Goals, Processes and Rationality: A Parable and a Framework Marc Le Menestrel

Session’s Menu  The parable of the Sadhu (discussion)  A Methodological Framework (lecture)

The Parable of the Sadhu  Attainment of goal is threatened by unexpected event  Adverse decision-making conditions  Ethical dilemma between attainment of a major goal and respect of a moral obligation  Human conflict in intensity of moral values  Difficulty in the (re)assessment of the goal  Breach of leadership responsibility

Goals and Success  Sometimes, goals are attained but reward is not there…  Sometimes, goals are not attained but experience is gained and happiness is felt…  What is in success but beyond goals? What is the rational path towards genuine success?

What is Behavior?  It comes from an actor: an individual or a group of individuals (e.g. a company);  It is a transformation of the world: an action or a process;  It has an outcome: a consequence. A Behavior is an Action with its Consequences

What is Rational Behavior?  It is a behavior that is chosen intentionally and purposefully by the actor;  Among the available behaviors, the rational behavior is the preferred one. How does an actor choose the rational behavior?

The Consequence of choice  For each available action, the actor evaluates the consequences for him/her;  The best consequence is identified, from the point of view of the self-interest of the actor. Is the action with the best consequence for the actor the one to be rationally chosen?

A Word from Common Sense The end does not justify the means

The Process of choice The actor may also prefer an action relatively to another, because:  of some intrinsic pleasure in the action itself (virtue)  of some ethical principle that the action respects (deontology)  of the consequences of the action for others or for the environment (altruistic consequences) Ethical values help to identify and make explicit intrinsic preferences over actions, as ends in themselves, beyond the self-interest of their consequences.

? Ethical analysis of actions Dual Analysis Self-interest analysis of consequences The distinction between self-interest (of consequences) and ethics (of actions) is somehow conventional But it acknowledges the importance of self-interest as a motivation And connects with the model of economic rationality

A Framework of Open Rationality 1. Economic Analysis 2. Ethical Analysis 3. Ethical Dilemma 4. Dynamic Analysis

1. Economic Analysis The rational actor (you, the team, the firm) 1. Anticipates the consequences of the available actions 2. Evaluates these consequences according to their interest for the actor 3. Identify the action that leads to the best consequence Interest of the consequence ? Step 1: What is the action that leads to the best consequence for you?

2. Ethical Analysis To which extent is it ethical? Emotions/Virtue: Do I feel good? Is this a natural way to act? Deontology/Idealism: What sort of principle, rule or norm do I respect? What happens if everybody does the same? What happens if I always act like this? Utilitarianism/Consequentialism: What are the good consequences for others? Would I like these consequences for myself? What are the good consequences for the environment? Would the children of my children like these consequences? To which extent is it unethical? Emotions/Virtue: Do I feel bad? Is this an unnatural way to act? Deontology/Idealism: What sort of principle, rule or norm do I violate? What happens if everybody does the same? What happens if I always act like this? Utilitarianism/Consequentialism: What are the bad consequences for others? Would I suffer these consequences for myself? What are the bad consequences for the environment? Would the children of my children dislike these consequences? Step 2: What is the ethics of the action that leads to the best consequence for you? ? Here you raise an ethical dilemma!Here you justify your interest!

3. Ethical Dilemma Step 3: Facing the extent to which there is a dilemma Prudence: Could the unethical aspects lead to unexpected negative consequences? ? Unethical aspects of behavior More ethical alternative Vision:Can you find a more ethical alternative? Imagination: If the consequences of the alternative affect your interest, cannot they be improved? ? ?

The Dilemma of Buzz Mc Coy Prudence: Could Buzz have anticipated the reaction of Steven and the guilt he will feel? Leave the Sadhu Bring the Sadhu to his monastery Vision:Could Buzz have envisioned bringing the Sadhu back? Imagination: Could Buzz have realized that this was an opportunity? ? ? Attain his goal Feel guilt all his life Fail his goal Discover Buddhism

Open Rationality Less ethicalMore Ethical Better Worse Ethical Values Interest Ideal Rational choices between interest and ethics are often kept hidden, but they are the most difficult: We can rationally give priority to interest, and sacrifice ethics We can rationally give priority to ethics, and sacrifice interest Irrational Priority to interest Priority to ethics

4. Dynamics Analysis Ideal If you are in the ideal position, you may not be lucky for very long Irrational Priority to interest Priority to ethics Lack of transparency Legal pressure Liabilities Bad Reputation PR costs Negative motivation Managerial inertia Transparency Social involvement & support New scope of activities New business processes Long term thinking Strategic investment Positive motivation Learning process Increasing demands (legal, social) Credibility ambiguous Contentment, lack of vigilance Unawareness, rationalization If you give priority to interest, you will need reactive strategies to survive If you give priority to ethics, you may find help for your proactive strategies

A Difficult Strategy… Few ones are going to believe it, Outside or inside the company… Ideal Irrational Priority to interest Priority to ethics

A Reactive Strategy… We wait for change to become necessary But it can be very dangerous… Ideal Irrational Priority to interest Priority to ethics

A Proactive Strategy… We are likely to be more credible, And more motivated for change… Visionary Leaders Welcome! Ideal Irrational Priority to interest Priority to ethics

Conclusions It is easy not to see ethical dilemmas: you just have to find a good justification for the action leading to the best consequence! It is not easy to see ethical dilemmas: it questions ourselves and it does not look fun… It can be rational to be ethical sacrificing your interest, or to sacrifice ethics for your interest: the choice remains yours It is difficult, but helpful, to search for ethical dilemmas beforehand if you want to have a chance not to be trapped by them and anticipate their dynamics

Next session Accounting Practices: the Enron Collapse Preparation: What do you think of S. Watkins attitude and behaviour? How would you blow the whistle? Reading: Watkins, S.S. “Ethical Conflicts at Enron: Moral Responsibility in Corporate Capitalism” Currall, S.C. & Epstein, M.J., “Lessons from the Rise and Fall of Enron “