By connecting us with information, we have the opportunity to make more informed decisions. By taking on the routine tasks such as adding numbers or performing complex calculations, we are freed to think about the implications of such results rather than carrying out the drudgery of arithmetic. Remember doing long division by hand with three digit numbers? Beyond calculation, technology opens the door to finding information. It is hard to think about doing research without Google. Steven Johnson makes a great case for the role of technology in innovation in his wonderful video. The benefits of technology are obvious.

Unfortunately, the other side, where technology interferes with our thinking or keeps us from thinking, is too often overlooked. Most of the examples I offer can be simply summarized: We accept and believe the results from technology, while in many subtle and not so subtle ways, we should ask questions instead. The problem is, many have not been trained to ask the questions.

If you told a person (well, most people) that two years ago you heard the Grand Canyon was 2 billion years old, you would conclude, assuming the source was accurate, that today the Grand Canyon is still about 2 billion years old. A computer would conclude the Grand Canyon today is 2,000,000,002 years old. Similarly, when told that a circle has a diameter of about three inches, and then asked the circumference of the circle, a reasonably thoughtful person would say it is about nine inches. Again, a computer would determine it to be 9.424777960769379 inches, or something like that, depending on its internal representation of numbers! In the digital age we give the time as 9:27, while in the analog era we would say it is almost 9:30. Technology presumes a level of accuracy in the data that is often not warranted.

The problem is amplified when an error is made in entering data. A person walks into a fast-food restaurant and orders a meal. The total comes to $5.26, and the person hands the clerk a $10 bill. The clerk returns $14.74 in change. Obviously the clerk entered the payment as $20 rather than $10, but has no recognition that the change is greater than the payment. Human error is a reality whether in an analog or digital age. The problem in the digital age is an over-reliance on the validity of the results coming from the technology.

In a potentially more serious example of this overreliance, a woman drove her rental car into a lake following the directions on her GPS. “I don’t know why they wouldn’t question driving into a puddle that doesn’t seem to end,” [Bellevue fireman] Lt. Eric Keenan said. Basically this is the same as the fast-food story with more challenging results, though the women in the car were able to walk away.

For many problems, it is more than one number being in error or improperly approximated. Rather, the challenge comes in responding to information created by calculations using accurate and inaccurate data. A tragic result came several years ago when pilots had to deal with erroneous calculation results from the onboard computer system:

“Air France Flight 447 was en route from Rio de Janiero to Paris on May 31, 2009, for an overnight trip, when it vanished. There was no warning before the flight crashed into the Atlantic Ocean in the early morning hours of June 1, 2009 — nearly four hours after take-off. The 2009 crash, which killed all 228 passengers and crew on board, is considered one of the worst ― and most mysterious ― aviation disasters in modern history,” according to an ABC News report.

More recent analysis of what happened can be found in the ABC Nightline Report by Matt Hosford, Lauren Effron, and Nikki Battiste, July 5, 2012:

“‘[The pilots] seemed to have trouble looking past the automation they were accustomed to and not really able to continue with the old raw information that pilots used to depend on,’ he said. ‘Clearly the report shows that there was a lot of difficult communication on the flight deck, a lot of incomplete thoughts, a lot of confusion.’

“According to the report, a speed sensor on board the plane, called a pitot tube, stopped functioning after becoming clogged with ice at high-altitude while the plane was flying through a thunderstorm. This caused the auto-pilot to disengage and shift the controls back to the pilots. While flying in heavy turbulence, the pilots failed to properly diagnose the severity of the problem because the pitot tube, a critical piece of equipment to the aircraft, was sending inaccurate data to the cockpit, the report said. The pilots put the plane into a devastating stall and it fell rapidly from the sky, before pancake-ing into the ocean.

“’Despite these persistent symptoms, the crew never understood that they were stalling and consequently never applied a recovery maneuver,’ the report said.’

Most business cases are not nearly so dramatic or tragic as this one, but they have huge economic consequences as well. Again, the problems occur when approximate numbers, some of them incorrect for a variety of reasons, are combined to provide insight and efficiency in the solution of complex problems. I offer two examples in the manufacturing world.

