Training Intuition

By Alison Damast | Fall 2015

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Five years after its launch, the Notre Dame Deloitte Center for Ethical Leadership offers some surprising insights into why employees behave ethically — or don’t — in tough situations

Ethics training programs often are designed with the premise that employees go through a deliberative thought process when faced with an important decision. For example, if a high-ranking vice president at a multinational corporation is offered a lucrative bribe, an ethics and compliance officer might assume that the executive would logically progress through a reasoned framework before coming to a decision.

That assessment might go something like this: What are my company’s policies on this issue? What are our corporate values? How do they apply here? Is this truly a bribe or have I misunderstood? How will I benefit? What are the possible consequences? What impact will this have on various stakeholders?

As it turns out, this reasoning does not always happen that way in real life, said Adam Kronk (MNA ’09, ’02), program director of the Notre Dame Deloitte Center for Ethical Leadership (NDDCEL).

“If you are put in a tough situation, you’ll most likely have some kind of gut-level, pre-programmed response,” Kronk said. “You aren’t always going to reason through a decision like a perfectly rational human. And when we teach and train as if you always will, then we miss some huge opportunities to have an impact on ethical behavior.”

Grasping those crucial opportunities is one of the prime drivers behind the Center, which has been making a name for itself in the ethics community during the five years of its existence. Established with a gift from Deloitte to help advance ethical behavior in the business world, the Center’s research seeks to shape diverse issues, from how companies conduct performance reviews to how they design ethics policies that resonate with millennial employees.

It’s common for ethics centers housed at universities to focus their work on corporate social responsibility, sustainability and macro-level strategy, all of which are important. This Center concentrates on behavioral ethics, integrating insights from fields such as neuroscience and psychology to figure out what makes people tick and how to have a positive impact on that process.

The research that has emerged from the field in the past 15 years has the potential to change how companies approach everything from hiring to training to culture building. Some have used the term “character ethics” for this work, but Edward Conlon, the Center’s faculty director and the Edward Frederick Sorin Society Professor of Management at the Mendoza College of Business, believes that term can be misleading.

“Character ethics makes it sound like we want to go out and change someone’s personality and who they are,” he said. “We’re interested in improving the likelihood that your employee will make business decisions ethically and how you can influence behavior in the workplace.”

The Center’s core mission is helping businesses understand how individual character, values and integrity play an important role in creating a positive and ethical workplace culture, Kronk said. As part of this goal, the Center funds several research studies each year to examine trends in the field.

“What we do is act as a bridge between the headway made in academic research and the interest of the corporate world in having a positive impact in those areas,” Kronk said.

For example, the Center is funding work by F. Asis Martinez-Jerez, an assistant accountancy professor at Mendoza, who is looking at the impact that disciplinary action at companies has on employees. The findings may surprise some. “It turns out disciplinary actions don’t necessarily increase ethical behavior,” Conlon said. “In fact, they can have a negative effect.”

Another NDDCEL-funded study by Mendoza Assistant Professor of Management Emily Block examines how the reputation and history of a firm can affect the extent to which people report ethical violations.

Beyond Notre Dame, the Center is helping Taya R. Cohen, an associate professor of organizational behavior and theory at Carnegie Mellon’s Tepper School of Business, study how companies can identify the moral character of a job applicant in an interview context. Until now, companies interested in finding out this information have given paper-and-pencil personality tests. That method is effective up to a point, Conlon said. “But companies don’t always want to do that, particularly if they are interviewing someone at a more advanced level.”

The Center highlights many of these projects’ findings via a feature on its website called, “To The Point: Dispatches from the Ethical Frontier.” The one-page essays summarize the studies in a much more digestible format for executives, Kronk said, and the hope is that the simplified versions will allow them to take these important research findings and apply them to their workplace or the classroom.

For example, one of the dispatches, “It Ain’t All Bad (Or At Least It Shouldn’t Be): Why Ethics Education Needs to Stay Positive,” summarizes a study from the Southampton Management School that looks at why focusing on examples of ethical breaches in the business world, such as Enron or other high-profile
scandals, in ethics classes and trainings may be the wrong way to introduce the subject. It could, in fact, reduce the likelihood that individuals will behave in an ethical manner.

