Do the Right Thing When No One is Looking - Participant Booklet - Learnexus
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Do the Right Thing When No
One is Looking
Participant Booklet
©Level Five Associates, LLC 2018 1Your Personal Leadership Philosophy Over the past few weeks you have been crafting your Personal Leadership Philosophy. Remember that this is a living document and can change over time to fully reflect you and your leadership commitment. You should continue to make changes to your PLP over the course of these leadership sessions as we explore different topics. Find a partner and share your current Personal Leadership Philosophy. One person shares while the other listens empathetically (remember what you learned earlier). Give each other feedback. Write your reflections here from the feedback from your colleague. When will it get tough to stick to the philosophy? When will it be difficult to put it into practice? What will you do to stay committed to it? ©Level Five Associates, LLC 2018 2
Exercise 1: It happens all the time
Bernie Madoff
Madoff’s Ponzi scheme racked up enormous losses: more than 15,000 claims approaching $300 million
in damages, and $64.8 billion in paper profit was wiped out. Madoff sold most of his investments
through feeder funds; that is, other funds that either marketed their access to Madoff to potential
investors or claimed they had access to some exotic investment strategy. In reality, the feeder funds
were doing nothing more than turning much of the money they collected to Madoff…It is now clear that
Madoff was a crook, and his purposeful, deceitful behavior lies outside of the focus on unintentional
ethical behavior. Yet we are fascinated by the harmful behavior of so many other people in this story,
people who had no intention of hurting Madoff’s eventual victims. Many analysts have now concluded
that outperforming all kinds of markets, as Madoff did, is statistically impossible. Ample evidence
suggests that many feeder funds had hints that something was wrong, but lacked the motivation to see
the evidence that was readily available.1
How and why did the managers of the feeder funds fail to notice that Madoff’s performance reached
a level of return and stability that was impossible?
Challenger 1986
On January 27, 1986, the night before the launch, engineers and managers from NASA and from shuttle
contractor Morton Thiokol met to discuss whether it was safe to launch the Challenger at low
temperatures. In seven of the shuttle program’s twenty-four previous launches, problems with the O-
rings had been detected. Now, under intense time pressure, Morton Thiokol engineers hurriedly put
together a presentation. They recommended to their seniors and to NASA personnel that the shuttle not
be launched at low temperatures, citing their judgment that there was a connection between low
temperature and the magnitude of these past O-ring problems.
NASA personnel reacted to the engineers’ recommendation not to launch with hostility, according to
Roger Boisjoly, a Morton Thiokol engineer who participated in the meeting. In response to NASA’s
negative reaction to the recommendation not to launch, Morton Thiokol managers asked for the chance
to caucus privately. “Just as (NASA manager) Larry Mulloy gave his conclusion,” writes Boisjoly, Morton
Thiokol manager “Joe Kilminster asked for a five-minute, off-line caucus to re-evaluate the data and as
soon as the mute button was pushed, our general manager, Jerry Mason, said in a soft voice, ‘We have
to make a management decision.”
In the caucus that followed, “No one in management wanted to discuss the facts,” writes an incensed
Boisjoly… Against the objections of their own engineers, the four Morton Thiokol senior managers
1
Bazerman & Tenbrunsel, Blind Spots, 2011, p10-11
©Level Five Associates, LLC 2018 3present voted to recommend the launch. They gave their recommendation to NASA, which quickly
accepted the recommendation to launch.
The most startling aspect of this story is the data that engineers analyzed when trying to determine
whether low temperatures were connected to O-ring failure. NASA and Morton Thiokol engineers
argued about the possible role of temperature based on the fact that low temperatures were present
during many of the seven launches that had O-ring problems. They were well-experienced engineers
with rigorous analytic training. Yet no one at NASA or Morton Thiokol asked for the temperature for the
seventeen past launches in which an O-ring failure had not occurred. An examination of all the data
shows a clear connection between temperature and O-ring failure, and that the Challenger had a 99
percent chance of failure. But because the engineers were constrained in their thinking, they only
looked at the subset of the available data and missed the connection.2
The management team no longer viewed this as an ethical decision. Jerry Mason reportedly decided
to treat the decision as a “management decision”. What were the powerful and arguably dangerous
informal values that influenced their behavior?
What about the engineers? What should they have done differently?
