In this research essay I will be analysing the role of ethical values of managerial leaders in decision-making. I will be at the early theories or framework propounded on ethical decision-making and what is obtainable now. Managerial leaders are those who manage an organization and at the same time, influence and motivate their subordinates as confirmed by Doh and Stumpf (2005) who see managerial leaders as individuals 'who conceive work as an enabling process which integrate people and ideas to establish strategies and enable decision making'. In business every leader faces a decision on what to do and in what way.
Making decisions is not always black and white as leaders sometimes find themselves in ethical dilemma where their ethical values are put to test. Ethical values 'set the standard regarding what is good or bad in conduct and decision making' (Daft, 2008) and 'include traits such as honesty, integrity, trustworthiness, reliability...' (Burns, 2004). Ethical dilemma 'involves problem solving situation in which decision rules are vague or in conflict'
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(Ferell et al., 2008). Since business decision making is characterized by various alternatives, making the right decision is based on the managerial leader's ethical value.
Ethical values are considered important to managers as seen in the different framework drawn on ethical decision-making. It is believed the ethical values assist a manager in four ways namely recognizing a moral issue, making a moral judgement, establishing moral intent and engaging in moral action (Groves et al, 2008). An ethical value in managerial decision- making portrays to stakeholders the values which the organization claims to have (Blodgett et al, 2009). The four ways are common features which ethical decision making models use to guide the decision maker. The role played by the ethical values of managerial leaders is that it simplifies the situation and makes it easy for a managerial leader to make a choice.
Depending on the managerial style, different ethical values are applied by managerial leaders when making a decision. Relationship-oriented leaders are concerned with developing good relationship with their subordinates and being liked by them (Edgar et al., 2007). The ethical value which a leader possesses helps him consider the interest and implication of every stakeholder before making a decision. Ladkin (2006) describes the concept 'Staying with' as one which allows leaders to engage in an active and conscious openness to situation at hand. This allows for the leader to listen to the various stakeholders group and know what the situation is and how it affects other groups. This is supported by (Cotter and Greif, 2007) who believes that an ethical decision is one which considers the needs and concerns of stakeholders to the ethical issue at hand. In essence ethical values ensure managerial leader put their stakeholders in consideration in business decisions.
Managerial leaders who look after the interest of stakeholders are not only ethical but effective as against those who pursue that own interest. Effectiveness is important to decision making. Leadership decision does not just have economic, technical and financial consequence but also on employees (Enderle, 1987). Ethically sound leaders will look after the interest of subordinates to attain a competitive edge. So the decision to regard employees in decisions taken is a function of ethicality. Unethical leadership behaviour in Wal-Mart the world's largest retail organization is shown in its abuse of employees and discrimination (Schwepker and Good, 2004). Ethical values can thus be said to be a determinant of fair treatment given to employees leading to an increased employee commitment and in the long run lead to profitability.
Ferrell and Gresham (in Pelliter and Bligh 2006) describe three different ethical decision making model. The first model has to do with individual factors; the second considers the organizational setting while the third is concerned with opportunities for ethical and unethical decisions. Ethical values present managerial leaders the freedom to choose from different options when making decisions and taking actions. This according to Enderle (1987 cited by Murphy and Enderle, 1995) is the ethical responsibility of leadership and virtuous behaviour. This simply translates that ethical values of managerial leaders presents them with different alternatives when making business decision.
It can be argued that ethical values play little or no impact in managerial decision making since it comes into play if the person involved has a high moral integrity (Jensen and Wygant in Glover et al., 1997). Glover et al (1997) goes further by stating that 'moral intensity drives the recognition of the moral issue in a situation and may moderate the relationship between individual values and the decision choice'. Thus ethical values play a role in decision making when the managerial leader involved has a high moral intensity. This moral intensity allows the managers not to pursue personal interest when making decisions. One can then imply that a managerial leader who is has a low moral intensity will pursue his own self interest and will not think of moderating the individual values with the decision to be made.
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Managerial leaders have to plan and control activities and in the process of doing this, actions that are considered fair have to be taken and this is based on their ethical values. Ethical values cannot be treated in isolation as it helps a leader distinguish right from wrong. It is necessary for a leader to do this as his decision is what guarantees the success and survival of an organization. Ethical values in a leader allows for ethical decisions to be made. The lack of ethical values brings stagnated growth to the organization concerned.
