Effective decision-making is the cornerstone of any thriving business. According to a survey of 760 companies cited in the Harvard Business Review, decision effectiveness and financial results correlated at a 95 percent confidence level across countries, industries, and organization sizes.
Yet, making ethical decisions can be difficult in the workplace and often requires dealing with ambiguous situations.
If you want to become a more effective leader, here’s an overview of why ethical decision-making is important in business and how to be better at it.
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DOWNLOAD NOWThe Importance of Ethical Decision-Making
Any management position involves decision-making.
“Even with formal systems in place, managers have a great deal of discretion in making decisions that affect employees,” says Harvard Business School Professor Nien-hê Hsieh in the online course Leadership, Ethics, and Corporate Accountability. “This is because many of the activities companies need to carry out are too complex to specify in advance.”
This is where ethical decision-making comes in. As a leader, your decisions influence your company’s culture, employees’ motivation and productivity, and business processes’ effectiveness.
It also impacts your organization’s reputation—in terms of how customers, partners, investors, and prospective employees perceive it—and long-term success.
With such a large portion of your company’s performance relying on your guidance, here are seven ways to improve your ethical decision-making.
7 Ways to Improve Your Ethical Decision-Making
1. Gain Clarity Around Personal Commitments
You may be familiar with the saying, “Know thyself.” The first step to including ethics in your decision-making process is defining your personal commitments.
To gain clarity around those, Hsieh recommends asking:
- What’s core to my identity? How do I perceive myself?
- What lines or boundaries will I not cross?
- What kind of life do I want to live?
- What type of leader do I want to be?
Once you better understand your core beliefs, values, and ideals, it’s easier to commit to ethical guidelines in the workplace. If you get stuck when making challenging decisions, revisit those questions for guidance.
2. Overcome Biases
A bias is a systematic, often unconscious inclination toward a belief, opinion, perspective, or decision. It influences how you perceive and interpret information, make judgments, and behave.
Bias is often based on:
- Personal experience
- Cultural background
- Social conditioning
- Individual preference
It exists in the workplace as well.
“Most of the time, people try to act fairly, but personal beliefs or attitudes—both conscious and subconscious—affect our ability to do so,” Hsieh says in Leadership, Ethics, and Corporate Accountability.
There are two types of bias:
- Explicit: A bias you’re aware of, such as ageism.
- Implicit: A bias that operates outside your awareness, such as cultural conditioning.
Whether explicit or implicit, you must overcome bias to make ethical, fair decisions.
Related: How to Overcome Stereotypes in Your Organization
3. Reflect on Past Decisions
The next step is reflecting on previous decisions.
“By understanding different kinds of bias and how they can show themselves in the workplace, we can reflect on past decisions, experiences, and emotions to help identify problem areas,” Hsieh says in the course.
Reflect on your decisions’ processes and the outcomes. Were they favorable? What would you do differently? Did bias affect them?
Through analyzing prior experiences, you can learn lessons that help guide your ethical decision-making.
4. Be Compassionate
Decisions requiring an ethical lens are often difficult, such as terminating an employee.
“Termination decisions are some of the hardest that managers will ever have to make,” Hsieh says in Leadership, Ethics, and Corporate Accountability. “These decisions affect real people with whom we often work every day and who are likely to depend on their job for their livelihood.”
Such decisions require a compassionate approach. Try imagining yourself in the other person’s shoes, and think about what you would want to hear. Doing so allows you to approach decision-making with more empathy.
5. Focus on Fairness
Being “fair” in the workplace is often ambiguous, but it’s vital to ethical decision-making.
“Fairness is not only an ethical response to power asymmetries in the work environment,” Hsieh says in Leadership, Ethics, and Corporate Accountability. “Fairness–and having a successful organizational culture–can benefit the organization economically and legally as well.”
It’s particularly important to consider fairness in the context of your employees. According to Leadership, Ethics, and Corporate Accountability, operationalizing fairness in employment relationships requires:
- Legitimate expectations: Expectations stemming from a promise or regular practice that employees can anticipate and rely on.
- Procedural fairness: Concern with whether decisions are made and carried out impartially, consistently, and transparently.
- Distributive fairness: The fair allocation of opportunities, benefits, and burdens based on employees’ efforts or contributions.
Keeping these aspects of fairness in mind can be the difference between a harmonious team and an employment lawsuit. When in doubt, ask yourself: “If I or someone I loved was at the receiving end of this decision, what would I consider ‘fair’?”
6. Take an Individualized Approach
Not every employee is the same. Your relationships with team members, managers, and organizational leaders differ based on factors like context and personality types.
“Given the personal nature of employment relationships, your judgment and actions in these areas will often require adjustment according to each specific situation,” Hsieh explains in Leadership, Ethics, and Corporate Accountability.
One way to achieve this is by tailoring your decision-making based on employees’ values and beliefs. For example, if a colleague expresses concerns about a project’s environmental impact, explore eco-friendly approaches that align with their values.
Another way you can customize your ethical decision-making is by accommodating employees’ cultural differences. Doing so can foster a more inclusive work environment and boost your team’s performance.
7. Accept Feedback
Ethical decision-making is susceptible to gray areas and often met with dissent, so it’s critical to be approachable and open to feedback.
The benefits of receiving feedback include:
- Learning from mistakes.
- Having more opportunities to exhibit compassion, fairness, and transparency.
- Identifying blind spots you weren’t aware of.
- Bringing your team into the decision-making process.
While such conversations can be uncomfortable, don’t avoid them. Accepting feedback will not only make you a more effective leader but also help your employees gain a voice in the workplace.
Ethical Decision-Making Is a Continuous Learning Process
Ethical decision-making doesn’t come with right or wrong answers—it’s a continuous learning process.
“There often is no right answer, only imperfect solutions to difficult problems,” Hsieh says. “But even without a single ‘right’ answer, making thoughtful, ethical decisions can make a major difference in the lives of your employees and colleagues.”
By taking an online course, such as Leadership, Ethics, and Corporate Accountability, you can develop the frameworks and tools to make effective decisions that benefit all aspects of your business.
Ready to improve your ethical decision-making? Enroll in Leadership, Ethics, and Corporate Accountability—one of our online leadership and management courses—and download our free e-book on how to become a more effective leader.
