation's values can be harmonised in a way that best serves the organisation's mission.Much current management theory implicitly (and sometimes explicitly) recognises the importance of the ethical dimension. For example, the principles of Total Quality Management contain the seeds for sound ethical management. The TQM approach is based on a recognition of the need for continual review of the processes of production and provides diagnostic tools of measurement to determine performance and measure progress. The tenets of TQM are readily applied by management to the technical areas associated with the systematic control of goods and services that are produced for internal and external customers. However, this same approach can deliver impressive results when applied to the task of examining the prevailing culture of an organisation and its constituent parts. In this respect, it can be seen that the principles of TQM can be extended beyond the technical aspects of the business to the values that are operating there.
TQM's emphasis on a management style that is consultative and participatory, together with its emphasis on collaboration through the two-way flow of information and the use of teams, holds potential for effective ethical management. In the second session, this morning, we will look at a way of measuring values within an organisation and the steps that need to be taken to increase their effectiveness. As noted above, they are what shape the corporate climate within which all the other productive processes are operating. When we speak, therefore, of ethical management, we are discussing an integrated approach that recognises the utility of examining the values that influence "the way things are done around here". The utility of such an approach can be found in the fact that an organisation's dominant values have a significant effect on, among other things, morale and productivity.But there is another reason for examining such matters. Leaving aside questions of increased productivity, higher retention rates, improved compliance and so on; there is also the issue of simple decency in the way in which we organise our social institutions. We sometimes act as if businesses can exist as totally independent entities. This dangerous fiction obscures the fact that businesses, governments, indeed all of our institutions are created by and for people. To take a serious look at values and ethics is to make a statement along the lines that we recognise the importance of the human dimension in what we do. It says that whilst notions of efficiency are important, they are not the whole of the story. It recognises that people are not cogs in a machine. It says that we are concerned about the kind of community that we want our organisation to be. It says that people matter.
The Code of Conduct, which we will examine , spells out many of the behavioural implications of the values or ethic on which it is based. As such it is a potentially powerful tool for organisational change. It might seem to some that the very idea of ethical management creates problems for those who would conduct a successful business. This seems to be doubly so when considering, the not unreasonable view, that a successful business will be run in a cost-effective and profitable fashion. Where, in all of this, is there room for ethics? Indeed, one could be forgiven for thinking that business and ethics are like oil and water - they don't mix. This is certainly the view of many members of the community. The evidence for this can be found in an intriguing piece of research conducted by Hugh Mackay.Mackay discovered the not-too-surprising fact that members of the community consider that ethics are likely to be incidental to business. He reports that Australians find it difficult to make judgments about corporate morality, and part of the difficulty is that they see major differences between the behaviour of a corporation (where 'profit' is taken to be the driving force) and the behaviour of individuals (where motivations are far more varied and diffused). This line of thinking often leads people to such assertions as "business is there to make money", and to question whether ethics really "comes into it".Many people would like the situation to be different, but there is an overwhelming sense that the very essence of business means that ethics will often function as an "optional extra" rather than being fundamental to the character of business corporations.

This view of business is frequently shared by those who are in the public sector and who face either commercialisation or privatisation. At one level there is fear about the ability to compete, at another is a sense of anticipation that corporatisation means that notions of public service can be ditched and that the 'gloves can come off'.The problem with this is that the view of private enterprise held by the public is largely a caricature. However, before exposing the error, it may be useful to look at how the public views the ethics of the public sector! It will be recalled that the community is suspicious of the ethics of those who are driven by the profit motive. On this basis one might expect that the public service would be regarded with trust and esteem. Unfortunately not. Popular logic sees things quite differently. In fact, Hugh Mackay found that government institutions attract more criticism than private enterprise. He found that Paradoxically, the very absence of profit motive is sometimes thought to make government departments and instrumentalities more insensitive, more cavalier, and more bureaucratic in their behaviour: if "how they treat people" is regarded as one of the key symptoms of the ethical climate of an organisation, then the government institutions generally fare worse, in the public mind, than private enterprise.In such cases, where profit is not regarded as a distraction from ethics, people are inclined to assume that a certain "slackness" takes over. It begins as inefficiency and may sometimes end as immorality. Because of the impression that government organisations are largely "bureaucratic", the suggestion is also made that they lack clear and decisive leadership from the top, and that, in fact, the example set by bureaucratic managers probably encourages the very slackness which lies at the core of the problem.

