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Ethical Challenges in Measuring Organizational Performance

Explain several ethical challenges one could incur when measuring performance within an organization?

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I have found two articles that would be useful for the question at hand. I have included the most relevant section of Wayne Norman's article and included all of Ronald Sims article as is very applicable to the question at hand. The Sims article was written in 1992 but is cited quite a bit as it is very useful, though older. The citation for Wayne Norman's article is included below.
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Just to give you some insight, one example he gives relates to ethical behavior. He discusses how something that might be illegal in the United States might be perfectly legal in a foreign country and the question becomes, "Is it ethical to partake in that illegal/legal activity if you, for example, are trying to make a sale in that foreign country (though you would not do it in the United States)?". How does that type of questionable action translate into performance measuring when compared to other, non-questionable actions?

Another issue Sims discusses relates to hazardous waste disposal. If a firm dumps their hazardous waste into public waterways, they may save a lot more money than if they built an on-site waste treatment facility or hired a company to manage their waste. From a cost minimization perspective, performance might appear to be greater for the firm that chooses to dump the waste in public waterways. However, if there becomes a cost to unethical behavior (such as dumping waste in public waterways), the way in which performance is measured changes.

Norman Wayne's article also touches on this issue. He discusses how critics of and apologists for modern business emphasize different objectives for ethical or socially responsible business. He contends that some critics will evaluate businesses largely in terms of their impact on the environment, while others will emphasize the minimization of fraud by employees and the fulfillment of fiduciary duties to shareholders.

One of the difficulties in measuring performance and the issue of ethics is that what is "ethical" is rather subjective in terms of who is measuring it. That is, how one ranks ethics and violations there of, might not parallel that of someone else. Consequently, you end up with two competing performance measures that were potentially based on very differing paradigms and, ultimately, are difficult to compare.

I think both articles will help you write a worthy paper on the topic (the Sims article also has other references should you want them). I hope this helps. Please feel free to let me know if you have any questions at all. I am happy to help.

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Journal of Business Ethics, Volume 86, Number 3, pages 257-271
"Recognizing Business Ethics: Practical and ethical challenges in awarding prizes for good c
orporate behaviour[1]
Wayne Norman, Ph.D. (Duke University)
Caroline Roux, MSc (McGill University)
Philippe Bélanger, MA (Université de Montréal)

Philosophical and Ethical Challenges

There are two different kinds of ethical challenges that a committee organizing an ethics prize will face: first, there are issues concerning the ethics, if you will, of its own operations and processes; and secondly, there are theoretical and philosophical issues about what ultimately are the most justifiable ways of evaluating and comparing the ethical performance of different firms. Here are some examples of these two very different sorts of ethical issues in reverse order: issues in ethical theory, and issues in ethical practice.

There are several overlapping ways we might sum up the general challenge for ranking the ethical practices of different firms, some of which invoke some of the deepest, most intractable issues in ethical theory.

§ There are a plurality of basic values and principles, and reasonable people can disagree about which ones are more important or fundamental in any given situation. John Rawls famously refers to this as "the fact of pluralism"; something that must be taken into account by any adequate theory of justice (or social responsibility) in a democratic society.[8]

§ This fact of pluralism is illustrated in the way critics of and apologists for modern business emphasize different objectives for ethical or socially responsible business. At the extreme, some critics will evaluate businesses largely in terms of their impact on the environment, while many business leaders will emphasize minimizing fraud by employees and fulfilling fiduciary duties to shareholders.[9]

§ Given these two observations, a prize-awarding organization seeking broad legitimacy and acceptance of its judgments will have to try to reconcile what are perhaps irreconcilable normative perspectives when it evaluates candidate firms.

§ We can also observe that it is fundamentally unclear how we can quantify levels of ethical or unethical conduct. If a person keeps the next three promises but tells one lie, has her "ethical performance" increased or decreased? If a firms donates one-million dollars to a worthy charity, but is caught dumping toxic waste, is this a net positive or net negative ethical performance? If these questions sound absurd or impossible to answer objectively, it may be because of this basic difficulty quantifying qualitative ethical evaluations (see Norman and MacDonald 2004: 249-53). And if we have difficulty quantifying one firm's ethical performance, it will be that much harder to compare the ethics of multiple firms.

§ We might also note the epistemic difficulty for any committee external to a firm (or even for insiders)[10] to gather all the information that is necessary for an informed evaluation. For some vanguard firms that have, over the past decade or so, been submitting themselves to internal and external social auditing (or "triple bottom line" accounting), this process can take a full year and involve significant corporate resources (including full-time employees engaged in stakeholder relations) and time.[11] Obviously, no prize-awarding organization can conduct such an audit of all candidate firms.