That’s a finding Kronk puts to use on the first day of his undergraduate class on business ethics each semester. He points out to his students how the opening chapter of the textbook focuses on an executive who went to prison for 14 years for attempting to fix the London interbank offered rate (Libor) scandal. Then, instead of belaboring that negative example, he encourages them to consider what qualities of ethical leaders they hope to emulate as they launch their careers.

“I start class by basically saying the example in the textbook is, ironically, a lousy way to start an ethics course,” he said. “If we focus so much on the things that are going wrong, then we are creating a norm, an expectation that that is what people do. It reduces students’ self-efficacy, the sense they have that they can make a difference and ask more of business.”

Another popular feature on the Center’s website is a series of video interviews with CEOs who come to the Notre Dame campus, in which they talk about their personal experiences with ethics in the workplace. Each video is accompanied by teaching notes from the Center that suggest ways the executive’s insights in this area can be discussed in a group setting. The most popular video features Weston Smith, the former CFO of HealthSouth, who talks about the fraud he committed that eventually landed him in prison. In other videos, CEOs reflect on the tough ethical calls they had to make during their careers and how that benefited them and their companies in the long term.

Beyond the resources available to business practitioners on the website, the Center’s staff works throughout the year to convene business leaders and scholars. The Center’s flagship event is its annual forum, which took place this year in Dallas, and brought together 40 corporate leaders and scholars. Attendees ranged from Google’s Mary Kate Stimmler, a people analytics expert, to Mary Gentile, the author of the Giving Voices to Values college curriculum. (Mendoza was one of the first schools to teach an ethics course specifically based on that curriculum, and now offers an elective each semester as an addition to the required business ethics course for all business majors.)

Plans are in the works for the fifth annual forum in Chicago in April 2016, which will focus on how best practices from design thinking can be used to help executives rethink their companies’ ethics programs.

Kronk and his colleagues also spend time counseling C-suite leaders looking to better shape their organization’s workplace culture and ethics policies. For example, Kronk has been in conversation with the U.S. Navy’s Adm. John M. Richardson after a cheating scandal surfaced in the Navy’s nuclear propulsion program in Charleston, S.C.

Kronk discussed with the admiral how the culture of the program and the tension between officers’ loyalty to their peers and their respect for the Navy’s chain of command may have contributed to the problem. They discussed options for more intentionally weaving ethics training into all aspects of on-the-job training within the Navy, rather than compartmentalizing it in a stand-alone two-hour class. “Organizations who do ethics training this way really increase the odds of it
sticking later on,” Kronk said.

This past May, the Center organized a roundtable with business executives from the financial services industry, after learning last fall that financial regulators would
be looking at workplace culture and ethics more closely when doling out penalties under the U.S. Federal Sentencing Guideline. The event enabled these leaders to speak candidly, learn from one another and strategize about ways to foster ethical behavior at every level of their firms.

As NDDCEL moves into its fifth year, it is taking on some larger and ambitious research projects. It is currently funding a study by Mike Mannor, an associate professor of management at Mendoza, that will create an open-source database to catalogue public CEO’s values, virtues and characteristics based on 20 years of raw data from earning calls, letters to shareholders and other sources. “We’re hoping to potentially get to a point where we can correlate the values CEOs have with the performance of their organizations,” Kronk said.

Meanwhile, the Center’s staff is in the midst of writing its own book that addresses how companies can better train employees. The premise of the book is based around the earlier referenced finding that people don’t only make ethical decisions in a deliberative manner — they also rely heavily on intuition. The book will unpack that concept and give guidance on how companies can structure various elements of their companies differently to take this reality into account.

But perhaps the Center’s greatest impact so far has been “elevating the conversation” among executives from a focus on compliance to a focus on how to build an ethical culture, Kronk said.

“It’s in the news constantly, whether it is an individual or organization being fined or taken to task for doing something they shouldn’t have done,” he said. “But people are tired of hearing about wrongdoing, tired of feeling helpless to stop it. We seek to offer practical insights and tangible solutions to these problems. The appetite for our work is increasing every day.” ethicalleadership.nd.edu