This finding should tell us something – NOT because the popular perception is accurate, but because it is so distorted. There is some recent, and rather compelling, evidence for concluding that the public has got it wrong. At a recent luncheon, held by the Australian Society of Certified Practising Accountants, the former Premier, Nick Greiner, was called upon to launch two new Centres of Excellence. Mr Greiner began his remarks by confessing that his recent experience of the private sector had led to what (for him) was a most unexpected conclusion. He then revealed that he now recognised that many public sector managers were as good as (and in some cases better than) their private sector counterparts.Now, the significance of this goes beyond the simple point that common perceptions about the public service are somewhat partial. For, if one concludes that the public may have got it wrong about government enterprises then it is just as likely that they have a similarly distorted picture of the private sector. And this is, of course, pretty much the case.Most people are satisfied with a false dichotomy about the relative strengths and merits of public and private enterprise. These misconceptions are carried over into the prejudices of those who are employed in the respective sectors. Thus, those in the private sector frequently think that public servants are lazy and/or bound by bureaucratic inertia. And those in the public sector think that the private sector is driven by greed and that its policies are pursued without any regard for the common good.The truth is that best practice requires much the same of both sectors. For example, the private sector has a long tradition of succeeding where it has been able to focus on the broader interests and needs of the community in which businesses have been based. Many successful industries and businesses have been run with an explicit aim of serving the public and making a better world (eg Cadbury's). Others have been aware of their dependence on a healthy social infrastructure as the ultimate foundation for their profitability.
In current times there is a perceptible return to management philosophies which recognise that, in the long term, good ethics is good business. So it would be a mistake to think that best practice in the private sector can be emulated by adopting a 'gloves off' stance.In the same vein, the public sector has been leading the way by embracing new management philosophies designed to recognise that businesses are integrated units in which responsibility is best delegated along lines of accountability. As Mr Greiner recognised, reforms in the public sector are seeing the implementation of policies and practices that are at one with the best. Good management is about choosing the right means to achieve justifiable ends. In the case of individuals or an organisation, these ends will need to be viewed in the context of how they affect the community's pursuit of wider 'goods' (be they economic or social goods). For example, in achieving the goal of designing faster, more economical trains is it proper to allow for a sacrifice in the margin of safety? The same question applies when considering the design of toasters, cots, life insurance and so on. There are no black or white answers to such problems. That is why the community trusts (or perhaps hopes) that managers will recognise that business is ultimately about people in society and their common good or welfare.It is in this context that the Code of Conduct needs to be situated. It would be far too easy to see the code as just another set of pious sentiments imposed from above. It would also be very easy to see the code as irrelevant or worse, as impractical. The truth is that the code should be seen as playing a fundamental role in helping to define and realise the notion of best practice. One of the key components of successful management is a capacity to respond to change. Response time is retarded by inefficient or entrenched structures. Thus, the process of keeping a manual inventory of stocks and stores may be fondly thought of as possessing a certain kind of quaint charm. However, this should not be allowed to obscure the fact that the cost of maintaining an outdated work practice is to be borne by the whole enterprise. In some cases, where the tail wags the dog, such a system may even work to frustrate change at a more general level. Management expert, Peter Drucker, has stressed that an ability to manage change is going to be the defining characteristic of the successful business of the future. If this is so, then it will mean building in a capacity to take a constructively critical look at all of our policies and practices.Whilst it is important to reserve a place for healthy traditions, it is equally important that businesses release themselves from the shackles of habit. It is easy to see the significance of this when it comes to manufacturing processes, management procedures and all the other 'surface' characteristics of an enterprise. However, there is an even more fundamental level that, being taken for granted, is frequently overlooked.This is the level of the organisation's culture or character (ethos). Custom and practice can be just as stultifying at this level. An uncritical environment can lead to a situation in which custom and practice are used to justify the indefensible. People become prisoners of values that might have made sense at another time but clearly fail in the clear light of present scrutiny. This then is the context in which the SRA Code of Conduct ought to be examined. It will then be seen to be an indispensable element in the overall architecture of the organisationAt first glance, the Code of Conduct seems to be all about behaviour. But its real foundation is in the values that it promotes.
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