My comments inserted, Ben .... Bob 18May06
ETHICAL QUALITY MANAGEMENT AND MORAL LEADERSHIP:
THE KEY TO CONTINUAL PERFORMANCE IMPROVEMENT
During the last five years, the news media have been rife with stories of ethical failures by business firms. A prominent example was the Enron scandal which came to light in late 2001 when
the company applied for bankruptcy (Carroll and Buchholtz, 2006). Another serious indictment
fell on Arthur Andersen, an accounting firm which went bankrupt after it was accused of fraud
and complicity in the Enron debacle. Eventually many other scandals were exposed to the public
since 2002. They involved many such big names like WorldCom, Global Crossing, Tyco and
Adelphia. Since that time, other corporate names have appeared in the news for allegedly violating the public trust or for raising questions about corporate ethics.
During the 1980s, the American industry was compelled to undergo a painful process of transformation in response to shrinking sales and marker shares (Marchese, 1996). Seeking answers
for these problems, business firms have come to realize that something must be done with the
way they were organized. Over the years, they have built and accrued structures that were big,
sluggish, control-based and bureaucratic. This structural phenomenon was not limited to the corporate world alone. Health care, government, and education had similar structural problems.
Sheer necessity then forced many of them to reinvent themselves to become leaner and more agile organizations. Many jumped on the total quality management (TQM) bandwagon which was
considered to be an outgrowth of Deming’s work in Japan after World War II (Blankstein, 1996).
The goal was to reinvent the American business firm, revolutionize the American industry and
achieve if not surpass Japan’s economic achievements. Alas, while some successes have been
documented, many TQM projects have been deemed embarrassing failures (Koch, 2003). Some
say that the implementation failure rate is high, even as high as 70 percent (Clemmer, 1990). The
literature is full of books and articles citing many reasons for these failures. However, the most
frequently cited reason for the failure of any quality initiative is the lack of viable commitment
from management (Maguad, 2002). Oftentimes management is reluctant to change their paradigms or old habits. Managers fail to realize that quality improvement starts with them, that they
must “walk the talk” if they have to cause others to behave differently. Unless substantial behavioral change is noticed, quality management will be seen merely as a rhetorical program and not
an action-oriented program. But how is this substantial behavioral change accomplished? If
management must walk the talk, then they must lead in a way that cultivate a high level of trust
and respect from members. The top leadership must model ethical and moral conduct (Lussier
and Achua, 2001).
This paper explores the link between moral leadership and the successful improvement of quality
in organizations. The research questions are: How can ethics avoid failures and improve organizational quality? Can quality be achieved or sustained in an immoral, corrupt or dishonest system? Is ethics still the most critical value that leaders must have to influence organizational behavior and performance? Good questions
The Basis for Moral Leadership
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The study of ethics has been at the heart of intellectual thought since the ancient times. Its ongoing contribution to the advancement of knowledge and science makes it a vital aspect of management theory. Ethics can be regarded as a set of moral principles or values (Carroll and Buchholtz, 2006). It is the discipline that deals with what is good and bad and with moral duty and
obligation. Ethical behavior refers to behavior that conforms to generally accepted social norms
(Griffin, 2006). Business ethics is concerned with good and bad or right and wrong behavior and
practices that take place within a business context.
Advocates for Moral Leadership
The need for high ethical standards and moral conduct has had many advocates throughout history. A number of them are cited in the article. Confucius talked about the ethical path that we
should follow here on earth, what he called the Way. When asked if there was any single word
that could guide a person’s entire life, he replied that perhaps it was shu, a word that means compassion, open-heartedness or caring for others. Then he went on to admonish: “Do not impose on
others what you do not wish for yourself” (Freedman, 2002). This is popularly known today as
the “golden rule”. The first task of a true statesman is to face the truth and to use words honestly,
that is to call things by their right names. If a prince wanted to be called a prince, then he had to
act like one. Above all, and exemplary person must endeavor to practice ren, which can be understood as “a compassionate love for humanity.” Ren is an all-embracing term that combines
qualities like kindness, benevolence, and virtue. It means treating people decently, beginning
with the members of one’s own family, since it is in the family that an individual learns respect
and cooperation and gains experience in dealing with others.
