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Ethics Feeds Innovation

by Mark Pastin

Ethics brings to mind dusty volumes of impenetrable text, heated arguments that go nowhere, and an overbearing concern with political correctness. But my thirty years as an ethics consultant has taught me something different. Ethics is really about releasing the forces of innovation in an organization. The reason for this is simple. To have ethics in an organization is to have ways in which employees can jump the line of command without fear of reprisal. And this same jump-the-line-of-command philosophy can make innovation a powerful organizational force.

I think everyone wonders how General Motors came to sell thousands of cars that had a known (to GM), life-threatening ignition switch problem. When you think about things this way, you are really thinking of GM as if it were a single person of a single mind. That is not how these things happen. What happens is that individuals, perhaps many individuals, in the organization know something is wrong and let their supervisors know about it.  But their supervisors, often fearing blame for the error, don’t act. They may even retaliate against the reporting employee for “making trouble.”  And even if the immediate supervisor raises the concern to his/her own supervisor, the chances of the concern reaching a high enough organizational level are slim.

This is a familiar problem in ethics. Most of the wrong-doing in which organizations engage is known to be wrong by a number of employees. But the information does not get where it needs to go, to the top of the organization or even to its board, because employees fear reporting the wrong-doing up the chain of command. Employees especially fear reprisals if they go over their supervisor’s head. This is often a reasonable fear. The net result is that the organization itself is not aware of its own wrong-doing until someone outside makes an issue of it. As GM knows, this is a painful way to learn about your misdeeds.

In both ethics and innovation, the line of command is the enemy. There is always  talk about overcoming the line of command, managing the organization from the bottom up, and even eliminating management. It is just a lot of talk. The line of command is the most enduring feature of organizations, from the Catholic Church to Apple. Some CEOs have pledged to banish management. But these CEOs do not plan to cede their own positions. And having employees report to committees is hardly a recipe for innovation. So while the line of command is the enemy of ethics and innovation, don’t expect it to go away.

In ethics, we use various techniques to overcome line-of-command blindness. For example, the ethics hotline is a familiar feature of organizations today. This is a toll free number that employees can call on an anonymous basis with ethics questions and concerns. The hotline only works if it is backed by a firmly enforced policy that prohibits retaliation against reporting employees. Additionally, managers are required to periodically attest as to whether or not they are aware of any acts of corporate wrong doing. This forces managers to own up to ethical issues or face the consequences of a false attestation. This system is hardly perfect but it does short circuit the line of command when it comes to ethics.

A funny thing happens in organizations with effective ethics reporting systems. Employees begin to “abuse” the ethics reporting process by suggesting all sorts improvements to processes, practices and even products and services. Once they are released from the restrictions imposed by the line of command, good ideas begin to flow. It is too bad that these ideas are often ignored as not relevant to ethics.

This tells us something we already know and something we do not already know. We know that the line of command stifles innovation, especially when innovators are caught behind managers who became managers because they themselves were not innovators. What ethics teaches us is that we can short circuit the line of command for special purposes and we can do it effectively. This is what we need to release the forces of innovation – methods of communicating upward in an organization to a resource that is intelligent and open to good ideas. This approach has the great advantage of not requiring what isn’t going to happen – ending the line of command.

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