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New Year's Resolution

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As you read this you will, no doubt, have already made (and perhaps broken) your New Year’s resolutions. I’d like to propose one that we, as business leaders, have a special responsibility to follow and whose failure we hear about in the news almost every day.

Of course, I’m talking about resolving to behave ethically. That is a resolution you can keep, right? Well, when facing a true ethical dilemma it’s sometimes very hard to do. But there’s a way to make it easier.


Why write an article on ethics in a newsletter devoted to Six Sigma? What’s the business case for continuing to read this article, if you will? Well, as professional leaders who work in the sometimes arcane world of data, we have ample temptation, motivation, and a lack of technically competent oversight that would make unethical behavior easier to get away with and more damaging than if we had real jobs. Just look at the current financial crises—one of the root causes of this mess was people behaving unethically with numbers—though in many cases not necessarily illegally. As Six Sigma geeks, we probably don’t have the ability to collapse the world’s financial lending system, we’re probably limited to only destroying our company, and the people and companies that depend on it. Important enough, I contend, for us to think through these things.

In following the path of define, measure, analyze, improve, control (DMAIC), we had better define some terms. Ethics relates to behavior or conduct within a social context. L.K. Treviño and K.A. Nelson defined ethics in Managing Business Ethics (John Wiley & Sons Inc., 2007) as “the principles, norms, and standards of conduct governing an individual or group.” They emphasize that because ethics has to do with actions taken, it can be managed in business just like any other employee behavior.

Ethics are distinct from morals. Morals are the internal and subjective judgments that people make about what’s right and wrong. Morals are “Of or concerned with the judgment of the goodness or badness of human action and character,” according to The American Heritage Dictionary of the English Language. Morals are personal and are a product of the culture, local community, and familial conditions within which we were raised.

It fascinates me to see that morals and ethics aren’t necessarily related. An act can be moral and ethical or immoral and unethical, but it could also be immoral and ethical, or moral and unethical.

The legality of actions is a third, and also independent, consideration. I’m sure you can think of laws that have been unethical or immoral, or both. And of course there are actions that are legal that you will find immoral and/or unethical. After all, there can’t be a law for every behavior. However, the more difficult ethical decisions you will be confronted with aren’t about breaking or not breaking a law. Those bozos who sold highly-leveraged mortgage-backed securities to pension funds probably didn’t do anything illegal, but a case can be made that it was unethical. Tricky ethical dilemmas offer choices that are all legal and “equally unfavorable.”

So what I’m agitating for isn’t that you behave legally during the coming year—I know you were going to do that (and if you weren’t, I doubt there’s anything that I'm going to be able to do about it). I’m proposing that you think about your actions within an ethical framework. As we have told our friends in production over and over again, the best time to plan on how you’re going to react to an event is long before the event occurs. Reacting in the heat of the moment makes for bad choices, and this is especially true when dealing with ethical dilemmas. For example, the first time a pension fund approached an advisor asking about mortgage-backed securities, the advisor faced an ethical dilemma: should he advise them to steer clear due to the risk with the consequence of losing a huge commission, or should he make the sale even knowing the risk?

Or maybe that’s too financial an example. How about this one: You’re a Black Belt doing an analysis on a process and find that the process isn’t only unneeded, but that it actually harms the product quality. Given the state of the economy, it’s clear to you (and because your managers didn’t read my last column) that once you communicate this to management, they will jump on the chance to reduce headcount. Your best friend works on that line and is getting ready to close on her first house. Do you tell management about your findings? Ethically you may feel it’s your duty to save the company money—after all, it might even enable the company to survive and continue to employ you and many others. Morally, you may feel an obligation or responsibility for the jobs that will be lost as a direct result of your analysis, perhaps especially for your friend, who’s going to be at serious financial risk.


So if that’s what I’m talking about this month, the next step is to find a way to measure it. What would we measure in relation to dealing with an ethical dilemma? Because ethical dilemmas really have no right answer (if there was one, it would be obvious what to do) what we can measure is the way we approach the problem. There’s the “front page” test—if your decision were published on the front page of the New York Times or The Wall Street Journal, would you be proud to show it to someone you admire? There’s the “gut check,” like Treviño & Nelson defined—does it feel right? (Be careful with this one, as mankind is a rationalizing animal).

There’s even a checklist with numerical rankings that was developed by Doug Wallace and Jon Perkel. All of these measurements relate to the process through which you have made your decision, as by its nature an ethical dilemma has no reasonable measurement for correctness. If you steal a $1 pen or $1 million diamond, you have lost your integrity. Cost/benefit analyses determining the consequences of an unethical decision don’t mitigate the fact that you have made an unethical decision (though such measures can be an input into your decision-making process, of course).


It’s in this step of DMAIC where the hard part begins, but the good news is that this is the part that can be done according to a process.

There are a number of procedures for working your way through an ethical dilemma—one where “two or more important values, rights, or obligations conflict,” as Treviño and Nelson put it. They take an interesting approach and describe a prescriptive approach (how you should make a decision) as well as a descriptive approach (how people actually make a decision). Wallace and Pekel, on the other hand,  provide a 10-step process for making a decision. And you will notice how the steps below reflect define, measure (maybe), analyze, improve, and control; or, if you prefer, plan-do-check-act, as you would expect with problem-solving processes based on the scientific method.