Siddhartha Gautama, who founded Buddhism in India in the sixth century B.C., offered the Noble Eightfold Path to help end suffering which originates in people’s desires for pleasure (Hill,
2006). This path for transformation emphasizes right seeing, thinking, speech, action, living, effort, mindfulness, and meditation. Buddhists seek nirvana through charity, modesty, compassion
for others, restraint from violence, and general self-control (Wild, Wild, and Han, 2001).
Socrates insists that one should do nothing at all unless it is just. One should never treat anyone
unjustly, even in return for injustice. One should never even harm anyone, under any circumstances. It is not only necessary but sufficient for virtuous behavior that one should know what is
good or bad for him or her. Thus, in the terms of the Socratic paradoxes, “all virtue is one”,
and/because “virtue is knowledge” (Rowe, 2001, p. 7). He was thought to have made the famous
remark “the unexamined life is not worth living” (Goldberg, 1989, p. 15).
Like his teacher Socrates, Plato was also primarily concerned with the question “What is the
good or virtuous life?” His overriding concern in The Republic was with the nature of justice
(Goldberg, 1989). As human beings are social in nature, the just or right way to live can be defined only in terms of their relations with others. Plato’s vision of a just state is one in which the
members of each class do what they know best, for the good of all, and mind their own business.
As justice individually is the harmony among parts of the soul (the appetitive, the spirited, and
the rational), so social justice consists in this special cooperation among classes of the state.
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Aristotle stressed that since human life is by nature social and active, human virtue or excellence
should reflect this. The secret to happiness is living a virtuous life. Like Plato, Aristotle also focused on justice which consists of two kinds: distributive and rectificatory (corrective). Distributive justice involves establishing principles for fairness in distributing goods among citizens.
Corrective justice focuses on setting right or equalizing harms for injuries done.
As teacher, preacher, and reformer, Jesus of Nazareth is without equal. It is remarkable to note
that two centuries after he lived, he continues to be a figure of such towering significance. He
used parables to explain about the kingdom of heaven. Jesus claimed that his authority came
from a spiritual source, from his Father who sent him into this ministry. His message of hope for
a new day of mercy and truth attracted people from all classes of people, even from the poor and
the marginalized. He treated everyone as having worth. He lived what he preached. Jesus’ Golden Rule similar to that of Confucius –“Do unto others as you would have them do unto you” continuous to be a basic and strong principle of ethical living and decision making today.
Mohammed taught that those who hold property (regarded as trustees), while entitled to receive
profits from the property, are admonished to use it in a righteous, socially beneficial, and prudent
manner (Hill, 2006). Muslims view themselves as part of a collective in which the wealthy and
the successful have obligations to help the disadvantaged. Islam stresses the importance of living
up to contractual obligations, of keeping one’s word, and of abstaining from deception.
Thomas Aquinas stresses the importance of the law which in general is a dictate or rule of reason
that commands or forbids (Golberg, 1989). There are three kinds of law: Eternal, Natural, and
Human. The eternal Divine Law determines the proper function of all things and directs them to
the proper attainment of their proper ends. The first principle of Natural Law is the teleological
one that good is to be done and evil avoided. Acts of virtue are good as such and are to be done
while acts of vice are evil and are to be forbidden. Some acts may be indifferent, neither distinctly good nor bad: these the law may permit. Since the Natural Law provides only general, eternal
principles of nature, temporal of Human Laws are devised to govern particular cases and circumstances.
Immanuel Kant talks of the moral law which is a law that prescribes to itself. An act is morally
worthy if it is done purely for its own sake. It is not done out of habit, out of respect for religious
or political authority, or to satisfy some further end such as a desire for happiness. Moral character means the capacity to be motivated to act purely on the basis of a rational grasp of the moral
law. Therefore, according to Kant, the ultimate aim of education is to develop the moral character (Dickerson, 2001).
