In a thought-provoking article in the journal Research in Organizations, Barry Schwartz (2011) argues that rules and incentives put in place to help keep our organizations functioning are the very things standing in the way from having wise organizations – that is, organizations that make ethical choices. This statement was particularly thought-provoking for me, as I do research both on how to frame and implant rules about ethical behavior in organizations (Mulder, Jordan, & Rink, 2015), as well as wisdom (Sternberg & Jordan, 2005). Thus, as a scholar, but more so as a person who is deeply concerned with the prescriptions science makes for organizations, I am conflicted with these two ideas: Schwartz’s proposal that rules undermine practical wisdom (i.e., ethical behavior at work), and our scientific findings that specific rules are effective for encouraging ethical behavior. What should organizations and HR leaders do in practice?

Along with my colleagues, Laetitia Mulder and Floor Rink (2015), we find that the more specifically a rule about ethical behavior is framed, the more an employee is likely to act ethically – that is to act consistently with the rule. Why? Because the specificity of the rule reduces people’s ability to morally rationalize why their inconsistent behavior might be acceptable. For example, if I know that my employer has the rule of “Do not accept gifts from clients”, it is far harder for me to rationalize why accepting concert tickets from a client is not in violation of this rule compared to if the rule is framed more generally (e.g., “Do not engage in conflicts of interests.”).

However, Schwartz argues that the rules and incentives that organizations implement are substitutes for practical wisdom – but they are ersatz substitutes. Why? According to Schwartz, rules (1) guarantee mediocrity, as those subject to the rules are not freed to think for themselves and produce the innovation that comes from a rule-poor environment, (2) keep people so focused on the list of rules that they don’t have the cognitive freedom to learn from experience, (3) stand in the way of innovation, as innovation comes when fewer parameters are provided (given that those observing the situation have the requisite experience and training in place), and (4) establish a moral structure from the top down, rather than tap into workers’ pre-existing motivational structures.

Upon thinking more about this apparent paradox, I realized that Schwartz’s and our prescriptions are not as incompatible as they might seem on first glance. We are both starting from the same goal: a desire to cultivate ethical organizations and institutions. It is just that we are approaching the issue from different starting places and assumptions. Schwartz is approaching the issue from the place where institutions and organizations are formed – saying, in effect, how do you ideally want to shape your organizational environment in order to foster wisdom? Schwartz assumes that an organization possesses employees with the aim (or telos, as Aristotle would call it) of being good organizational citizens, having empathy, and desiring to be in their roles not because of the external incentives that accompany them but because they see their job as truly a higher calling. However, our research understands that many organizations and institutions employ workers who do not see their jobs as serving some higher purpose (i.e., employees’ teloi are not virtuous) and are there only to play to the incentives provided. HR managers often must hire the “best” employee available – rather than the one who possesses the right combination of motivation and character that they are seeking – and this employee has to provide some output and act ethically.

In light of these constraints, what should HR managers do to achieve wise organizations? My answer returns to Schwartz. Practical wisdom is the ability to balance various competing interests (Sternberg, 1998) and is derived from a combination of both will (i.e., the desire to do the right thing) and skill (knowledge of how to do the right thing), as well as having an environment in place that fosters wisdom. Thus, the answer may be quite simple: look at who you recruit and how you recruit them (their will), how you train them (their skill), and how you recognize them (i.e., incentivizing).

How do you find employees with the “right” motivation (i.e., with a virtuous telos)? First, we know that gaining new employees via referrals or direct applicants (rather than general calls for applicants) leads to more committed and loyal employees. Without going into more detail than this blog allows, organizations can increase the number of referrals and direct recruits via having strong social capital (organizational culture, management philosophy, etc.). These applicants want to work for your company because they understand something about its culture and ethos and want to be a part of it. Second, once these more committed recruits apply for jobs within your company, how can you glean what motivates them – that is, what makes them tick and gets them excited? As any social psychologist would tell you: the best predictor of future behavior is past behavior. Thus, look at the applicant’s resume. What jobs did they accept in the past? Do they do volunteer work? For which non-profits? Have they taken an unconventional (and often more challenging) path to getting their education? How do they talk about their work? It is a calling? While these may not be sure-fire ways to guarantee that you are hiring people with a virtuous telos, it is a “simple” way to select people with the values and motivations that will contribute, rather than detract from your organization’s ability to possess practical wisdom. Second, how do you train and develop your employees? Schwartz writes that in order for skill to foster wisdom, it must be skill that is derived from actual experience based on training and this training must possess four components: (1) be well-grounded in theory and technique, (2) provide people with the freedom and time to practice, (3) provide people with the freedom to make errors and learn from those errors, and (4) communicate trust in their abilities to make the right decision. And lastly, you need to examine the incentives that your organization provides. As research by Teresa Amabile (1993) teaches us, incentives can both encourage and stifle the innovation process in workers. Incentives unrelated to the task (i.e., money) are extrinsic motivators that reduce the creative process and people’s intrinsic commitment to the activity. But incentives related to the task enhance these aspects. Thus, think about how your organization can implement incentives more closely aligned with the creative process. Examples of this might be funding for industry conferences in desirable locations or days off to specifically pursue some creative pursuit or interest (e.g., volunteering, pursuing a hobby).

Schwartz assures us that humans possess the attributes necessary to be wise (e.g., sensitivity to context, empathic understanding, recognition of patterns) – leaders just need to construct an environment that lets wisdom flourish rather than be squelched.

References

Amabile, T. M. (1993). Motivational synergy: Toward new conceptualizations of intrinsic and extrinsic motivation in the workplace. Human Resource Management Review, 3(3), 185–201. http://doi.org/10.1016/1053-4822(93)90012-S

Mulder, L. B., Jordan, J., & Rink, F. (2015). The effect of specific and general rules on ethical decisions. Organizational Behavior and Human Decision Processes, 126, 115–129.

Schwartz, B. (2011). Practical wisdom and organizations. Research in Organizational Behavior, 31, 3–23. http://doi.org/10.1016/j.riob.2011.09.001

Sternberg, R. J. (1998). A balance theory of wisdom. Review of General Psychology,2(4), 347–365. http://doi.org/10.1037/1089-2680.2.4.347

Sternberg, R., & Jordan, J. (2005). A Handbook of Wisdom: Psychological Perspectives. Cambridge University Press.