6-Step Guide to Ethical Decision-Making

Last Updated June 16, 2023

The heart of a good business is not profits or best-of-breed products and services. Those are results from what lies at the core of good business: good ethics.

Unethical behavior has derailed companies across industries. Since the beginning of the new millennium, there has been a string of high-profile scandals, from the implosion of energy giant Enron to the crises that claimed top executives at financial services firm Wells Fargo and ride-hailing company Uber.

“Few areas cause more harm in the business community than when businesses lack an ethical foundation,” said Joseph Potchen, an attorney and a visiting professor at Michigan State University’s Eli Broad College of Business, where he teaches a graduate-level course on business ethics. “Most people would agree that having good ethics is important. However, it’s when people lose sight of proper ethical behavior that the problems and issues begin.”

As a result, there is a continued need for business leaders in the United States and around the world to uphold the highest ethical standards.

“Despite the negative headlines, the reality is that people still look to top executives and key managers in businesses for leadership and guidance,” Potchen said.

Trust in Business

Although public trust in business fell slightly from 2016 to 2017, more people (52%) continued to trust companies “to do what is right” compared to the media (43%) and government (41%), the annual Edelman Trust Barometer found.

Business lagged only non-governmental organizations (53%) in the level of trust among four institutions, according to Edelman, a global communications marketing firm. Three out of four respondents said businesses can boost profits while also enhancing their communities socially and economically.

Business is “the last retaining wall” for public trust, the survey found. Maintaining that wall calls for a strong and consistent commitment to ethics.

Understanding Ethics

But in an increasingly competitive and complex marketplace – where the pressure to succeed is intense and ever-present – how can organizations and individuals resist the urge to cut ethical corners?

Over the decades, much research has been devoted to that question as it applies to commerce, academics, and medicine, among other fields. These studies have underpinned the development of numerous frameworks and theories designed to foster ethical behavior.

Here we take a look at a six-step model for ethical decision-making that can prepare business leaders and other professionals to face a range of organizational challenges and personal choices.

1. Know the Facts

Before tackling an ethical issue, clearly define the nature of the challenge. Often, it can begin simply with a process, or decision that makes a leader uncomfortable. That’s a warning sign. Take the time to explore the issue in detail.

2. Identify the Required Information

You don’t know what you don’t know. List the information you will need to obtain in order to make an informed decision. Similarly, identify any assumptions being made about the specific ethical dilemma or challenge. A situation can change dramatically once all the facts are known, and making a decision based on incomplete information can be a pathway to disaster.

3. List the Concerns

Now it’s time to explore all of the factors that can influence a decision. Who are the people involved in the ethical issue? What are their individual concerns? What are the pertinent laws? Do professional standards and codes of conduct for the specific industry come into play?

4. Develop Possible Resolutions

At this stage, begin looking in detail at potential resolutions and their likely outcomes. This is also an appropriate time to seek counsel from people with knowledge and expertise in relevant areas. Consider creative options that go beyond simple answers.

5. Evaluate the Resolutions

What are the projected outcomes for each potential resolution in terms of cost, legality, and impact? For example, how would your actions as a business leader be viewed if they became public? Would a customer or corporate partner still want to do business with a company that made this decision? What would an industry governing board say?

6. Recommend an Action

It’s time to decide. Not making a choice is the wrong choice. Business leaders must work through these steps and arrive at a decision if they hope to retain trust among team members, executives, shareholders, and consumers.  Any recommendation must also be implemented.

“Simply choosing a course of action is not enough,” Potchen said. “It must be implemented.  Who is going to take the action and when? What follow up will there be?”

Maintaining an ethical organization is no easy task. However, it is essential to long-term success. A business without an ethical foundation eventually will run into trouble, as has been proven time and again.

Taking the time to master the steps of ethical decision-making is a must for business leaders.