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This very useful debate on ethics and values [thanks everyone for this] seems to make a big assumption – that unethical behaviour was the main reason for the crisis, so with more ethical standards it would have been avoided or substantially reduced. But apart from a few egregious examples, it is not clear that most senior execs were deliberately doing things for their own gain that they knew to be against the interests of investors, employees or customers.

 

An alternative view is that executives were mostly doing things they thought - but incorrectly - to be in the best interests of their organizations and their customers [as well as themselves].  This hypothesis is supported by the endless positive assessments of corporate prospects by analysts and other well-informed commentators, right up to the moment things went wrong. Surely all those hundreds and thousands of executives could not have hidden dishonest or deceitful behaviour from the outside world for so long?

 

If they were not being dishonest or unethical, then, were they in fact being insufficiently competent in the strategic management of their organizations. Government grilling of banking executives, for example, has shown that CEOs were doing things that were widely regarded as skilful, even super-clever, that neither they nor most others realised were dumb until after the event. And the banks were not alone in managing themselves into crisis, or at least into serious trouble – we now have car makers, airlines, ship-building, commercial real-estate, retailers and hundreds of other sectors in difficulties they could and should have foreseen and guarded against.

 

I had reason to reflect on whether senior management have been sufficiently competent in managing strategic performance in recent years, and whether they need better tools for the job, in presentations at business schools in Argentina and Brazil over the last 2 weeks, a 60-min. screen-cast of which you can find at http://www.strategydynamics.com/strategy-lessons.

 

Kim Warren: London Business School

 

 

Kim,

You add a whole different perspective to the whole discussion.  Reminds me of how I used to assure my suspicious friend about the bosses in his company who he felt were treating employees badly:  "Don't worry.  I don't think they're malicious.  They just don't know what the heck they're doing." 

Seriously, I think you make an important point.   Executives may pursue a wrong-headed strategy completely in good faith.  I just hope that top execs acting in bad faith (read: reckless greed) and their lawyers won't use it too often to hide behind the "business judgment rule".   I think that an executive who pursues a risky strategy (including the use of complex financially engineered products) still has the ethical duty to study the downside (a point you make very well in your screen-cast lecture) and to reasonably inform and protect the investors and the vulnerable (e.g., customers, community, etc.).  Not to do so would be both incompetent and unethical.  In other words, there is such a thing as "ethical competence".

An important implication of your point which is relevant to business educators is to ask:  How many of the unsound strategies are also taught in business schools?  How many of these strategies are also ethically problematic, if examined critically?  In addition to derivatives which companies have gone into without top management fully understanding them, the reengineering craze of the early 90s pops to my mind, with millions of jobs vaporized worldwide.  Even some applications of Porter's 5 forces framework makes me squeamish -- why should a company take advantage of the weak bargaining power of buyers?  Isn't that anti-competitive behavior which got Microsoft in trouble?  By the way, the example you cite in your screen cast about a company influencing medical opinion leaders in order to get patients to switch to a new medical device could raise some ethical flags in our country if the company is not careful -- a case where ethics AND competence are required.

PS. Thanks for generously sharing the screen-cast link.  Will be sure to refer it to my strategy colleagues.  I've been advocating simulations and system dynamics (I use iThink) for a while and your lecture will help my case.  We have Strategic Management Dynamics in our library.

Regards,

Ben
 
-------------------------------
Benito L. Teehankee, DBA
Sen. Benigno S. Aquino Jr. associate professor in business and governance
Ramon V. del Rosario Sr. Graduate School of Business
De La Salle University
Manila, Philippines
Office: +632-5234295

Building on Kim's comments – what if the (recurring?) crisis are symptoms of an upcoming Kuhnian 'paradigm shift' in the way business is conducted?

What if we focus on 'creating' the new worldview, instead of 'castigating' the actors in the present system?

Sujit

 

 

This very useful debate on ethics and values [thanks everyone for this] seems to make a big assumption – that unethical behaviour was the main reason for the crisis, so with more ethical standards it would have been avoided or substantially reduced. But apart from a few egregious examples, it is not clear that most senior execs were deliberately doing things for their own gain that they knew to be against the interests of investors, employees or customers.

 

 

 

An alternative view is that executives were mostly doing things they thought - but incorrectly - to be in the best interests of their organizations and their customers [as well as themselves].  This hypothesis is supported by the endless positive assessments of corporate prospects by analysts and other well-informed commentators, right up to the moment things went wrong. Surely all those hundreds and thousands of executives could not have hidden dishonest or deceitful behaviour from the outside world for so long?

