The Black Box of Ethical Dilemmas

Should I exaggerate in the CV? Cheat fellow colleagues? Use unfair means in an exam? Lie to my partner? To the tax authorities? These are all examples where ethical dilemmas come into play. Our everyday lives - personal, professional, or social – are arenas of such dilemmas. We feel the urge to stand up to our moral values yet our efforts are sometimes futile - lamentably, more often than we would like to admit. For many years, research has been documenting our malleable ethics, and we have but to take a quick look around to verify it ourselves. Corporate scandals, government corruption, cheating, stealing, lying are ever-present and ever-tempting.

At IE Business School, we have been conducting research on the causes and solutions of such indulgence in unethical practices. For example, in one paper, we investigate the role of competition. Competition has become a widely acceptable norm to promote efficiency and innovation. However, there are circumstances when competition in fact can create anomalies. One major way those inefficiencies can occur is through the use of unrestrained means by the competitors (or rivals) into achieving the final end. That is, attention is drawn to the final end rather than to the means of achieving it.

One classic way to create competition is to benchmark players relative to each other. It is common to read about the top 10%, 5%, etc. industry performers or internationally ranked businesses on various indicators. Similarly, the use of Bell Curve or Gauss Curvefor performance management within companies, although debated endlessly, is still widespread. In such a stacking reward system, typically the top 20% performers are disproportionally rewarded, the mediocre 70% are modestly rewarded - if at all - and the lowest 10% performers are fired. Such measures of relative performance are now finding their way into classrooms. In an MBA classroom setting, A is typically reserved for the top 10% of students irrespective of their actual performance or learning.

We conducted an experiment to study the effect of competition, in particular, of relative competition on indulgence in unethical practices. Participants were invited for an online quiz that consisted of questions on basic calculus problems, guessing the next one in a sequence of shapes, and spotting the odd word out of a sequence. They were randomly assigned to one of the three conditions: Control, Absolute Competition, and Relative Competition. In addition, they were asked to have a pencil and paper to write down their answers to be able to verify the correct answers at the end of the quiz.

Performance was calculated by the actual number of correct answers. Additionally, participants in the Absolute Competition and Relative Competition conditions were told that they could correct their answers themselves and at the end self-report their performance and that this self-reported score would be used to pay their performance rewards. This meant that in these two conditions, participants had the opportunity to freely report a different number of correct answers than their true score. That is, they had an opportunity to cheat. All participants were paid the same participants fee. In addition, randomly chosen participants in the Absolute Competition were eligible to be paid a bonus based on the number of (self-reported) correct answers. And, in the Relative Competition, top 5% participants would get a bonus based on the number of (self-reported) correct answers.

The results were striking. Even though the actual performance of participants in the three conditions was similar, participants in the absolute and relative competition conditions self-reported significantly higher number of correct answers than their true scores. In fact, participants under relative competition, on average, self-reported twice the number of actual correct answers. Furthermore, the extent of cheating (over-reporting) was significantly more in the relative competition condition than in the absolute competition condition.

What do these results suggest? The moment rewards and incentives get tied to performance, the tendency for use of unethical practices increases. Moreover, the Bell-curve type of aggressive competition pushes people further down their ethical limits. Perhaps, one's behavior starts getting guided by a stronger unethical proclivity - "others are expected to cheat; so this is what it takes and I will do as well to preempt them" than it would be under absolute competition - "I will do what it takes".
 These findings raise further questions. How should incentive & reward schemes be designed within organizations? What processes and systems should be put in place in order to keep the competition at healthy levels? How can individuals be nudged away from unethical practices?

In other related studies, we have been exploring ways to reduce such unethical practices. In a set of experiments, we investigate a technique we call Unpacking. That is, unpack the unethical behavior into its consequences or into the incremental actions it involves, before actually making the decision. To see how unpacking works, let us imagine a carton box and an empty room. We want to estimate the area the box will take in the room. For most of us this reads like "will the box fit in the room?" or at best "what proportion of the room will the box take if we put it in the room, as it is?" Now, from basic geometry, the full area of a box is the space it takes when it is completely unfolded.

We all knew that. But how many of us visualized the box unpacked when we were estimating its area in the room? Chances are, we focused on the packed version of it and on the practicality of fitting it in the room.

Similarly, unpacking can bring the unethical behavior into full focus by acting as a magnifying glass to reveal implicitly present but otherwise not readily visible aspects of it. In one experiment, adults were presented with the choice of indulging in unethical behavior. To half of them (Packed Condition), the situation where they had interest in indulging in a clearly unethical behavior (e.g., cheat in an important exam) was described. To the other half (Unpacked Condition), the same situation was presented along with some possible consequences of indulging in unethical behavior (e.g., getting caught, free-riding on other's effort, false presentation of one's knowledge to the evaluator). The results showed that unpacking that unethical behavior into a set of explicit consequences worked to make the group in the unpacked condition substantially less willing to indulge in cheating.

In a follow-up study, participants were allowed to think of the consequences on their own. It was an even more serious situation: people were asked if they would fudge 3 out of 100 data points in the results of a drug's safety test, to make the drug eligible to be launched in the market. Half the participants (Packed Condition) saw a description of the situation and the other half (Unpacked Condition) were asked to think and write down possible consequences of data fudging. Again, overall participants were reluctant to indulge in data fudging, but those asked to unpack, significantly more so.

Unpacking might work fruitfully and simply in everyday situations. For our own decisions, it is a gentle reminder to give the matter a second thought. Next time you struggle with temptation, try to get out of the packed situation by simply asking yourself:
"What are the consequences of indulging, for me and for others? Who are those others?"
"What specific actions would I have to undertake?"

Not only that, findings from this research can help in intervening in unethical behaviors of others. People - and in particular higher-ups that are usually faced with many decisions of an ethical concern in organizations - are notoriously reluctant towards preaching as well as whistle-blowing. We do not really enjoy to be reminded of our shortcomings, let alone if someone implies an ethical failure in our decisions. Moreover, a direct confrontation might involve undesirable implications for the messenger rather than the message. Rather than actively suggesting, you can always offer a reminder:
"I am sure you have thought of the possible consequences of it."

"What are the specific steps we would need to take to do it?"

"Are we confident we want to go all the way down with this?"

Be it small-scale or larger-scale unethical behavior, committed by ourselves or by others, we all care when it happens. The more romantic part of us might care just for the sake of being ethical; our practical part might care for the gains that can be accrued; and our cynical part might care of what is at stake. Often we end up being surprised about how nice people could end up doing bad things. What makes you or others indulge in unethical practices? And what can you do about this?

Kriti Jain is Assistant Professor & Konstantina Tzini a Doctoral student at IE Business School. This research has received funding from the People Programme (Marie Curie Actions) of the European Union´s Seventh Framework Programme.

[This research paper has been reproduced with permission of the authors, professors of IE Business School, Spain http://www.ie.edu/]