Lean production, with “just in time” delivery of product to the manufacturing floor allows for great cost reduction and speed of assembly. In the case of an automobile manufacturer, for example, rather than receiving a shipment of tires in the warehouse, the company receives only the tires needed in the next hour delivered directly to the assembly line. The result is lower costs (no warehouses, no inventory management, no delivery costs from the warehouse to the assembly line) for the auto company. A digital model, including the times of delivery of the tires to the factory, correlated with the factory production schedule, will show that everything works fine. Often heavy traffic delays the delivery truck bringing tires to the assembly area, backing up production. Other times, the production line has delays and more tires are delivered than are needed. The times for delivery are not as precise as they are estimated.

In practice, suppliers often solve this problem by creating warehouses of their own near the assembly plant. Several years ago, I visited a Wal-Mart distribution center in Arkansas. They bring in the products needed for each of the regional stores at one end of the distribution center, while at the other end these products, automatically sorted on switching conveyor belts, are loaded on trucks for the daily delivery to these regional stores. To deal with traffic and variable demand, however, the suppliers each have to buffer their goods with a warehouse of their own. Driving to the Wal-Mart distribution center, we saw warehouses for all major suppliers and lines of trucks waiting to deliver to the distribution center. There is lots of variability in this problem, including the quantities needed in the daily orders from the stores, the timing of delivery to the distribution center, as well as delays in the manufacturing process of the goods from the suppliers. The numbers may look great from the technology models, but the reality requires many workarounds, often very costly for the suppliers.

The same problem, on steroids, comes from outsourcing the manufacture of complex parts of a design. In addition to the variability in demand, delivery, and manufacturing, we can add two more issues: time for the design of the parts and the fit (i.e., size, electrical connections, and the sometimes subtle interaction between the part and the rest of the product) in the final product. Designs can be delayed months or years in the case of a new engine for an automobile or an airplane, for example. When the supplier has a complex supply chain itself, the challenges are compounded.

Technology can provide us with dramatically improved productivity and efficiency, but if it is not used wisely, it can also be at the root of dramatic errors, cost overruns, and delays. Accounting for approximations, thinking through alternatives, and generally managing risk is a vital part of any process. Unfortunately in this era where speed is so essential, that thinking is usually put off until the problems happen and then it is much more costly to fix. To evaluate risk, the kind of thinking required includes estimating, approximating, and anticipating. I believe one of the places I learned these skills is trying to do long division on three-digit numbers, a skill completely ignored when the numbers are punched into the calculator.

Our lack of skills combined with the pressures of speed and efficiency make up a lethal combination leading to many dramatic, costly, and sometimes deadly failures.

Both education and business need a reset for the digital age!

Al Erisman is executive editor of Ethix, which he co-founded in 1998.
He spent 32 years at The Boeing Company, the last 11 as director of technology.
He was selected as a senior technical fellow of The Boeing Company in 1990,
and received his Ph.D. in applied mathematics from Iowa State University.

Steven Tourek is senior vice president and general counsel for The Marvin Companies in Eagan, Minnesota. Before joining Marvin, he practiced law as a commercial litigator for 27 years and co-founded the law firm of Winthrop & Weinstine  in Minneapolis.

He received his bachelor of arts degree from Dartmouth College and honors BA and LLB degrees from Cambridge University, England. Before admission to Trinity College at Cambridge University, he attended Yale Law School.

Tourek serves as a director and president of Unity Insurance Inc., a Vermont captive insurance company that insures various risks of the Marvin Companies.

This conversation between Al Erisman and Steve Tourek took place on September 18, 2012, in Los Angeles, California, and was updated January 2013.

◊ ◊ ◊ ◊ ◊

Ethix: Why did you go into law?

Steve Tourek: I was a philosophy major at Dartmouth College, but focused on studying the world religions from within that department. I was pursuing a sense that life had a meaning, and was trying to find out what that meaning was. This led me to ethics courses, a subset of the course offerings in the religion department. In my last year, which was the tumultuous time of 1969-70, the campus was on hiatus in the spring. Classes were suspended, and they sent us out to campaign for George McGovern or Richard Nixon, or whoever. I was awarded a degree with highest departmental honors based on my promise to complete the work later. This became my first major ethical challenge. Was I going to keep my honors degree or my promise?