Jeremy Bentham pioneered the principle of utility and claimed that any act or institution is good
only if tends to produce the greatest amount of happiness. He also argued that “an act will be
good if and only if it tends to increase the happiness of the agent and those likely to be affected
by it more than any other act; or failing this, if it tends to diminish unhappiness more than any
other act” (Goldberg, 1989). Like Bentham, John Stuart Mill also subscribed to the view that
“the greatest happiness of the greatest number” should be the sole criterion for what is right and
properly to be desired (Cooper, D. E., 2001). We should always act so as to produce the greatest
ratio of good to evil for everyone (Carroll and Buchholtz, 2006). The principle of utility further
3
reinforced Mill’s principle of liberty which stated that the only purpose for which power can be
rightfully exercised over any member of a civilized society is to prevent harm to others.
The 20th Century and Beyond
Albert Schweitzer claimed that “a man is ethical only when life, as such is sacred to him, that of
plants and animals as that of his fellow man, and when he devotes himself helpfully to all life
that is in need of help” (Tsanoff, 1968, p. 255). He called it the ethic of Reverence for Life which
is the universal foundation upon which moral tests and standards rest. The essence of goodness is
to preserve life, promote life, and help life to achieve its highest destiny. Schweitzer regarded
ethics, in its unqualified form, as “an extended responsibility with regard to everything that has
life” (Tsanoff, 1968, p. 256).
Robert Greenleaf taught that a great leader must first serve others (Greenleaf, 1996). He or she
exists to serve those whom he or she nominally leads – those who supposedly follow – and takes
their fulfillment as his or her aim. True leadership emerges from those whose primary motivation
is a desire to help others (Spears, 1995). Servant leadership transcends self-interest to serve the
needs of others, by helping them grow and develop, and providing them the opportunity to gain
materially and emotionally (Daft, 2005). The best test to determine whether servant-leadership is
being practiced is by observing those who are being served. Do they become healthier, wiser,
freer, more autonomous, and more likely to become servants themselves (Spears, 1995)? How
are the least privileged in society affected? Are they benefited or at least not further deprived?
Perhaps it was Peter Drucker who gave us the most concise ethical principle for which leadership
is responsible: primum non nocere – “Above all, not knowingly to do harm” (Drucker, 1985, p.
368). This is the basic rule of professional ethics, the basic rule of an ethics of public responsibility. It is the job of managers to scrutinize their deeds, words, and behavior to maker sure that
they do not knowingly do harm.
The father of Global Policy Sciences, Yehezkel Dror (2001), is the modern scholar who
has cited ethical and moral standards and conduct for rulers to be the most important quality for public leadership.
The 20th century is replete with examples of business ethics scandals which continued through
the early 2000s. Some well-known names which hit the spotlight in the 1990s were NBC, Home
Depot, Mitsubishi, Coca-Cola, Texaco. Some other names like Archer Daniels Midland, Royal
Dutch Shell, Bridgestone/Firestone, and Ford Motor Company emerged on the scene in the early
2000s. Perhaps, the ethics scandal that has come to define modern times was the Enron scandal
of 2001. Its former executives were implicated in massive allegations of corporate fraud, financial misdealings, and various charges of criminal misconduct. Arthur Andersen, a major accounting firm and Enron’s auditor, was subsequently prosecuted for complicity which led to its eventual demise. Other scandals came to light: WorldCom, Global Crossing, Tyco, Adelphia, Dynergy, HealthSouth, Boeing, Martha Stewart, Parmalat (Italy), just to name a few. Today, some of
the criminal trials of those indicted during this series of scandals have been concluded while a
number are still underway. These scandals provide ample evidence of the huge cost of quality for
moral failures in the business world. According to Taguchi, these failures can be measured in
4
terms of loss to society incurred if the company does not operate according to a specified reference point, a target value, or stakeholder expectation.
It appears that at the onset of the 21st century, the American society is clamoring for renewed
emphasis on values, morals, and ethics. The business ethics debate is but a subset of this larger
societal concern. Whether the business community will rise to the challenge remains to be seen.
The 2006 book, Beyond Earth: The Future of Humans in Space* , which is the first
systems approach to human, policy, science, technology and management variables involved with the migration of humans to permanently live and work in space, and which
was created by forty-two space professionals, has a “Code of Ethics for Humans in
Space” chapter. The authors, K.T. Connor, Lawrence Downing and Bob Krone, state
(p.119):
“This challenge to launch an intensely collaborative venture beyond our planet
is a humbling one. It calls upon us to reflect on our common humanity and
to summon the best of the goodness that is within us to infuse our actions and
decisions. We can squander this opportunity if we allow ourselves to be
limited by the biases of a single culture, class or country, or if we settle for less
than goodness.”
