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The Downsides of Trying to Appear Ethical


Reputation is one of the most valuable assets a firm can have. Leaders, managers and employees want to be seen as competent, generous, efficient, honest and fair. But an emerging body of research suggests that attempts to maintain the appearance of doing what’s morally right can lead decision-makers to engage in various wrongs.

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Our research has found three ways in which concern with reputation can actually lead managers and employees to violate ethical standards they would have otherwise upheld. Understanding the mechanisms at play is the first step toward acting like an ethical and equitable leader.

Imagine you’re a manager at a consulting firm that has a contract with a client for no more than 500 hours of billable work, and your team’s total hours winds up being exactly 500. Would you report that number to the client? In seven studies, we found that up to 35% of people will underreport such outcomes. In such instances people choose not only to lie, but also to receive less material reward for themselves — all in the service of protecting their honest reputation.

In eight experiments, we’ve shown that bosses normally award bonuses to the more deserving of two employees when neither employee is a friend. However, bosses routinely decline to award the bonus to the more deserving employee if that employee is a friend. In one study, only 27% of participants gave a bonus to their slightly more deserving friend, whereas 61% gave a bonus to a slightly more deserving stranger. This appears to be rooted in people’s desire to signal their impartiality to the entire office; when we changed the situation to ensure that no one in the office knew what the leader’s decision was, people showed a strong preference for awarding the more deserving candidate — even when that candidate was a friend.

In six experiments, we explored how concern with appearing partial or unfair might lead managers to waste resources. In one experiment, participants played the role of a manager deciding how to allocate a new computer to one of two equally deserving employees. Nearly half the participants chose to let the computer sit idle on a shelf rather than give it to just one employee.

So, what can well-meaning managers do to overcome such pitfalls?

One intervention can help: handing these tricky decisions over to impartial parties. In our research we discovered that when you’re in a position of allocating desired rewards between yourself and another person and you abdicate this position of power — that is, you give away your right to decide to the other party — the other party frequently rewards you with the most desirable outcome. People are eager to provide these rewards because they view abdication itself as an act of generosity. Such a strategy can help people reap the reputational rewards of ethical behavior without having to engage in unethical action along the way.

Shoham Choshen-Hillel is a senior lecturer at the School of Business Administration and the Federmann Center for the Study of Rationality at the Hebrew University of Jerusalem. Eugene M. Caruso is an associate professor at UCLA Anderson School of Management. Alex Shaw is an assistant professor of psychology at the University of Chicago.

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