[MUSIC] Welcome to the session on how organizations contribute to ethical blindness. This session, is split on, in two videos, in the first video, I will familiarize you with the forces that create, strong organization context, and thus contribute to ethical blindness. In the second video we will see how organizations try to fight, against compliance risks by creating control systems, that obviously give our knowledge that we developed so far in ethical blindness, are not sufficient to keep this risk under control. The main goal of this session on organizations is, to familiarize you with the organizational factors, that drive the risk of ethical blindness. You will learn how they can form dangerous constellations around you when you make decisions. And you will learn how you should not manage that risk in organizations. Let us first start by looking at the risk of narrow framing in organizations. How do they contribute to ethical blindness. You might know the Encyclopedia Britannica, that's a global standard work for information. Created in 1768 already. So, it is a success model for more than 200 years. Few meters of leather bound books with the best available information you can imagine. In 2012. The production of these books was stopped. And the reason is quite simple. It's Wikipedia. It is, in my view, one of the many cases where corporations did not understand the changes around them in ap, in appropriate way and were crashing after so many years of success. So the question that I would like to, to think about with you here is, if you are a global expert in the production. And dissemination of knowledge. Like the encyclopedia Britannica was. Why is it someone else who invents Wikipedia and not you? Why can you not see it coming? Why do we not see this radical change around you that threatens your existence? Why do we behave like a dinosaur in a market where everyone else sees it coming except you? We have seen in our session ethical blindness already that organizations tends toward simplicity. They have their routines, they developed their standard operating procedures, they more or less operate on auto pilot most of the time. Why? Because it makes them highly efficient. As soon as they have the right routines, for the right kind of decisions, they can, more or less, proceed without thinking much. We have seen that, therefore, learning in organizations is very difficult. The more you succeed with your routines, the less you'll learn. So, transcending the practices that once you establish, is very difficult. The Encyclopedia Britannica became blinded by its success, by its old routine as well. And this routine perception of the world, their frame, is based two things. First, people are interested. In knowledge and, therefore, by books. Second they buy the encyclopedia, Encyclopedia Britannica because it is the highest quality available on the market of information. And this was true for more than 200 years. But Wikipedia changed the rules of the game. People today want highly mobile information. They want it wherever they are. They want it more or less correct. So they believe in the autocorrection of the system of shared knowledge. So Wikipedia got attacked from an actor outside of their system. The killer application arrived from the periphery of the system. And they didn't see it coming. Will they survive? Well they put their stuff online against money now but it's not clear whether people will invest in it in the future. The Ford Pinto that we have seen already is a similar case where people developed their strong and narrower teams and they get blinded for the change around them. They get blinded for the things they should see. But they can't. How we manage these kinds of risks? How do we build them up in the first place? How do organizations develop strong contexts? How do they contribute to this? This is what we are going to discuss today. We have seen pressures from the immediate situation when we went through the experiment of Milgram and Ash and Organizations can add to that. And make this context even stronger. We will see in this session some tools they have the disposition to promote ethical blindness. These tools are basically three. Setting objectives. Designing incentives. Evaluating performance. Let us look at them. A bit more in detail starting with the objectives. Sometimes men will just believe that if they create very tough objectives, that on principle not achievable, they will motivate people to go for it. Well, objectives can be too tough and research shows that if you. Confront people with unrealistic objectives. You push them towards their limit. They might do whatever it takes to achieve these objectives even if it is not ethical or not legal. So you increase the risk of rule breaking by setting unrealistic objectives. Combine these unrealistic objectives with a very simple bonus system where you just reward individuals. You drop team bonus. You create a highly individualistic. Competition where people run for their own particular objectives. And then you add an evaluation system where you categorize people in low performers and high performers, as, as we have seen in our discussion on Enron. What you will get is a fight for survival, the fear to be humiliated. Losers who get punished, and you don't want to be a loser. So if you set highly unrealistic targets, you combine them with individualistic incentives. You humiliate people in the evaluation system and then you start the circle again. You'll create an organizational context in which the risk of ethical blindness increases, because people develop this tunnel vision. That's what they have to do, that's what they go for, and they don't see left and right, aspects that they might need to see to make appropriate decisions. Some of you might think, now, wait a minute. This is a description of my organization. Well, you have all the warning signals here. You can see it coming in your own context. If you want to increase this effect as a leader, what you can do is you send ambivalent signals about the rules of the game. So the rules are not unclear. Think about how at the beginning of the 2000s people started to talk about. Old economy and new economy. You are new economy. The rules of the old economy don't count for you. And then, don't punish people if they break the rules. Promote them. Create aggressiveness. Use a language that is aggressive. Talk about warfare with your competitors, about bloodshed, about survival. Of a few about killing. Then you create this culture of fear as the emperor does in fairy tale in the very beginning of our course. If you act to this very authoritarian leadership style, what you create is a situation where people do not feel in control of what they do. They feel that someone else, you the leader, controls the situation. They can easily disconnect from responsibility. They can shift the blame on others. This is what has been called the locus of control effect. As long as you don't feel that you are in control of the situation, you can do horrible things. But you still feel well because you are convinced that someone else is responsible. Just think about how corporations often announce mass layoffs. They will say things like, the market situation forces us to lay off people or globalization is responsible for this. You'll rarely find managers who will say well because of the horrible strategic decisions I made in the last five years we have to fire people. Because then it is you who is responsible. In the other case it is globalization. You can disconnect. It's the market you can disconnect. So as long as you create a situation where people easily disconnect from responsibilities. By you being an authoritarian leader, by creating the tunnel vision, by using aggressive language, you promote ethical blindness. This might sound like a cartoon version of an organization for you. But is it, it is the situation that you found at Enron. That you can find at Lehman Brothers, at Ford, and in many other scandals. That we examined in this course and that you read about in the news everyday. And it is a constellation that you find, at least partly, in many organizations that did not yet have a scandal of unethical or illegal behaviour. Maybe you find that constellation, partly, even in your own organization. And as we have seen already in other sessions, corporations slowly move into that direction. It does not fall from heaven as a bad culture, it develops as a constellation, slowly over time. So here you have the recipe for disaster, you take these three tools that we met in this session. Unrealistic objectives, one dimensional incentives, Darwinist evaluation systems that humiliate people. You combine them with a specific leadership style an aggressive, one with a war rhetoric, with a rule ambivalence that you create around your employees. With the tendency to disconnect from responsibility and you have very powerful contacts that in combination with the fact that we saw in our session with the situational forces will push organizations towards ethical blindness. Thank you for listening to this little story on organizations and ethical blindness. We will continue our session with second video where we see how organizations react to compliance risks. [MUSIC]