And I then got busy with life. I was married and had a young child. I went to Yale Law School for a year. Then I came back to be assistant dean at Dartmouth College for a year. And pursued my dual loves of law and rowing by going to Cambridge University where I spent three years studying law and captaining the Cambridge University crew. A highlight was competing against Oxford in “The Boat Race” on the river Thames in London before a huge crowd. I was the first American captain of that team, and we won! But while at Cambridge, I gave up competitive rowing for a time in order to finish the thesis and keep my promise.

A Law Career

What attracted you to law? You said it was your love, but was it justice or was it money?

It was justice, not money. But my mother intervened in an interesting way. I had been accepted to Yale Divinity School. I had a position available to me at St. Paul’s School at Concordia to teach religion and history. At the same time I was accepted to law school at Yale, Harvard, and Stanford. And my mother said, “What are you going to do?” and I was in a quandary. She said, “Well, duh, you’ll never make any money being a preacher, or a teacher. So you need to be a lawyer.” And that made perfect sense to me. I said, “If mom thinks it’s the right thing to do, I think I’ll give it a try.”

Interestingly at that point in time, law was not a particularly lucrative profession. The profession had not been, this is Alexander Haig speak, “businessified,” if that’s a word. You could make a decent living, but you would not get rich practicing law. It was about being a facilitator of justice; it was about helping people, and serving people. And serving the community.

“practicing law was about being a facilitator of justice”

So you saw a tie to the ethics you had studied, and that led you to law?

I did. It seemed a very logical, natural fit. I didn’t see myself as an academic and it seemed like a great fit for me.

You went on to a rather substantial career in law. Could you tell us about that?

I went to a law firm in the Twin Cities [Minneapolis and St. Paul in Minnesota], one of the major commercial law firms, where I started doing commercial litigation. I left with five other people in 1979 to start our own law firm, which now has grown to over 100 people. In my present position with Marvin, I am now one of their largest clients. I think I still technically have a counsel relationship to that law firm, because they didn’t want to let me go and still value my legal skills, which is very nice.

Leaving Law Practice

What caused you to leave the practice of law?

I had one of those moments of reckoning, or awakening, in my career after 27 years. The practice had become very stressful, very all consuming. When Shakespeare said “The law is a just jealous mistress,” he was not kidding. I lost my first marriage during that period. And I was kind of losing myself, very disintegrated in terms of what the profession rewarded and what I felt was worthy. I started to feel that there was more to life than fighting, disagreement, and playing within an artificial set of rules. And I really had a strong yearning to branch out and serve, and do it in a different way. I remarried, and I convinced my wife and myself that I could accept a lesser income for a greater sense of purpose. And I did that in about 2003.

Do you say that law is a lost cause, or do you think that there is some reconciling role that other people could play? Maybe not you, because of your long experience?

I do not think law is a lost cause by any means. I think justice is divine. The prophet Micah said in Scripture, “What is it that’s good? To act justly, to love mercy, and to walk humbly with your God.” And I think those are God’s marching orders, and I certainly pay attention to them. I honestly believe that justice is a very high calling. In fact, I think law, in truth, is one of the three healing professions. Physicians heal the body, clergy heal the spirit, and lawyers have the ability to heal the community, to heal relationships. At their highest and best, lawyers can be instruments of ethical decision making, of reconciling relationships, not just simply ending conflict. They can make communities a better place. I had those moments where I could do that. But I came to the point where I felt I could do more of that if I were on the inside of a business. At the same time I also became an adjunct professor at the University of St Thomas School of Law, and an advisor to the Holloran Center for Ethical Leadership in the Professions at the university.

I love being able to teach lawyers-in-the-making and raise their awareness and sensibilities about this dimension of becoming a professional ― and help students reach their potential as human beings. The work I do with Marvin, a client I had served for 25 years, is great. I knew the family, and I knew the ethical orientation and values of this family business. That is a much richer environment for me at this point in my life. But I want to be clear. I don’t want to be seen as dissing law.