*Bob Krone, Ph.D., Editor, 2006, Beyond Earth: The Future of Humans in Space,
CGPublishing, Inc. Apogee Space Press, Canada)
ETHICS AND FAILURE PREVENTION
In order to understand the relationship between ethics and failure prevention, it is important to
understand the three key ethical management models that exist in the organizational world: moral, immoral, and amoral. Moral management conforms to the highest standards of ethical behavior and strives to operate within the confines of sound ethical standards predicated on such norms
as fairness, justice, respect for rights, and due process. It seeks out only those economic opportunities that the organization can pursue within the confines of acceptable ethical behavior. Immoral management, on the other hand, is focused on exploiting opportunities for corporate or personal gain. Not only is it devoid of ethical principles, but also it implies a positive and active opposition to what is ethical.
But in the human rush to classify things as good or bad, moral or immoral, the role that amoral
management plays in organizations is often overlooked. Amoral management is not just a middle
position between moral and immoral management. Although there is a tendency to position it as
such, it is different in nature and kind from the other ethical models. Amoral managers believe
that different rules apply in business than in other realms of life; therefore, they do not factor ethical considerations into their actions, decisions, and behaviors. They are “simply casual about,
careless about, or inattentive to the fact that their decisions may have negative actions or deleterious effects on others” (Carroll and Buchholtz, 2006, p. 189). Perhaps, besides the major the
ethics scandals seen during the last few years, the more serious organizational issue today seems
5
to be amoral management – subscribing to or living out the amoral ethic. While amoral managers
seem to be good people, they essentially see the competitive world as ethically neutral. Thus, unless they move toward the moral management ethic, we will continue to see public criticisms
hurled upon business and other organizations. Figure 1 provides a summary of the major characteristics of moral management, amoral management, and immoral management.
Improving the organization’s ethical climate is essential to avoiding failures in the organization
and enhancing the quality of its operation. This may be accomplished through various means:

Top Management Leadership. The behavior of managers has the most important influence on
the ethical behavior of their subordinates. Through its capacity to set up a personal example
and shape policy, top management is in the ideal position to provide a highly visible role
model for others to follow.

Effective Communication. Managers need to communicate, orally or in written form, the importance of ethics to the organization. They must also be forthright, sincere, and honest in
their communication transactions. The communicator should be faithful to detail, should be
accurate, and should avoid deception or exaggeration. Also the ethical manager should also
be careful what information to disclose to others.

Ethics Programs and Ethics Officers. Ethics programs are organizational units that have been
assigned the responsibility for initiating ethics education in the organization. These initiatives
often involve developing and disseminating codes of conduct, training on standards of conduct, administering some type of hotline for employees, and providing a means to report misconduct. The ethics officer is one who is in charge of implementing the various ethics initiatives in the organization.
Figure 1
Three Approaches to Management Ethics
(Carroll and Buchholtz, 2006, p. 193)
ETHICAL NORMS
IMMORAL
MANAGEMENT
Management
decisions,
actions, and behavior imply a positive and active
opposition to what is moral (ethical).
AMORAL
MANAGEMENT
Management is neither
moral nor immoral, but
decisions lie outside the
sphere to which moral
judgments apply.
Decisions are discordant
with accepted ethical principles.
Management activity is
outside or beyond the
moral order of a particular
code.
An active negation of what
is moral is implied.
MOTIVES
May imply a lack of ethical perception and moral
awareness.
Well-intentioned but self-
Selfish. Management cares
6
MORAL
MANAGEMENT
Management activity conforms to a standard of ethical, or right, behavior.
Conforms to accepted professional standards of conduct.
Ethical leadership is commonplace on the part of
management.
Good. Management wants
only about its or the company gains.
ish in the sense that impact
on others is not considered.
GOALS
Profitability and success at
any price.
Profitability. Other goals
are not considered.
ORIENTATION
TOWARD LAW
Legal standards are barriers that management must
overcome to accomplish
what it wants.