The role of ethical values is so important that the business ethics is divided into two to guide managers in ethical decision making. The two divisions are normative ethics and descriptive ethics. While the former guides an individual on how to behave in relation to moral philosophy and theology, the latter deals with management and business with regards to how to predict and explain individual behaviours (O'fallon and Butterfield, 2005). This distinguishes managerial decision making and ethical values where one can claim that ethical decision plays no role in managerial decision.
Ethical leaders are leaders with ethical values. The ethical values of managerial leaders create an avenue for different business deals to be got. It brings about trust during a transaction that necessitates the smooth and easy flow of any business contract. Ethical leaders are those who build trust and loyalty in their organization and without trust there can be no cooperation, community, commerce and conversation (Solomon in kooskora, 2005). Owing to this statement is the fact that ethical values in leaders help in fostering business deals as their have created a reputation in the mind of other business partners that business contract will be void of business malpractices.
Ethical values in the long run bring about success as leaders with ethical values will succeed but unethical leaders will ultimately fail. The failure of unethical leader will not be an immediate one but something that will be seen in the long run and this can ruin a business. Managerial leaders with ethical values create a conflict free working environment that is beneficial to the organization. Ethical value is argued to play a minimal role in business decision making as it is yet to encompass the intricacies involved in leadership of a company (Murphy and Enderle, 1995).
Making a decision between getting more money and doing what is right is an ethical dilemma that every managerial leader faces. Here the ethical values are put to test as every organization strives to earn as much profit as is possible. The leader has to decide if to acquire more profit at the expense of his reputation and that of the organization or to forgo it. Pursuing personal gratification without taking into consideration the ethical values is an expensive and fatal error for business (Kooskora, 2005). Therefore ethical values help leaders make selfless decision that will generate success for a business
The success which ethical values bring about when used in by managerial decision making can be argued as not immediate. Murphy and Enderle (1995) assert that good ethics in business is very demanding and requires a price. They further state that ethics in business decision pays in the long run but is financially costly in the short term. This explains that in as much as ethical values bring about financial gain in the long run it is not reliable in the short term. In implication it then means ethical values brings about success of a business deal in the long run which will be of immense benefit to the organization involved.
Although Kooskora (2005) has argued that taking decisions without considering ethical practices is an error for business, Verschoor et al. (2000) asserts that 'bending activities concerning accounting practices even for obvious ethical reasons is at best short sighted and at worst potentially destructive'. This then implies that in as much that it is an acceptable fact that ethical values are pivotal in the business as they bring about ethical practices; they are not valuable in all business decision.
In decision making the role of ethical values is seen as a 'legitimate wiggle room within which to interpret rules not to rationalize unethical behaviour but to exercise appropriate discretion to reach an acceptable ethical outcome' (Verschoor et al., 2000). Apostolou (2010) explains that ethical values bring about transparency which will foster good business dealings with partners, suppliers and others. Burke a onetime CEO of Johnson and Johnson (cited by Murphy and Enderle, 1995) said 'every relationship that works is based on trust and you can't develop trust without moral behaviour'. In essence, ethical values create an avenue for genuine business dealings without fraudulent acts.
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Ethical values of an individual which in this case is the leader influences decision making by the form of evaluation. Here the leader can either check different alternatives or look at the different consequences that may arise before he concludes on what action to take. Hunt and Virtell (1986) explain that an individual engages in deontological or teleological evaluation when faced with alternatives. The former is an evaluation based on the inherent right or wrong implied by each alternative while the latter is an evaluation of outcomes to stakeholders. It has to do with the consequence, desirability or undesirability of the consequence, probability of the consequence affecting stakeholders and the importance of each stakeholder group (Jones, 1991). Ethical values allow a manager to exhaust all options before making a decision which in the end will be fair to all concerned.
The role ethical values play in managerial business decision making is determined by what context the decision has to be made. Awasthi (2008) asserts that previous psychological studies claim managerial decision exists in two frames which are ethical and managerial frame. When a situation is presented in an ethical frame, the goal is finding the best ethically right decision while when presented in managerial frame, the goal is to get the best decision for the manager and his organization.