Purpose of Business

Perhaps the same kind of statements might be true about business as well. For some it is all about the mighty dollar at any cost. But business also has a higher purpose than making money, and perhaps there is a parallel between law and business in this way. Teaching about business from another perspective can also be very rewarding.

Absolutely, and I believe strongly in what you’ve just articulated. Businesses are allowed to exist; they’re legal creations, because they add value to life. And when they stop doing that, their life span will be very, very short indeed. I think there is a crisis in business leadership in the current environment. Businesses are blamed for the recession, for the scandals, and the greed with some justification. But these behaviors are a distortion and not what business is about.

“Businesses are allowed to exist … because they add value to life. There is a crisis in business leadership in the current environment.”

Charles Handy wrote a great article published in the Harvard Business Review about 10 years ago [December 2002], “What’s a Business For?” Great, great thoughtful piece.

I recently read his book The Age of Paradox which I thought was profound.

He is a very insightful writer.

Beyond the values at Marvin, what was the attraction to joining the company? What attracted you to their products?

Product is one of the obvious ways a business adds value to society. The windows we make are aesthetically beautiful, they add to the quality of life, they bring light into a person’s world, and with the technologies that have been developed they also steward the environment and save energy. Marvin makes a beautiful, well- constructed, high-end product. It’s a product that is valuable to society and highly respected.

Along with that product is the business model, how the product is brought to market, including how we treat the distribution channel and the ultimate customer in that market. We seek to maintain long and trustworthy relationships with distributor partners. We respect them, and what they do. Many of them are family businesses as well.

Marvin has established a stellar reputation with its end customers as well. For many years the company has gone above and beyond the legal warranty to actually provide a first rate, individually tailored solution to whatever challenges the customer is facing. This comes from designing a great product that lasts, as well as acknowledging it is not always a perfect one, despite our best efforts. We try to honor our customers and their reasonable expectations.

Marvin Origins

Many people talk only about the financial dimension of the business. But the product allows people to thrive and do well; and the culture, which you have been describing, defines the company. Yet much of the literature on business puts these in a lesser place.

It is interesting that you say that. Marvin, in particular, has a very interesting history. The origins of the company date back to 1903. George Marvin settled in Warroad, Minnesota, which is a tiny little town of 1,700, six miles from the Canadian border on the shores of Lake of the Woods. Bill Marvin, who recently passed away, was the eighth employee of the company in 1938. And when he joined his father in the business, he had this idea that if he could make a product that could be sold outside of Warroad, he would be able to provide employment and good jobs for the people in that small community. This is another very important dimension of a business.

“… he had this idea that … he would be able to provide employment and good jobs for the people in that small community.”

Providing employment became even more important after the Second World War ended, because he saw a lot of his classmates coming back from overseas military service, and there wasn’t enough economy in this little town to keep them all employed. Many would have had to leave the community that they grew up in and loved, to find jobs in the city.

So he bought a saw when his father was not looking and started making windows and doorframes, particularly in the winters when no one could farm. He put them on the back of a pickup truck, and drove to Chicago to sell. That was the origin of Marvin Windows. Before that, the family had a typical small town, entrepreneurial family business: a grain mill, a pulp mill a hardware store, that kind of thing.

So employment was one of the motivating factors for them in developing the business?

Absolutely. Let me tell you a story. I became the first general counsel that they ever had when I joined them in 2003, one of the three nonfamily directors for the company. We were doing strategic planning and, probably because I was fresh from having read Charles Handy’s article and new to the company, I said, “You know we’re going to end up making a lot of decisions about the future in this discussion. I think it would be useful if we had a clear understanding of what we are about. We have to make money, but that’s a requirement, not a purpose. We make our money by making highly valued products that serve people. While that’s how we make our money, that’s really not our purpose either.

Our purpose is to contribute to the long-term viability of the communities in which we operate, by providing an opportunity for meaningful employment that develops the talents of our people. We do this by modelling, not talking about, ethical and responsible business practices that earn the trust of our stakeholders. “Stakeholders” is an intentional word, because it’s bigger than shareholders. It’s the whole chain of relationship: our distribution partners, our supply chain, our end customers, and our employees along with our owners.