Law is the ethical guide,
preferably the letter of the
law. The central question
is what we can do legally.
STRATEGY
Exploit opportunities for
corporate gain. Cut corners
when it appears useful.
Give managers free rein.
Personal ethics may apply
but only if managers
choose. Respond to legal
mandates if caught and
required to do so.
to succeed but only within
the confines of sound ethical precepts (fairness, justice, due process.
Profitability within the
confines of legal obedience and ethical standards.
Obedience toward letter
and spirit of the law. Law
is a minimal ethical behavior. Prefer to operate well
above what law mandates.
Live by sound ethical
standards. Assume leadership position when ethical
dilemmas arise. Enlightened self-interest.

Setting Realistic Objectives. Managers at all levels should set realistic objectives or goals.
They must avoid creating situations in which others may perceive a need or an incentive to
cut corners or do the wrong thing. For example, a marketing manager setting a 20 percent increase for next year when 10 percent is all that could be realistically expected is creating for
the subordinate a situation conducive to unethical behavior in order to please the boss.

Ethical Decision-Making Processes. Ethical decision making is a rather multifaceted process
that is complicated by multiple alternatives, mixed outcomes, uncertain and extended consequences, and personal implications (Hosmer, 1987). It usually involves a process of stating
the problem, analyzing the problem, identifying the possible courses of action that might be
taken, evaluating these courses of action, deciding the best alternative, and then implementing the chosen course of action. In this process, the individual is asked to identify the action,
decision, or behavior that is being considered and then to articulate all dimensions of the proposed course of action. This course of action is then subjected to an ethics screen, which consists of select standards against which the proposed course of action is to be compared. These
standards can be any or a combination of the following approaches:
1. Conventional approach. A decision or practice is compared with the prevailing norms of
acceptability.
2. Principles approach. Managers may improve their ethical decision making by factoring
into their proposed actions, decisions, behaviors, and practices a consideration of certain
principles or concepts of ethics. Some examples of these ethical principles are as follows:
a. Utilitarianism – We should always act so as to produce the greatest ratio of good to
evil for everyone.
b. Rights – We ask the question: “What constitutes a legitimate right that should be
honored, and what rights or whose rights take precedence over others?”
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c. Justice – It involves the fair treatment of each person.
d. Caring – Firms should make decisions that satisfy stakeholders, leading to situations
in which all parties in the relationship gain.
e. Virtue – This focuses on the notion that individuals should be imbued with virtues
like honesty, fairness, truthfulness, benevolence, non-malfeasance, etc.
f. Golden rule – “Do unto others as you would have them do unto you.”
3. Ethical Tests Approach. They are more practical in orientation and are useful in helping
to clarify the appropriate course of action in a decision situation. Some examples of ethical tests are as follows:
a. Common sense – “Does the action I am getting ready to take really make sense?”
b. One’s best self – “Is this action or decision I’m getting ready to take compatible with
my concept of myself at my best?”
c. Making something public – “How would I feel if others knew I was doing this?”
d. Ventilation – The idea of ventilation is to expose your proposed action to others and
get their thoughts on it.
e. Purified idea – An idea or action may be thought to be purified when a person with
authority says it is appropriate.
f. Gag test – The clearest signal that a dubious decision or action is going too far is
when you simply gag at the prospect of carrying it out.

Codes of Conduct. They are standards of behavior that serve to raise the level of ethical behavior in the organization by clarifying what is meant by ethical conduct and encouraging
moral behavior. When codes are implemented forcefully and embedded strongly in the culture, reports of unethical behavior tend to be lower (McCabe, Trevino, and Butterfield,
1996).

Disciplining Violators of Ethics Standards. Managers must discipline violators of its accepted
ethical norms if they are to bring about an ethical climate that everybody in the organization
will believe in.

Ethics Hotlines and Whistle-Blowing Mechanisms. Whenever they observe a questionable
practice, employees should have a way to blow the whistle or to report violators. They should
have a way to know exactly what is expected of them and how to respond to ethical violations. Companies can also employ toll-free numbers wherein employees may call in simply
to inquire about ethics matters.