Table 1 - Two Ethical Decision-Making Processes According to Treviño and Nelson, and McNamara

Treviño and Nelson

Wallace and Pekel

1. Gather the facts

1. What are the facts of the situation?

2. Define the ethical issues

2. Who are the key stakeholders, what do they value, and what are their desired outcomes?

3. Identify the affected parties

3. What are the underlying drivers affecting the situation?

4. Identify the consequences

4. In priority order, what ethical principles or operating values do you think should be upheld in this situation?

5. Identify the obligations

5. Who should have input to, or be involved in, making this decision?

6. Consider your character and integrity

6. List any alternative and action plans that would:
            a) Prevent or minimize harm to stakeholders
            b) Uphold the priority values for this situation
            c) Be a good solution to the situation

7. Think creatively about potential actions

7. Build a worse-case scenario your preferred alternative to see how it affects the stakeholders. Rethink and revise your preferred alternative if necessary.

8. Check your gut

8. Add a preventive ethics component to your action plan that deals with the underlying drivers causing the situation listed in Step 3.


9. Evaluate your chosen decision and action plan against the checklist…. (referred to and linked above)


10. Decide and build an action plan, and implement and monitor it.


Well, I kind of have to shoehorn the decision you make to your ethical dilemma into the Improve step. I did mention that DMAIC is not the answer to everything, didn’t I? Yes, I thought I did. The decision may not make anything better, and in fact an ethical decision could make things a lot worse for you and others around you. But you get to maintain your integrity. If you follow a process, you can hope to demonstrate to an outsider that you tried to look at the situation from as many angles as possible to find the solution that best accords with your principles.


In the control phase of dealing with an ethical dilemma, as we do with other process problems, we re-examine what went wrong and try to identify if there’s something there to be learned that can prevent the same or similar situations from ever happening again. I like Wallace and Pekel’s procedure all the better for explicitly stating this step, which they call preventive ethics.

My contribution here is that you shouldn’t wait for an ethical dilemma to present itself before preventively figuring out how to deal with it. If you spend time thinking through how you will react to those dilemmas that you can reasonably predict could happen, your response, should it occur, will be based on your principles, rather than succumbing to the frenzy of the moment, the fear of consequences, or the benefits to ourselves.


When people hear of the latest ethical breach they always ask, “How could they have done that?” Sometimes these people we hear about have never faced an ethical dilemma, since they don’t have a moral compass. There was no conflict for them between principle and action. But in other cases, I suspect it was an insidious case of slippery slopes, which is often the case in the area of conflict of interest.

Here’s where thinking about ethics can be effective. The gratification or profit to be had by a teeny tiny breach of ethics seems to outweigh the cost. However, integrity is like being pregnant—you either have it or you don’t. And one tiny breach leads to another slightly larger one, and so on, all rationalized at each step of the way until you’re in so deep the inevitable is (or should be) public humiliation. By following a process to make an ethical decision, we can try to engage our rational thought process to armor ourselves against the monkey part of our brain, which wants to grab all the bananas now without a thought for what comes next.

You can never get a full appreciation of the consequences of an ethical decision in the absence of a time machine. Maybe revealing the analytical results leading to the layoff of that production line means that your friend finally writes that novel she has been thinking about and you get to say, “I knew her when…,” or maybe she loses her house before she finds another job. Maybe she would have been in a fatal accident the day after her last day of work but because she stayed home she is safe (though she probably is still angry at you). Maybe this puts her on a downward spiral from which she never recovers. This is exactly the reason that consequentialism—trying to predict the outcomes of your actions to find the best decision—presents such serious limitations as an ethical decision-making process.

As professionals who are likely to be, or become, leaders in our business, it’s incumbent upon us to hold ourselves to the highest standards. Some of you, perhaps even most of you, will face an ethical dilemma in the coming year, I’m sorry to say. In an awful ethical predicament, the only thing we have control over is how we make our decision. In the absence of omniscience, all we can do is resolve this New Year to follow Polonius’ advice in Hamlet, “To thine own self be true,” and maintain that over which we have control: Our own integrity.

If you’re interested in learning more about this complex topic, the Engineering Management Program at the University of Colorado is making available a two-and-a-half-hour overview of ethics in business, taught by Jeffrey Luftig, Ph.D. (to whom I’m greatly indebted for our long conversations on this topic). It’s at times funny, thought provoking, and will make you think about how you think about ethics.


Random Heresy

By the time you read this, the amazingly long U.S. presidential election will be over. All U.S. citizens will be wandering around aimlessly bumping into objects, pressing their hands to the sides of their heads as the indignation poisons slowly leave their bodies, leaving them with a hangover-like malaise and


News Flash

Six Sigma's lead instructor Steven Ouellette wrote an article with Dr. Jeffrey Luftig on "The Decline of Ethical Behavior in Business."



Six Sigma Online's lead instructor Steven Ouellette was profiled in the June 2008 issue of Quality Digest magazine. If you want to learn more about Steve's peculiar view of the world, as well as what he studied for a year in Europe, read the profile online.