In today's global business environment increased distances between head offices and operations make managerial decision-making more complex. Deciding where and how to invest often requires balancing financial, social and environmental returns. How managers visualize or mentally frame these options determines their course of action. Recent work by Ivey PhD's Michael Wood and Theodore Noseworthy and co-author Scott Colwell investigates the context in which managers make decisions with social or environmental tradeoffs. Their work finds that managers might not always see risks attributed to their actions, especially when distance is involved. Interestingly, findings suggest that by including the option not to decide, the impulse to overlook social or environmental consequences can be overcome.
Research
In a recent study in the Journal of Business Ethics, Wood, Noseworthy and Colwell explored how psychological distance affects managers' decisions and whether offering the option not to choose encourages better reflection on potential social or environmental impacts of their actions. The researchers designed two experiments to assess the effect that psychological distance (measured across the four pillars of temporal distance, spatial distance, social distance and hypothetical or probable distance) has on a manager's ability to see the ethical consequences of the decision he/she faces across various business sectors in Canada.
In the first experiment, individual managers were asked to make choices that had social or environmental trade-offs in the areas of waste management, fishing, mining and forestry. Results from the first experiment revealed that managers were more likely to select options that ignored social and environmental impacts when psychological distance was high (rather than low) in a forced-choice scenario (i.e., option "A" or option "B"). This being the case, the second experiment was designed to test whether the addition of a 'no choice' option (i.e., "neither") would enable managers to see the potential social or environmental impacts of their actions. Results revealed that rather than exercise the 'no choice' option, managers spent time reflecting on alternatives and opted for the more socially and environmentally responsible decision, even when psychological distance was high. Wood and his co-authors concluded that when given the option not to choose, managers were more likely to see the potential social or environmental impacts of their actions and thus select the more ethically responsible option.
Implications
For capital investment to be sustainable, firms need to be aware of the social and environmental implications of their actions. Wood and co-authors' work suggests that senior management can improve decision-making frameworks by simply including the option not to choose. Encouraging responsible and reflective decision-making leads not only to social and environmental benefits but also enhanced long-term financial returns.
References
Wood, Michael O., Theodore J. Noseworthy, & Scott R. Colwell (2013). "If You Can't See the Forest for the Trees, You Might Just Cut Down the Forest: The Perils of Forced Choice on "Seemingly" Unethical Decision-Making." Journal of Business Ethics. December 2012.