Business Ethics Training. Despite the ongoing debate and controversy about whether managerial ethics can and should be taught, it is generally believed that there is legitimate role for
8
ethics training in academia and in business organizations. Ethics training my include the use
of ethics codes as training devices, lecture, workshops, seminars, case studies, films, discussions, articles, speeches, and others. If techniques and strategies can be taught for handling a
variety of business decisions, the same can be done for predictable ethical decisions or challenges.

Ethics Audits. These are mechanisms by which a company may review its ethics initiatives
such as ethics programs, codes of conduct, hotlines, and ethics training programs.

Corporate Transparency. This refers to the state in which activities, processes, practices, and
decisions that take place in the company become open or visible to the outside world. The
opposite is that condition in which activities and practices are hidden from external scrutiny
and review.

Board of Director Oversight. Strong leadership from the board and the CEO is still the most
powerful force in improving the company’s ethical climate. One major lesson that we can
learn from the megascandals of the 21st century and the passage of the 2002 Sarbanes-Oxley
Act is that the board must be involved in the oversight of the company’s ethics programs and
initiatives.
Ben, see p125 of Beyond Earth “Consequences of Failure” including Yehezkel Dror’s
statements. You have ways to avoid failure here but not much on consequences of failure.
One frequent consequence (not in Beyond earth) is that years of successful growth and
performance of a company or agency, or an individual, can be destroyed by one immoral or
unethical act.
ETHICS AND QUALITY IMPROVEMENT
Over the years, companies have addressed the failure costs associated with blatant ethical violations such as large legal judgments, prison terms, anti-trust litigation, fines, lost sales, lost goodwill and many others. While this focus has merit, they have failed to realize that this is perhaps
only the tip of the failure cost iceberg. Thus, it is appropriate to introduce at this point a concept
borrowed from quality management that addresses all the possible costs of ethical failures.
The Cost of Quality
The costs of quality (COQ), also known specifically as the costs of poor quality, are costs commonly associated with avoiding poor quality and as the result of poor quality. These costs are
properly known as the costs associated with improving quality and costs due to poor quality
(Foster, 2004). These costs can be further broken down into three major categories: prevention,
appraisal and failure costs. Prevention costs are those costs associated with preventing defects
and imperfections from occurring. They are also considered as investments made to keep non-
9
conforming products from reaching the customer. They include the cost of training, quality planning, process engineering and other costs associated with assuring quality beforehand. An example of the cost of prevention related to ethics is the cost of educating employees in the organization’s ethical belief systems and boundary systems (Gagne, Gavin, and Tully, 2005). Appraisal
costs are those associated with measuring quality directly. They are associated with efforts to
ensure conformance to requirements through measurement and analysis of data to detect nonconformances. They pertain to the costs of lab testing, inspection, equipment test and materials,
losses resulting from destructive tests, and costs associated with assessments like the ISO
9000:2000 or other awards. The cost of an ethics audit is an example of an appraisal cost.
Failure costs can be further subdivided into two areas of costs: internal failure costs and external
failure costs. Internal failure costs are those incurred as a result of unsatisfactory quality found
before the product is delivered to the customer. Some examples include scrap and rework costs,
costs of corrective action, downgrading costs, and process failures. Reduced productivity due to
low employee morale following ethical lapses would be an example of an internal failure cost.
External failure costs occur after poor-quality products reach the customer. Some examples include costs due to customer complaints and returns, product recall costs and warranty claims,
product liability costs. In service organizations, these costs can take the form of interrupted service, delays in waiting to obtain service, excessive time in performing the service, errors made in
billing, delivery or installation, or unnecessary service. A lawsuit is an example of an external
failure cost that can result from unethical behavior. Experts have estimated that about 60 to 90
percent of total quality costs come from internal and external failures (Evans and Lindsay, 1999).
Taguchi took a significantly different approach to viewing quality by taking into account the
economic implications of not meeting target specifications. Any variation from the target value
causes a loss to the customer. He defined the cost of quality in terms of losses a product may
cause society after it is delivered to the customer. These societal losses include the cost of not
meeting customer expectations, the failure to meet performance characteristics, and the harmful
side effects caused by the product. Failure to meet customer expectations may lead to direct and
indirect losses for both the manufacturer and the customer. Failure to meet performance characteristics may result in societal problems like pollution and noise which may lead to medical
claims, worker compensation and other costs.