This indicates that ethical values are significant in business decisions when the mission of the organization is for its performance to be viewed as ethical but when has no role to play in the managerial aspect of a decision where the best result is regarded as one that is beneficial to manager and organization concerned, significant role in decision making when the decision in question is an ethical issue. Thus the role of ethical values in managerial decision making can be stated as creating ethical performance. This simply shows that ethical values are not relevant to all managerial decision making especially when decisions are made outside of ethics.
Awasthi (2008) goes further to explain in contrast to the previous psychological studies that managerial decisions can also embody ethical issues by giving an example of when major moral issues are given to managers in technical form. On one hand ethical decision is concerned with moral judgement with influence from personal interest, maintaining norm and post convention. On the other hand, managerial decisions involves economic rationality schema. This is a contradiction of the previous paragraph which attempts to give a clear distinction between ethicality and managerial decision as one can point out that ethical values is not just about making ethical decision but making the right decision which necessarily might not be ethical.
Young (2005 cited by Awasthi, 2008) makes plain that managerial decisions are sometimes characterised by unethical overtones. Where he believes moral judgement is an input in managerial judgement which plays a part in the managerial intent in decision making. This is in disagreement with the previous paragraph where Ashwathi (2008) tries to give a distinct division between ethics and managerial decisions. Murphy and Enderle (1995) are of the assumption that in real life business decision making that it is impossible to separate ethical issues from business and other issues although attempts have been made to try to distinguish the two. This clarifies the fact that ethical values guides the managerial leader in business decision which was earlier stated is never black and white that is it is never an easy choice between alternatives.
Although leaders with ethical values have been claimed to make decision on the basis of ethics, when under pressure, they are prone to disregard these ethical values. Leader's ethical values can be argued not to be always favourable in decision making. It has been argued with reference to sales managers that ethical values are sometimes forgotten on the basis of trying to meet and exceed target. While managers are considered to be a key source of guidance for ethical behaviour they often ignore or give tacit approval to unethical behaviour as long as sales goals are met (Schwepker and Good, 2004). In situations where meeting and exceeding target is important in order to get a promotion or avoid redundancy, managers shove their values to the side. Leaders here are under pressure and so would not produce make good ethical judgements. This shows that it is not in all situations that ethical value has an influence on managerial decision making
When a complex situation comes into play that is not in line with laid down rules then ethical values of managers come into play. 'Rules play a part in formation of value and the same time leave holes and room for interpretation and often take the back room to observed behaviour' says Verschoor et al. (2000) . Managers consult policies when about to take major business decision, they tend to resort to their values in the heat of the moment when the rules are not applicable. In essence ethical values is the infallible tool to managers as it is what they resorts to when all laid down procedures have been exhausted. This is supported by Verschoor et al. (2000) who explain that in business some novel situation arises where rules are not applicable and sometimes these rules are more problematic than the situation as they may lead to unethical outcome.
Ethical values is believed to simplify issues through a list of activities which include identify facts and issues, identify applicable values, seek help if needed, and reach the best decision through available information (Apostolu, 2010). It should be noted that most situations which require immediate action may not permit the time for such steps. However when time will permit one to follow these steps, the answer may not be forthcoming as against what was implied.
Honesty which was earlier identified as an ethical value in the introductory stage of this research is believed to play a part in well informed managerial decision making. Apostolu (2010) asserts that 'combined with a clearly set of ethical values, a transformed culture defined by honesty will breed better managerial decision making'. Honesty as an ethical value guide will produce better judgement which he stresses will bring about higher productivity and employee morale. This goes to show that ethical values will be push an organization to the forefront.
Different issues have been explained about the role of ethical values in decision making. There is a dichotomy of views on the role of ethical values in managerial leaders' business decision making. While some writers are of the view that it helps to simplify business decision making, some say there it makes decision making more complex that it should be while others simply cannot see the role it plays in making the decision. The last view states that although ethical values play a significant role in decision making, it is not applicable in all decisions. Therefore the role of ethical values is not so important in all business decision making since dependent on the situation and the individual involved.