We could easily extend this list of basic issues in the justification of ethical judgments that are alive and directly relevant to the comparative evaluation of businesses. But these points already lay out some daunting challenges that earnest prize-givers must somehow attempt to negotiate. In addition, as noted, like any organization, they will have to be scrupulous about their own ethics and perceptions thereof. Consider just two of the more likely ethical concerns.

· There are general questions about fairness: including questions of whether the prize-givers' conceptions and criteria for ethical business incorporate a broad range of perspectives (for example, the perspectives of different types of stakeholders, such as investors, bankers, consumers, employees or union members, etc). Perceptions of fairness in the competition will also be influenced by the selection of particular judges and whether they reflect a range of differing perspectives about ethical business.

· And there could be general and specific questions of bias on the part of committee organizers or judges, including potential conflicts of interests if firms close to these individuals are also candidates for the prize. These potential concerns presumably require clear and transparent procedures for dealing with conflicts of interest.

All of these truncated lists of issues give us an indication of the urgency of the design challenge for anyone wishing to create a prize (or an annual ranking) for ethical businesses. A badly designed prize competition could do more harm than good. We will now turn to some of the specific options for designing competitions and evaluation methodologies

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The Challenge of Ethical Behavior in Organizations
Journal of Business Ethics
JBE
Dordrecht
Jul 1992
Authors: Sims, Ronald R.
Volume: 11
Issue: 7
Start Page: 505
ISSN: 01674544
Subject Terms: Organizational behavior
Ethics
Decision making
Corporate culture
Organizations
Corporate culture
Business ethics
Classification Codes: 9190: US
2500: Organizational behavior
2410: Social responsibility
Geographic Names: US

The imperatives of day-to-day organizational performance are so compelling that there is little time or inclination to divert attention to the moral content of organizational decision-making. Morality appears to be so esoteric and qualitative in nature that it lacks substantive relation to objective and quantitative performance. An effective organizational culture should encourage ethical behavior and discourage unethical behavior. Admittedly, ethical behavior may cost the organization. Even though ethical problems in organizations continue to greatly concern society, organizations and individuals, the potential impact that organizational culture can have on ethical behavior has not really been explored. What is needed in today's complicated times is for more organizations to step forward and operate with more positive and ethical cultures.
Copyright Kluwer Academic Publishers Group Jul 1992

It has often been said that the only constant in life is change, and nowhere is this more true than in the workplace. As one recent survey concluded, "Over the past decade, the U.S. corporation has been battered by foreign competition, its own out-of-date technology and out-of-touch management and, more recently a flood of mergers and acquisitions. The result has been widespread streamlining of the white-collar ranks and recognition that the old way of doing business is no longer possible or desirable" (U.S. News & World Report, 1989, p. 42).

As the twenty-first century approaches, companies face a variety of changes and challenges that will have a profound impact on organizational dynamics and performance. In many ways, these changes will decide who will survive and prosper into the next century and who will not. Among these challenges are the following:

(1) The challenge of international competition.

(2) The challenge of new technologies.

(3) The challenge of increased quality.

(4) The challenge of employee motivation and commitment.

(5) The challenge of managing a diverse workforce.

(6) The challenge of ethical behavior.

While these challenges must all be met by organizations and managers concerned about survival and competitiveness in the future, this paper will focus on the challenge of ethical behavior. More specifically, this paper will (1) discuss some reasons' unethical behavior occurs in organizations, (2) highlight the importance of organizational culture in establishing an ethical climate within the organization, and finally, (3) present some suggestions for creating and maintaining an ethically-oriented culture.

ETHICS AND THE CHALLENGE OF ETHICAL BEHAVIOR

The imperatives of day-to-day organizational performance are so compelling that there is little time or inclination to divert attention to the moral content of organizational decision-making. Morality appears to be so esoteric and qualitative in nature that it lacks substantive relation to objective and quantitative performance. Besides, understanding the meaning of ethics and morality requires the distasteful reworking of long-forgotten classroom studies. What could Socrates, Plato, and Aristotle teach us about the world that confronts organizations approaching the twenty-first century? Possibly a gap in philosophical knowledge exists between organizational executives and administrators of different generations. Yet, like it or not, there has and will continue to ...

Solution Summary

Performance measurement within an organization can be highly subjective, depending on the criteria. For example, critics of and apologists for modern business emphasize different objectives for ethical or socially responsible business. Some critics will evaluate businesses largely in terms of their impact on the environment, while others will emphasize the minimization of fraud by employees and the fulfillment of fiduciary duties to shareholders. Consequently, performance measurements may be difficult to compare across organizations.

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