Welcome to the end of the safari through uncharted decision-making territory with your guide Dilbert. You have encountered the Big Five animals that kill off 70% of all strategy – now get ready to meet their black sheep sibling…
Bounded ethicality is your systematic and predictable tendency to act dishonestly because you only see the parts of the animal that you want to see. You might cheat on taxes, lie about your exciting life, take credit for your colleagues results or steal pencils from work without ever really questioning your self-image. Yes, there are also the big ones out there like Dick Fuld, who as the CEO of now bankrupt Lehman Brothers was a key player in the largest financial crisis in almost a century. But most people just engage in everyday dishonesty – and the combined value of that has been proven in studies by behavioral economics professor Dan Ariely to greatly outnumber the big bad villains!
Now, how do you recognize the black among the sheep in the wild? Well, firstly you need to understand that most people actually want to behave – out of a strong sense of fairness or simply because dishonesty is punished in society. Consider this experiment: You are standing on a train station next to another commuter, when you are both approached by an elderly gentleman with a proposal. He will give your fellow commuter USD 1,000, if she can agree with you to share some of it. She proposes USD 20 for you and USD 980 for herself – what do you do? If you are like most people you say no because it is unfair, and the experiment almost always concludes close to 50/50 sharing. So, you want to behave – but you also want to maximize your own utility – and whenever these two things are at odds, you can be sure to find trouble.
Surprisingly, black sheep comes in flocks and they have an extended family to watch out for: Everyday dishonesty, indirect unethical behavior (you overlook or hide unethical behavior for example by outsourcing unsustainable production practices to third party businesses), motivated blindness (classic impartiality issue like accounting firms watching over their clients), in-group favoritism (for example you give board roles to your network), implicit attitudes (your stereotypical opinions about different demographic groups – a whole training industry has sprung up around just this one bias – and no, training does not help), experience of fairness (your tendency to be willing to lose out yourself in order to punish unfair behavior). Recognize any of these in recent business scandals?
As you can probably imagine it is much easier to recognize bounded ethicality in others than in yourself, so fixing it is difficult. Start by identifying risks of motivated blindness in departments and reward systems – for example investment teams in pension funds often assess their own performance, and somehow they deserve exuberant bonuses every year… A great trick is to continuously remind the organization about your ethical code – it might sound too easy, but this simple act can drive enormous impact as proven in many studies for example with theft – not least because the first unethical behavior is typically small but shapes the future view on fairness. On a grander scale build simplicity, transparency, diversity and impartial control into organization, processes, and systems to create an environment without shady spaces for bounded ethicality.
This time I mean it. This is the end of the Dilbert guided safari through uncharted decision-making territory. The Big Five of Availability, Confirmation, Overconfidence, Emotional and Loss Aversion biases kill 70% of your strategies – and their black sheep sibling Bounded Ethicality can burn down the global economy – so a formidable foe to beat. When you want to safeguard your strategy against these animals, contact me at email@example.com or +45-23103206.
Stay safe. And don’t play with the animals.