 

 

 

If they were not being dishonest or unethical, then, were they in fact being insufficiently competent in the strategic management of their organizations. Government grilling of banking executives, for example, has shown that CEOs were doing things that were widely regarded as skilful, even super-clever, that neither they nor most others realised were dumb until after the event. And the banks were not alone in managing themselves into crisis, or at least into serious trouble – we now have car makers, airlines, ship-building, commercial real-estate, retailers and hundreds of other sectors in difficulties they could and should have foreseen and guarded against.

 

 

 

I had reason to reflect on whether senior management have been sufficiently competent in managing strategic performance in recent years, and whether they need better tools for the job, in presentations at business schools in Argentina and Brazil over the last 2 weeks, a 60-min. screen-cast of which you can find at http://www.strategydynamics.com/strategy-lessons.

 

 

 

Kim Warren: London Business School

 

 

 

 

 

 

 

 

 

 

Building on Kim’s comments – what if the (recurring?) crisis are symptoms of an upcoming Kuhnian ‘paradigm shift’ in the way business is conducted?

What if we focus on ‘creating’ the new worldview, instead of ‘castigating’ the actors in the present system?

Sujit

 

 

This very useful debate on ethics and values [thanks everyone for this] seems to make a big assumption – that unethical behaviour was the main reason for the crisis, so with more ethical standards it would have been avoided or substantially reduced. But apart from a few egregious examples, it is not clear that most senior execs were deliberately doing things for their own gain that they knew to be against the interests of investors, employees or customers.

 

 

 

An alternative view is that executives were mostly doing things they thought - but incorrectly - to be in the best interests of their organizations and their customers [as well as themselves].  This hypothesis is supported by the endless positive assessments of corporate prospects by analysts and other well-informed commentators, right up to the moment things went wrong. Surely all those hundreds and thousands of executives could not have hidden dishonest or deceitful behaviour from the outside world for so long?

 

 

 

If they were not being dishonest or unethical, then, were they in fact being insufficiently competent in the strategic management of their organizations. Government grilling of banking executives, for example, has shown that CEOs were doing things that were widely regarded as skilful, even super-clever, that neither they nor most others realised were dumb until after the event. And the banks were not alone in managing themselves into crisis, or at least into serious trouble – we now have car makers, airlines, ship-building, commercial real-estate, retailers and hundreds of other sectors in difficulties they could and should have foreseen and guarded against.

 

 

 

I had reason to reflect on whether senior management have been sufficiently competent in managing strategic performance in recent years, and whether they need better tools for the job, in presentations at business schools in Argentina and Brazil over the last 2 weeks, a 60-min. screen-cast of which you can find at http://www.strategydynamics.com/strategy-lessons.

 

 

 

Kim Warren: London Business School

 

 

 

 

 

Sujit,

Your idea makes sense to me.  I do agree that worldviews can "trap" people into self-damaging systems of behavior time and again.  Kim has plenty of ideas on using systems dynamics for better strategies but I'd like to know your ideas on "creating the new worldview".

Regards,

Ben
-------------------------------
Benito L. Teehankee, DBA
Sen. Benigno S. Aquino Jr. associate professor in business and governance
Ramon V. del Rosario Sr. Graduate School of Business
De La Salle University
Manila, Philippines
Office: +632-5234295

I think Michael makes a crucially important point about the need to expand objective functions in several important dimensions.  However, students with a practical bent will automatically ask how this is to be done.  I surveyed our MBA curriculum and the tools and problem-solving methods taught are strongly biased for a single objective -- whether it be in management science or management accounting.  What methods can be taught to students which support a multi-stakeholder, mutli-objective perspective?  Has anybody in the list used analytic hierarchy process (AHP) for this, for example?  What about system dynamics as Kim suggests?

Regards,

Ben
-------------------------------
Benito L. Teehankee, DBA
Sen. Benigno S. Aquino Jr. associate professor in business and governance
Ramon V. del Rosario Sr. Graduate School of Business
De La Salle University
Manila, Philippines
Office: +632-5234295

 

Have you looked at Balanced Scorecard? I do not hold this up as an exemplar but it does deal with N attributes. Of course, Drucker told us years ago that the minimum set is Market Standing, Productivity, Innovation and Liquidity.

 

The AHP is mathematically flawed (unless you can assure that all options are transitive).

Better you should consider Bayesian Belief Networks.

 

Cheers,

Jack Ring

-------------------------------
Benito L. Teehankee, DBA
Sen. Benigno S. Aquino Jr. associate professor in business and governance
Ramon V. del Rosario Sr. Graduate School of Business
De La Salle University
Manila, Philippines
Office: +632-5234295