“Big Picture” Ethics and Nonprofit Decision-making

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May 1, 2012; Source: NPR

Is acting unethically a conscious choice, or are there other factors at play?

The latest story about a nonprofit executive director, finance manager, or board member who has embezzled from their organization provokes a variety of reactions, including anger, indignation compassion (usually for the victims; rarely for the accused), and bewilderment. What causes someone in a responsible position—usually with high levels of income, education, and a solid professional reputation—to lie, cheat, or steal?

Ann Tenbrunsel, a researcher at Notre Dame who studies unethical behavior, suggests an intriguing answer. Often, it’s not a moral failing or a conscious decision to do wrong that leads people astray. Instead, the origin lies in how the decision is framed. In this NPR story, for example, the owner of a mortgage business is horrified to learn that his seemingly profitable business isn’t profitable at all. In order to preserve cash flow, keep his business afloat, and keep his employees paid, he inflates his income on a loan application. He does this despite having a strong commitment to ethical behavior, born, in large part, on his own brother’s conviction for fraud.

The term researchers use for these apparently aberrant decisions is “bounded ethicality,” meaning that it’s difficult for any of us to always see the ethical big picture. We make ethical decisions using specific, situational frameworks. Each situation has its own definitions of “right” and “wrong.” We shouldn’t lie, but that dress never makes your wife look fat. We shouldn’t lie on the business mortgage application, but lying becomes not only acceptable to us, but even a positive thing if it means keeping people employed and meeting one’s ongoing commitments.

The story is quick to point out that the theory of bounded ethicality is not an excuse for illegal or unethical acts. Rather, it is an explanation for the thought processes that accompany these illegal or unethical acts.

Knowing this presents all organizations and their leaders with a challenge: how do we assure that situational decisions are made in full knowledge of the ethical big picture? For example, how do we balance passion for mission with the need to act ethically when we’re closing in on that major gift that assures mission fulfillment? How do we remember that there are ethical considerations and standards that transcend, and hopefully influence, the current situation? As leaders, how do we infuse “big picture” ethics into our organization’s decision-making without making every daily decision a subject of ethical debate?

We would love to hear from readers on their experiences with such bounded ethicality in their own work lives. –Michael Wyland

  • Garth

    I suspect this is where the big advantage that good non-profit boards have to offer – the ‘critical distance’ of not knowing all the details – can help them keep more of a focus on the big picture, including the ethical big picture. No guarantees, but extra assurance of a strong, independent board.

  • Paul Sturm

    I teach the ‘Ethical Issues in Nonprofit Management’ course for graduate students at Notre Dame of Maryland University and share with them the best advice I received from one of my mentors who said “A nonprofit organization is a public trust. Always remember you’re spending other people’s money.”

    I take my students through several case studies and role-plays where they experience the complexities of ethical dilemmas. That said…I believe there would be far fewer scandals in the nonprofit sector if executives and managers were mindful of my mentor’s words.

  • Nathan Slovin

    It is lonely at the top and knowing this and also knowing that I could not speak with subordinates I discussed decisions I needed to make with a mentor and in later years with my Past President‘s council. Their detached position often times helped identify red flags that I was not seeing and enabled me to adjust my decision or go back to the drawing board.

    Beyond that I have followed the rule that if I could not make public my decision making process and my decision to others then I would not make the decision.

    Finally, in relation to my first point I find that many executives do not have anyone to confide in. My recommendation to anyone sitting in the top seat is to find a trusted advisor who is not afraid to speak honestly with you.