Ford Pinto
In the early 1970s, the Ford Pinto’s gas tank was found to explode at an unacceptable frequency during
rear end collisions. And because the car doors jammed up during these accidents, numerous people
died. In the aftermath of the scandal, the decision process that led to the Pinto’s faulty design was
scrutinized. Under intense competition from Volkswagen, Ford had rushed the Pinto into production in a
significantly shorter time period than was usually the case. The potential danger of ruptured fuel tanks
was discovered in preproduction crash tests, but with the assembly line ready to go, the decision was
made to manufacture the car anyway. The decision was based on a cost-benefit analysis that weighed
the minimal cost of repairing the flow (about $11 per vehicle at the time) against the cost of paying off
potential lawsuits following accidents. Ford deemed it would be cheaper to pay off lawsuits than to
make the repair. The Pinto was manufactured with its faulty design for eight more years.
We suspect that none of the Ford executives who were involved in this now-notorious decision would
have predicted in advance that they would make such an unethical choice. Nonetheless, they made a
2
Bazerman & Tenbrunsel, Blind Spots, 2011, p14-15
©Level Five Associates, LLC 2018 4choice that maimed and killed many people. Why? It appears that, at the time of the decision, they
viewed it as a “business decision” rather than an “ethical decision”. 3
Why did the Ford executives make such an unethical choice?
The Theranos Deception
Elizabeth Holmes dropped out of Stanford at 19 to start a patch drug delivery system company named
Theranos. By 2003, she had received her first million dollars, hired employees and rented a lab. She
continued to successfully raise huge amounts of money, and by 2014 had $400 million in cash and a
market value of $9 billion. The focus of the company changed from the drug-delivery patch to blood
analysis from a single finger-prick. The company developed proprietary nanotainers to collect the drop
of blood to be analyzed in Edison, their blood-testing device. The process was marketed as being able to
test for up to 70 different markers from the drop of blood collected in a pain free, inexpensive and quick
way. Results would be available in hours at half the cost of Medicare/Medicaid reimbursement rates.4
In 2011 her Board of Directors had added former Secretary of State George Schultz, former Secretary of
State Henry Kissinger, former Secretary of Defense William Perry and former Senator Sam Nunn.
A cover feature in Fortune in 2014 brought wide-spread attention to Theranos and Elizabeth Holmes
which led to more media coverage. The stories touted the wonderful and mysterious technology.
Holmes would not discuss specifics claiming proprietary information and trade secrets.5
Enter Tyler Schultz, grandson of George Schultz. He had first met Elizabeth Holmes in late 2011 while a
junior at Stanford. He became enthralled with Holmes’s vision and passion, became an intern, and then
an employee of Theranos. He first worked with the assay validation team whose job it was to validate
and document the accuracy of blood tests run on the Edison machine. What he found, though, was that
the results were inconsistent with retests on the same samples showing drastic differences.
Tyler concluded that Theranos was disregarding the most outlying results to cut down the variability
factor, which had the potential of overstating the success of the system’s ability to identify disease. He
gave one example of a test for an STD that Theranos claimed was accurate 95% of the time, while his
research indicated 65% to 80% accuracy. This meant that 20-35 people out of 100 would be told they
were disease-free, when in fact they were not.6
Schultz believed Theranos President Sunny Balwani put pressure on lab employees to ignore the results
that failed the standards. With his famous grandfather George Schultz and other luminaries as board
members at Theranos, Tyler Schultz was concerned that their reputations could be affected by the
3
Bazerman & Tenbrunsel, Blind Spots, 2011, p70
4
Nick Stockton, “Everything You Need to Know About the Theranos Saga So Far,” May 4, 2016.
https:/www.wired.com/2016/05/everything-need-know-theranos-saga-far/
5
Stockton, “Everything You Need to Know.”
6
John Carreyrou, “Whistleblower Shook Theranos and his Family,” Wall Street Journal, November 17, 2016.
©Level Five Associates, LLC 2018 5eventual exposure that senior management at Theranos was engaged in fraud. This included the
president Sunny Balwani, and the founder Elizabeth Holmes.
In early 2014 he contacted Elizabeth Holmes directly to explain what he had observed.
She referred him to Daniel Young, a Theranos VP in charge of biostatistics who claimed additional
measures were being used that verified the validity of the Edison results. Schultz anonymously sent a
complaint to New York state’s public health lab in March 2014 accusing Theranos of manipulating the
process of proficiency testing used by regulators to monitor the accuracy of lab results. Again notifying
Holmes he had identified “doctored research and ignored failed quality-control results” and receiving no
response, Schultz quit Theranos. In early 2015, he became a confidential source for John Carreyrou, a
Wall Street Journal reporter.
Carreyrou didn’t trust the secretive nature of the company and the lack of detailed data to support their
claims.7 He also noted that there had been no traditional peer reviews of their work. Upon completing
his investigation on October 15, 2015, he published his findings in the Journal. The resulting cascade of
journalism on the issue eventually shut down the Edison project. Lawsuits led to revelations of false
claims of the military using it on the battlefield, false endorsements by drug companies and a
terminated partnership with Walgreens.
