Ethics at high speed

Published in Acumen 12, Second Quarter 2015

The need for speed in business is widely recognised, both in terms of the driving factors, such as increasing technological advances, and in terms of the benefits, such as staying ahead of competitors. A question that this focus on speed poses is whether organisations can operate at increasingly high speeds and be ethical at the same time.

Does speed encourage cutting corners?

An obvious trap is that the need for speed can prompt organisations and employees to cut corners. This could take many forms. If the issuing of a necessary business permit or licence is very slow, it could lead to the permit being “bought” to short-circuit the process. Customs officials also know that speed is a crucial factor for trucks transporting fresh produce or perishables across a border. This can lead to a “price” being paid to avoid a delay that would ruin the goods.

The manufacture of the Ford Pinto provides a more extreme example of the consequences of a desire for speed. In the 1970s Ford President Lee Iacocca’s goal of a compact car that weighed less than 2 000 pounds and was priced at less than $2 000 resulted in the production of the Ford Pinto. During the period of only 22 months from concept to production, Ford had been aware of the design defects. However, under competitive pressure from other small car manufacturers, the company was not open to any delay in production and therefore did not change the design, deciding instead that it would be cheaper to pay off possible lawsuits. The defect? In a rear-end accident the car could leak fuel and burst into flames. Figures vary as regards the number of deaths, but it is conservatively estimated at 27.

Another pertinent example of the consequences of the need for speed centres on journalism, especially online journalism. The pressure to be the first to publish, to put out news at greater and greater speeds, to keep news updated, and to meet the public’s increasing demand to access news as it happens poses huge threats to the accuracy and veracity of reporting. Corrections can - and are - made after the event. But given the ability of online news to reach millions of people almost instantaneously, it is often not possible to adequately correct the facts when they are being shared across a proliferation of other news outlets: individual blogs, radio, television, websites, and web broadcasts. It amounts to a case of having let the genie out of the bottle and not being able to get it back in again.

Too time-consuming to be ethical?

Speed and ethics can also combine negatively when tasks are particularly time-consuming. This can have disastrous consequences when it leads to short cuts in areas such safety or quality. One such high-profile example was the BP Deepwater Horizon oil spill in 2010. The US federal investigators’ report into the cause of the explosion aboard the Deepwater Horizon drilling rig found that BP had run behind schedule and tens of millions of dollars over budget in trying to complete the Macondo well in the Gulf of Mexico. More importantly, the report also found that BP had taken many shortcuts that contributed to the disastrous blowout and oil spill, which claimed eleven lives and is considered the largest marine oil spill in the history of the petroleum industry.

In the field of workplace ethics, the risks associated with time-consuming tasks can apply to the compliance function. The increasing demand to be compliant with a multitude of laws and regulations is making compliance an onerous task in many countries. Compliance officers are battling to balance the many duties of the function, including establishing standards for business conduct, ensuring compliance with anti-bribery and corruption requirements, tracking and analysing regulatory developments, board reporting, amending policies and procedures, and liaising with internal stakeholders and control functions. Two 2013 surveys provide interesting insights into the consequent pressures.

Thomson Reuters Governance, Risk and Compliance surveyed more than 800 compliance practitioners from financial services firms in 62 countries between November 2012 and January 2013, to canvass their views on the costs of compliance and the greatest challenges they expected to face during the year ahead. The survey, the Cost of Compliance Survey 2013, confirmed that compliance requirements have increased, as has scrutiny from regulators and consumers. As regards on-going increases, 43% of the respondents said that they expect the amount of regulatory information published by regulators to be significantly more over the following 12 months.

While it may be assumed that regulation in the financial services sector is more demanding than in other industries, the Deloitte and Compliance Week Compliance Trends Survey 2013 confirms the same pressure amongst American compliance executive across many industries. The survey also found that the majority of companies still run compliance with relatively tight budgets and staffing.

The time-consuming nature of compliance can be used to justify a “tick box” approach to compliance, which is clearly not ideal, not least from a risk perspective. However, the far greater problem that can arise is that compliance comes to be seen as the totality of the organisation’s ethical focus and ethics initiatives - that companies decide that no more time, funds or resources can be allocated to anything else beyond compliance. This risk is enhanced by the reality that compliance is almost always obligatory (for example relative to legislation) while much of ethics can be considered voluntary.

The unsatisfactory consequence of a choice in favour of compliance instead of broad-based ethics would be to restrict the company’s ethics to only one facet of ethics, the rule-based side of ethics. However, to be an ethical organisation and create an ethical culture requires an equal focus on fostering value-based behaviours, which are much more sustainable and contribute significantly to an ethical culture. Rules and compliance alone are not sufficient to achieve an ethical culture.

On the negative side of speed and ethics, while the downside of cutting corners may be well understood, the risk of a limited, one-sided ethical approach is often not was well recognised.

Achieving greater speed via ethics

The positive contribution that ethics can make to achieving greater speed is also arguably not well recognised.

Jack Welch’s pursuit of speed during his tenure as CEO of General Electric from 1981 to 2001 warrants being mentioned for being under the apparently unlikely banner of self-confidence, simplicity and speed. Starting with the view that it takes self-confidence to simplify complex issues, his business case was that self-confident people make it simple, and simplicity makes you fast.

But the primary area where ethics can make a positive difference is relative to organisations that have a strong ethical culture and widely shared values. This affords them the advantage of high levels of clarity about what is and is not acceptable, which translates into both faster and more consistent action and decision-making.

A good example of this, which is still used as a best practice case study, is the 1982 Johnson & Johnson Tylenol case, when Tylenol capsules laced with cyanide led to seven deaths in the US in the Chicago area. Johnson & Johnson’s admission extended to the action of recalling 31 million bottles of Tylenol capsules and offering free replacements in the safer tablet form. After reintroducing their tamper-proof product, in just a year they had regained a 30% market share from a prior 37% share of the market. Central to this was the role their credo (values or code of ethics) played. It shaped, informed and kept aligned the myriad decisions which needed to be made and the priorities which underpinned them.

As to the question of whether operating at increasingly high speeds can erode ethics, the answer is unfortunately a loud yes. However, with appropriate levels of awareness, these pitfalls can be avoided without unduly losing speed. Crucially, organisations need to recognise that ethics can promote speed – with the added bonus that it contributes to greater consistency and better business practices too.

by Cynthia Schoeman