As leaders, we need to treat our customers, employees, suppliers and communities in the right way and operate our companies in an ethical manner. This is how to ensure sustainability and maximize shareholder returns over the long term.
7 leadership principles that apply to all businesses
Pursue mission-critical objectives with a laser-like focus. Spare no expense committing both talent and capital resources to ensure these objectives will be achieved. Commit these resources as early as possible. It is better to overcommit resources than under commit them, which may jeopardize the outcome.
Practice your profession with ethics and integrity
Excerpt from a graduate oath. Words business leaders, political leaders and other professionals should live by: “In exercising my professional duties, I recognize that my behavior must set an example of integrity, eliciting trust and esteem from those I serve. I will remain accountable … for upholding these standards.”
DeSantis vs. Disney demonstrates the rule of unintended consequences
The Supreme Court has held, “The First Amendment prohibits government officials from subjecting an individual to retaliatory actions, including criminal prosecutions, for speaking out.” The right of corporations to speak out on issues has always been a cherished value of the Republican Party. DeSantis is violating that value.
No, Mr. Shkreli, price-gouging customers is not taught in MBA class
Business schools that teach to maximize shareholder value but don’t emphasize the importance of ethics, integrity and the need to be a good corporate citizen are shortchanging their students and the companies they will work for.
Lawmakers must avoid conflicts of interest
Why don’t all lawmakers hold themselves to the same conflict of interest standard as decision makers in corporate America?
Warren Buffett on ethics and integrity
In speech to MBA students, Warren Buffett, said, “There are three things in hiring people [that you] should look for: integrity, intelligence, and energy. If the person doesn’t have the first … the latter two will kill [you].”
The Business Roundtable: Generate shareholder value while acting as a good corporate citizen
More CEOs should adopt the Business Roundtable’s principles. More business schools should administer the MBA Oath at commencement. It’s the right thing to do.
Tragic death at Bowling Green fraternity due to failure to fulfill fiduciary responsibility
Especially due to the power differential, fraternities have a fiduciary responsibility to keep their pledges safe.
Leaders need to show grace in defeat
On Nov. 7, Joe Biden won the 270 electoral votes required to win the presidency. All eyes are now on President Donald Trump.
Universal principles for all entrepreneurs
During a group discussion with designers in residence at the Philadelphia Fashion Incubator about entrepreneurship, we review what it takes to build a successful business.
Be Aware of the Unintended Consequences of Your Decisions
Article originally published in the Philadelphia Business Journal on July 30, 2018
Nearly all of us have heard the term “unintended consequences,” but we may not be aware of how to avoid them. In February 2018, in the publication The Library of Economics and Liberty, Robert Norton wrote, “The law of unintended consequences, often cited but rarely defined, is that actions of people – and especially of government – always have effects that are unanticipated or unintended.”
When the unintended consequence of a decision is favorable, there is never an issue. The favorable outcome is considered a bonus. When the unintended consequence is adverse, depending on its impact, the decision-making process is questioned, as is the leader who made the decision.
In his article, Norton wrote about sociologist Robert Merton, who in 1935 identified the causes of unintended consequences – three of which are in the control of the decision maker. I would like to focus on these three causes: ignorance, error and immediacy of interest.
Ignorance and error
In both of these cases, leaders make decisions on issues without considering the unintended consequences, or before needed information is obtained. These are decisions that are not well thought out nor operationalized.
During my tenure as the CEO of our company, I sat through meetings at which the management of a business unit presented their plan to enter a new market without any consideration of the unintended consequence of a competitive response and how it would impact our company’s market entry.
I would ask, is the market growing at a sufficient rate to absorb a new supplier without a competitive response? Will competitors respond by price cutting, or in a different way? What differentiates our product in the marketplace to limit a competitive response? Why would customers switch buying from their incumbent supplier and decide to buy from our company?
How competitors might respond to a new market entry is unknown. A leader will often need to make a decision, but the information desired to make a fully informed decision is not available. Before making that decision, effective leaders listen to the opinions of their experts and they fall back on their own experience, common sense and good critical judgment. This is how they de-risk a decision and minimize the chance of unintended consequences.
Immediacy of interest
Merton describes the type of decision where “someone wants the intended consequence of an action so much that he purposefully chooses to ignore any unintended effects,” to the peril of the decision maker and the organization.
NASA’s decision to launch the space shuttle Challenger on Jan. 28, 1986 against the advice of the Thiokol engineers is an example of a decision driven by immediacy of interest. NASA had promised Congress a too aggressive and unrealistic launch frequency. The pressure to meet this schedule resulted in a catastrophic decision to launch the Challenger in adverse temperature conditions, well below the ambient temperature for which the solid rocket booster O-rings were designed.
Upon hearing Thiokol’s recommendation to delay the launch due to risks to the astronauts and the shuttle, one of the NASA officials stated, “I am appalled by your recommendation.” Another NASA official stated, “My God, Thiokol, when do you want me to launch – next April?” NASA launched Challenger, and shortly after the launch the O-rings failed, resulting in an explosion and the catastrophic deaths of seven astronauts and loss of the shuttle.
What is the cause of immediacy of interest type decisions? Certainly, hubris is one cause. Dictionary.com defines hubris as “excessive pride or self-confidence, arrogance. Arrogant leaders are rarely if ever successful over the long term.
Another cause of immediacy of interest decisions is the pressure to act, which in and of itself is a way of achieving results. However, at what risk and at what cost? How many times do we read in the press about unethical or illegal acts that were committed due to the pressure to get something done? These situations eventually almost always become public, adversely impacting the reputations of the individuals and organizations involved. The reputations of organizations recover over time. Those of the individuals never do.
How do you avoid immediacy of interest decisions? If you are the boss, set high expectations for achieving great results, but make it clear to the organization that it must be done in an honest and ethical manner. No other way is acceptable.
Surround yourself with people who will tell you what they think, not what you want to hear. Listen to your experts. They know more about the unintended consequences than you do. And remember, what you do reflects not only on you, but on your organization and your colleagues as well. Don’t let them down.
Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.