“Our purpose is to contribute to the long-term viability of the communities in which we operate, by providing an opportunity for meaningful employment that develops the talents of our people.”

This core purpose has been evident in our company for a long time. Perhaps you saw President Obama’s “shout out” to us at the Democratic National Convention when he referenced the Minnesota company that got through the economic recession without laying off any people. That is a direct reflection of our ethics, of our values in action, and living up to our purpose.

Dealing With the Recession

How did that decision come about? When the construction industry dried up during the recession, there must have been a dramatic decrease in the sales of windows and doors. How was this discussed?

It was rooted in our long history of relationship with the community ― not only with Warroad but with all of the communities in which we operate. We now have eight manufacturing facilities all over the country.

Outside of Lake Wobegone?

[Laughter] Warroad is probably a lot like Lake Wobegone, yes!

We want to project those values and that philosophy to all the communities where we work. These communities are typically small, and very dependent upon our presence economically, and through philanthropy and other forms of civic contribution, not to mention jobs with health care benefits. Like every other business, we felt the same pressures, the same uncertainties and wrestled with what had to be done during the economic downturn. Because the culture is so strong in that respect, and the leadership so clear, there was not a lot of debate. There was certainly angst, but there wasn’t a challenge of the values. Doing the right thing isn’t necessarily doing the easy thing.

“There was certainly angst, but there wasn’t a challenge of the value. Doing the right thing isn’t necessarily doing the easy thing.”

And you don’t always know how it will turn out when you make that decision.

You don’t. We are a conservative company financially. We were blessed with not having debt and, because of prudent and conservative fiscal management in the good times, we had money in the bank to sustain us during the bad. We could decide, and we did decide, that we were going to keep our workforce together. We can make the argument that that’s smart, that when the economy recovers we’ll have an intact workforce. The decisive factor, however, was to respect our relationship with our employees and their families. It is a tangible example of what loving your neighbor can look like.

And a motivated workforce?

Yes. One where the skill sets and the experiential knowledge was quite high and would remain high. Our average length of employment is almost 20 years. But the driving motivation was that we realised that if we took the road more frequently travelled, with downsizing our employment base and closing facilities to match the demand we were experiencing, it might maintain profit margins, and benefit the shareholders, but it would destroy, certainly harm, the community. Our economic impact affects many lives beyond our employees because there are restaurants, grocery stores, and gas stations in those communities, as well. There are many people whose livelihood depends on the salaries and the wages that we provide. This thinking is part of the foundation of the company.

So we did that, and then we decided that that wasn’t enough. We all needed to share the pain as we worked through this difficult economic period. Salaried folks like me took pay cuts to align with the shorter work weeks that those who were paid hourly had to endure. We cut benefits, including some of our company-paid tuition for education, and 401K contributions, and these cuts affected the executive team, as well as the hourly employees. None of this could have happened if the shareholders had not agreed to participate as well: no dividends and no distributions for the family equity holders. Many of them are also employed in the business, so they were giving up dividend income as well as some salary or wages.

I realised when you work for a private business and a family business, they can have that long-term perspective and the core of values they’re prepared to live out. Businesses managed in a public setting, where there’s a different social contract with the investors, don’t have that option. So it’s not that I want to say, “Hey look at us, aren’t we something special.” What I’d just simply say is good for us, that we knew our values and we were prepared to live them.

Was there any risk at any point that you might not make it at all?

I would say that the simple answer to that is no, in a normal recession recovery cycle. We had ample savings to get us through, and we will make it. But as this housing recession drags on, it becomes a lost decade in our industry. The challenges to our recovery continue to mount. We run the risk of losing some of our key people to industries that don’t shoulder the same devastation that we did. The health care industry, the computer industry, and other industries have bounced back faster than housing. Housing will be dead last to sort out of this.

The challenge is to also be mindful of what is it going to take to remain competitive, and to generate the profits that enable philanthropy; enable providing the kind of opportunities that develop people’s talents and really engage them; and to deliver innovative new products. To keep that virtuous cycle going is a struggle but a most worthy one.