Ethics and Quality
The 2005 Baldrige National Quality Award (MBNQA) contains a section on Governance and
Social Responsibilities which accounts for 50 points of the possible 1,000 points (Brown, 2005)
that can be earned to win the award. This section focuses on an organization’s governance system, how it addresses its responsibility to the public, how it ensures ethical behavior, and how it
practices good citizenship. It can be said that the MBNQA criteria for performance excellence
rates morality and ethics at 5% of total performance.
A creation of “Quality Classics” was begun in 1958 by the Inland Empire Section 0711 of
the American Society for Quality (ASQ) with the addition of an essay in its quarterly Inland
Empire Quality Newsletter (see www.ASQ711.org, click on “Quality”). As of May 2006
10
twenty-six classics had been created with “Morality” being number twenty-one. That essay,
by Bob Krone, gives the answer “NO” to the question, “Can quality be achieved or sustained in
an immoral, corrupt or dishonest system?”
Customers expect reliable products and minimal defect rates from business providers. Thus, it is
unethical to deliver defective products knowingly to them. Businesses which take care of their
customers often develop a set of ethics that includes care for employees. This employee care is
reflected in such programs as education and training, health, wellness and compensation and
many more. Socially responsible companies also work hard to protect the environment which is
increasingly seen as a significant ethical concern. Consequently, more of them implement recycling programs and improve their environmental practices.
Perhaps one overlooked variable that must take the center stage in doing business is integrity.
With the Enron debacle and other highly-publicized scandals in the recent past, integrity in doing
business is becoming a precious commodity. Integrity boils down to honesty – honesty in dealing
with customers, employees, suppliers, and other stakeholders. No company should provide poor
service or ship a bad product to a customer. Good ethics therefore translates to good quality
management.
Ethics failures may be classified as either moral or economic. Moral failures may or may not entail an economic cost; nonetheless, on moral grounds alone, strong ethics standards are vital to
the promotion of a healthy society. Economic failures, on the other hand, can be classified as either external or internal. It is said that most ethics policies are directed toward preventing external failures (Bottorff, 2004). Some examples of these failures are legal liabilities, safety risks,
theft, or any negative responses from external stakeholders. The cost of these external failures
can be very significant and can amount to billions of dollars every year. However, it is easy to
overlook the tremendous internal cost of poor ethics. These costs are reflected in the barely noticed behavior patterns in the organizational social system or operating culture which inhibit operating performance. These ethics failures, which are rarely visible on the ethics policy radar
screen, may be responsible for over half of all quality costs (Bottorff, 2004).
Quality improvement programs in organizations have one goal in common: organizational performance. The success of these programs depends on the collective effort of everybody in the
organization. The effectiveness of this effort hinges on the organization’s operating ethics and
culture. Of course, top management must take the lead in institutionalizing ethics into the organization. This is because managers and employees look to them for cues as to what is acceptable
practice.
Ethical behavior affects organizational operations and outcomes in a positive way. It helps to
improve productivity (and quality) by improving communication and group dynamics and thus
increase the flow of information within the company. Thus, good ethics does not only prevent
unhealthy behavior but also inspire superior moral reasoning and performance that result in sustainable competitive advantages for the organization. In order for quality initiatives to work, the
company must combine process improvement with ethical and cultural changes in the organization. Focusing on technical improvements alone without taking into consideration the ethical and
11
cultural factors will derail the collective process that is essential to sustain the quality journey.
Ethics failures can often hold back process capability improvement. Conversely, poor process
capability can encourage poor ethical behavior. Ethics, indeed, is essential to the long-term success of any process improvement initiative.
CONCLUSION
Ethics and quality are interdependent. Organizations need to advance a culture of ethics in order
to make their quality initiatives work. When processes improve, the ethical culture also improves
and vice versa. Frequently, poor ethical behavior can impede process capability improvement.
Conversely, poor process capability can give rise to questionable ethical behavior. Unless ethical
excellence is designed into process improvement initiatives, the risk of failure in the quality
journey will remain. Ethics is thus essential to sustain the quality journey over time.
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