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(originally published by Booz & Company)


Making It Easy to Do the Right Thing

In recovering from a crisis, ethical business practice and high performance aren’t opposed.

This article was adapted from a speech the author gave in January 2009 at a Carnegie Council for Ethics in International Affairs seminar entitled “Top Risks and Ethical Decisions.”

It’s 1953. You are a senior executive at a major manufacturer of a beloved product known for health, conviviality, sophistication, and glamour. Major parts of the economy in at least two states depend on this product, as do the livelihood of everyone you work with and the prosperity of your own family. Then a report comes across your desk that says this product is carcinogenic and addictive: It will hook people and kill them. What do you do?

The product, of course, is a cigarette, and executives of tobacco companies in the mid-1950s faced exactly this choice. Over the years, they would go on to explore a variety of options — marketing and advertising approaches, lobbying and legal strategies, and research aimed at finding less harmful cigarettes — but in the end, their possible alternatives boiled down to only two: They could tell the truth to the world, or they could hide the evidence and hope for the best. Imagine yourself facing that kind of uncertainty; it might take 40 years or more for the real facts to come to light, but then again, it might be sooner or it might never happen.

Now consider the plight of an auditor at Arthur Andersen LLP for the Enron Corporation in 2000, an Army Corps of Engineers officer studying the levees in New Orleans in 2004, a funds manager selling derivatives (or Bernard Madoff investments) in 2007, or a peanut-processing company executive with a concern about salmonella contamination. In all these cases, and in many other less visible (but equally difficult) moral dilemmas, the decision to tell the truth or to bury it entails a huge amount of risk and soul-searching. Viewed in that way, what we call “ethics” is really a set of decisions about which risk is easier to sleep with at night: opening up about an uncertain situation or trying to hide the worst of it from yourself and everyone else.

The Organizational Issue
Most ethics debates leave it to the individual to make a choice, and the historical accounts tend to champion the truth-tellers. But what really happens is rarely that simple. In our world, because most major actions are taken by organizations, no decision maker stands alone in facing an ethical dilemma. Therefore, what sorts of features must we instill in a collective — a team, an organization, a nation, a culture, or a society — to make it easier for people to make the decision to tell the truth? What can we do, as a group, so we don’t have to rely on the ethical compass of individuals?

This problem is made much more difficult by the inherent nature of the choice, and particularly the way in which feedback from any decision is provided to the decision maker. For example, that cigarette executive might sincerely want to tell the truth. So he might start talking about that prospect to others within the company.

Instantly, he would learn that most people in the company don’t agree that going public is a viable option. Perhaps they are afraid to risk their careers by supporting something they think the boss doesn’t want to hear. Perhaps they have an argument to make against telling the truth publicly. Or perhaps the idea is so unthinkable, they simply shut down any discussion. In any case, the feedback is immediate and flat-out negative.

A persistent executive might, in time-honored corporate fashion, propose a solution while raising the problem. The proposed fix might be to market a “safer” cigarette, as many companies tried with filtered cigarettes in later years. But to test this solution, you have to introduce it in the market. It will take two or three years to learn whether it will be a success, and you might find, as McDonald’s found with its failed McLean burger, that the virtuous path is too unpopular to be successful.

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  1. Art Kleiner, “Jack Stack’s Story Is an Open Book,” s+b, Third Quarter 2001: A small Ozarks manufacturer uses disciplined openness to increase productivity and release entrepreneurial spirit.
  2. Art Kleiner, Who Really Matters: The Core Group Theory of Power, Privilege, and Success (Currency/Doubleday, 2003): Includes a chapter that explores the timing of feedback and the dilemma of the cigarette industries.
  3. A.G. Lafley, with an introduction by Ram Charan, “P&G’s Innovation Culture,” s+b, Autumn 2008: Creating a world-class growth organization by investing in people.
  4. A.G. Lafley and Ram Charan, The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation (Crown Business, 2008):A series of stories about leading companies that have redefined leadership and improved management.
  5. Matthew E. May, The Elegant Solution: Toyota’s Formula for Mastering Innovation (Free Press, 2006): An examination of Toyota’s philosophy of team-based innovation.
  6. Jeffrey Rothfeder, “Jeffrey Liker: The Thought Leader Interview,” s+b, Summer 2008: The lean process expert describes why emulating Toyota is so difficult.
  7. Steven Wheeler, Walt McFarland, and Art Kleiner, “A Blueprint for Strategic Leadership,” s+b, Winter 2007: How to achieve the leadership required to instill ethical behavior.
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