“To keep that virtuous cycle going is a struggle but a most worthy one.”

We went through this period again right after the stimulus funding, when all of these tax credits and stimulus funds went away. In the end, I think history will show that the stimulus did not motivate new behaviors; it just accelerated existing inclinations. It brought forward some activity, and it appeared as though we were coming out of the recession earlier. But when those tax credits and subsidies expired, the air came out of the balloon.

Our industry is struggling. I know this not only from our own experience, but also as the former chairman of the board of directors of our industry trade association in Chicago and Washington. The involvement of the government in our marketplace, trying to drive or create market behaviors, or perhaps pick winners and losers in the market, is one of those well intended things that perhaps has unintended consequences. Let’s get the conditions in place that will allow business to solve these problems. Only businesses can create jobs.

“Only businesses can create jobs.”

I remember in my conversation with Alan Mulally on this subject. I asked him about the bail-out money that went to his competitors, Chrysler and General Motors, but not to Ford. His answer surprised me. He said, “They didn’t have the luxury at the time to say let’s try it without bailouts. And if it doesn’t work, let’s run back and try it with bailouts.” He said, “You have to make the call, and honest, fair people made the judgement. Let’s go forward, let’s not rethink that.”

I think that’s fair.

Those were really interesting times. We don’t have a lot of experience with economic times like we have been through the past five years.

No. I’ve heard [Ben] Bernanke [chairman of the Federal Reserve] speak, and he is one who strikes me as caring a great deal for this country. He was in the eye of the hurricane, and I sense that we were a lot closer to the unmentionable than was widely reported.

Government Regulation

Let’s talk about government regulations in general for business. Some say, “We want no more government regulations.” Others say, “With all of this abuse, we must do something through regulation.” Where do you come down on this, and why?

We need some regulation. There needs to be some level playing field, and there needs to be some checks and balances. Blasé Pascal said, “To be human is to live in that tension between greatness and wretchedness.” That certainly has been my experience, and my observation.

Businesses need some oversight, but business is not the enemy. Business exemplifies a great deal of good, and does things that no other organisation can do. And what I would love to see is a partnership that is less politically driven and more purpose driven. I would not say do away with regulation. In fact, the rapid proliferation of regulation, that has been just astounding in the last three years, was birthed by the deregulation and the excesses of capitalism left unrestrained. But regulation is not perfect by any means, and also does harm.

Adam Smith, in The Wealth of Nations argues that what holds it all together is a sense of the common good, a voluntary ethical behavior on the part of citizens.

I wonder how this works in today’s more global environment. Adam Smith spoke about the butcher, the baker, and the brewer who together provide your dinner, not out of their own benevolence, but out of their self-interests. But what also what held them together is that the next day in town, they would encounter each other. There was a natural accountability. In our globalized world today, this doesn’t happen in the same way. How does this voluntary ethical behavior happen today?

This is a challenging point and applies to my practice in law. It used to be that this practice was very local. You pretty much knew everybody in the local bar, and you saw them on multiple cases over time. There was a natural restraint. Your word was your bond. You needed to be trustworthy, because if you were not you’d be found out very quickly. The “tom toms” would beat, and everyone would know about you. Steven Covey talked about this when he spoke of “the speed of trust.” Without trust, you couldn’t resolve things very well. If people couldn’t trust your word, everything had to be documented in triplicate. It became very cumbersome, and actually your clients would be detrimentally affected because of your reputation. There was a natural constraint on everyone’s zeal and aggressiveness.

But as more and more people received law degrees, the number of practicing lawyers expanded, and the restrictions on local practice were relaxed in the interest of commerce. Lawyers from New York, or L.A., or Chicago could come to Minneapolis to practice. They didn’t know anybody in the community, and the people in the community didn’t know them. And my observation of that is that it’s a license to behave poorly. For those lawyers who do not have a strong sense of personal identity with a moral core, it’s a license to engage in antics and overly aggressive pugilism rather than client representation. It is about self, not searching for justice.