March 14, 2018 the SEC found Holmes guilty of fraud, fined her $500,000, forced her to give up 19
million shares and ruled she cannot be an official of any public company for 10 years. Federal
prosecutors may still pursue criminal charges.
The elder Schultz remained on the Theranos board until 2015 and moved to a role on their Board of
Counselors.
1. What were the influences that might have enticed senior management at Theranos to commit
the crimes they did?
2. How do companies and individuals begin to do the wrong things?
3. What leader mistakes were taking place in Theranos?
4. How should the Theranos senior leadership have reacted when Tyler Schultz first raised his
concerns?
5. What pressures do you and your leaders face in doing the right thing, every day?
7
Stockton, “Everything You Need to Know.”
©Level Five Associates, LLC 2018 6Exercise 2: Character assessment using Keil’s Return on Character matrix
If your team were to rate you on each section of the ROC matrix, how would you score? Try to be as
honest as possible with yourself. Think about how these relate to the topics covered in the other
sessions.
Keil’s Marix
Element
Integrity- Telling the truth; acting consistently with principles, values, and beliefs
(walking the talk); standing up for what is right; keeping promises.
Never Always
Where could you improve?
Head
Responsibility- Owning ones’ personal choices; admitting mistakes and failures;
expressing concern for the common good.
Never Always
Where could you improve?
Forgiveness- Letting go of one’s mistakes; letting go of others’ mistakes; focusing on
what’s right versus what’s wrong.
Never Always
Where could you improve?
Heart Compassion- Empathizing with others; empowering others; actively caring for others;
committing to others’ development.
Never Always
Where could you improve?
©Level Five Associates, LLC 2018 7Exercise 3: Integrity – A closer look Integrity is very important in leadership. There is a strong business case for integrity (as discussed above). It is also a key way to build trust. The only way to have it is to live it. The leader must embody it, every day. Every day there are opportunities to live according to your word and to role model integrity for your team. Consider a regular day and answer the following questions: What are the behaviors that show you have integrity? What are the behaviors that show you do not have integrity? ©Level Five Associates, LLC 2018 8
Exercise 4: Why is it so hard? Do not place false hope in an “ethical organization.” We all fall prey to psychological default settings—it is part of being human. People have the ability to maintain a belief while acting contrary to it. The leader must persistently encourage and model how to “do the right thing.” Great organizations develop habits and behaviors that help narrow the gap. At the point of decision: Groupthink Groupthink is the cohesive tendency to avoid a realistic appraisal of an alternative course of action in favor of unanimity. Group work is the building block of organizations but can also create ethical gaps. How does “groupthink” show up in your organization or department? What does it look like? Can you think of an example? What habits can a leader develop to help mitigate “groupthink?” Bounded awareness Bounded awareness refers to the common tendency to exclude important and relevant information from our decisions by placing arbitrary and dysfunctional bounds around our definition of a problem. This is why we experience gaps between who we believe ourselves to be and who we actually are. It results in the failure to see information that is relevant to our personal lives and professional obligations. How does “bounded awareness” show up in your organization or department? What does it look like? Can you think of an example? What habits can a leader develop to help mitigate “bounded awareness?” ©Level Five Associates, LLC 2018 9
After unethical decision making: Cognitive dissonance- People feel great distress when they see that they had behaved at odds with their beliefs and values. Mistakes Were Made (But Not By Me) by Carol Travis and Eliot Aronson. Unethical amnesia – Maryam Kouchaki and Francesca Gina found unethical amnesia in over 2,100 participants, per their article “We’re Unethical at Work Because We Forget Our Misdeeds” in the Harvard Business Review May 18, 2016 Cognitive dissonance and unethical amnesia create a perfect storm. The distress makes it harder to remember dissonant behavior and thus easier to repeat it. Exercise 5: What will you not do? Consider your day-to-day role and responsibilities. Now, consider the potential you have to do the wrong thing. What would that look like? Make a list of all the actions you will not take. ©Level Five Associates, LLC 2018 10
Exercise 6: Value the process over the outcome Leaders make decisions - and they do a lot of other things, as well. But the most valuable act of leadership is making disciplined decisions about the business and people who run it. How can you demonstrate to your team that you value the process over the outcome? What are the behaviors you can exhibit that communicate your commitment to doing the right thing at the point of a decision? How will you do this? Write your thoughts in the box below. Exercise 7: Start, Stop, Continue Write one thing you will stop doing, continue doing and start doing as part of your commitment to do the right thing? Start: Stop: Continue: ©Level Five Associates, LLC 2018 11
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