So what is the constructive response to this then? I remember talking with Maine’s Senator Susan Collins, right after Sarbanes Oxley had been passed. And I said to her, “Do you know the burden that Sarbanes Oxley has put on people?” And she said, “Well, we had hoped the market would take of itself and it didn’t, and we just had to do something. And I fear that a lot of regulation is coming from people who say, “Do something.””. And I’m wondering if you have a solution to offer in this 21st century?

Well, if I did, I’d be bottling and selling it! But I do have a couple of thoughts. The first one is that since the beginning of time, the natural reaction to scandal and bad behavior is to create more rules. It is too easy to fight the last war, and to prevent the last bit of creative innovation.

“It is too easy to fight the last war, and to prevent the last bit of creative innovation.”

That’s looking backward, isn’t it?

Yes. I don’t believe that over the last 30 years the business scandals that we’ve seen have been caused by too few laws. I think the evidence is too little virtue. I don’t believe passing more and more and more rules and regulations will change those kinds of behaviors. And if they’re not effective, at what cost are they not effective? That’s something to bear in mind.

“I don’t believe that over the last 30 years the business scandals that we’ve seen have been caused by too few laws. I think the evidence is too little virtue.”

But there is a second way of thinking about this. I’m reminded of something Arthur Ashe said, which I’ve tried to implement my life whenever I have felt overwhelmed: “Start where you are, use what you have, do what you can.”

The fact that declining virtue is a big problem doesn’t relieve any of us of our own responsibility to address it. I come back to what you mentioned earlier when you talked about Ethix: a mission to put in front of the public, other businesses, and young business leaders examples of good leadership and good business practice.

The way the news works, the examples of poor leadership and poor judgement are everywhere. But where does one look to see a better way to address difficult problems, a better way to approach business, a better way for business to integrate with, and be perceived as providing value to society rather than preying on society?

A lot of the teaching that I do, and the work I do, is to try to give back to my profession by talking about business ethics done well. To try to put out there examples of tough issues and how people wrestle with them. Often you don’t have the clarity of knowing that it was the right or the wrong answer. Whenever we talk about morality we want to go to was it right or wrong, good or bad.

Decision Processes

And don’t we often want to focus on the outcomes rather than the decision process?

Yes. Some decisions are better or worse, truer or less true, or more consistent with transcendental values or overarching values. If you are a faith-based person you might include eternal values here.

I think we live in a very complicated world. You mentioned globalization a bit ago. Add to that the speed of technology and the volatility in the world today. There’s a compression of time frames that leadership has to deal with. Today, leaders in business are expected to make really big decisions with overwhelming amounts of data, but with little time (which is getting compressed ever more), involving more stakeholders who do not share the same view of the common good.

Particularly in the public sector, stakeholders include large numbers of investors. If you combine their positions with NGOs [nongovernmental organizations] who often have lofty but quite specific and narrow interests, and who don’t care very much about anything else, this creates a bouillabaisse of differing views that is very, very challenging. It is important that we try to increase ethical sensitivity to make leaders aware that there are ethical dimensions in a lot of these decisions that they are making quickly. We also want to embolden leaders with moral courage to make those judgements and to implement them even in the face of these differing views. Doing the right thing often is very hard.

“Doing the right thing often is very hard.”

The rhetoric around more or less regulations seems to lose sight of the fact that we need both appropriate regulations and virtue. In places I have been where there are few enforceable regulations, like the Central African Republic, it is very difficult to do business. But it is also difficult when staying within the letter of the law is all that matters.

I have looked at this from the point of view of how Jesus related to people, and there are a few of things that jump out. First of all he saw them as co-workers, capable of working with him to accomplish his mission or purpose. Second, he saw us in need of repentance, a strange mixture of good and bad. He also viewed us sympathetically, seeing us as lost and in need of a guide. But he also saw in us potential that we didn’t know we had.

When I look at those things, I see a call to ethical leadership. Ethics is trying to tame those animal spirits, and leadership and guidance through these decisions is some of God’s work. The Hebrew language has a word “avodah” which is both work and worship. I have really come to appreciate that, because I see the in the mundane things that I do ― the everyday toil of being general council and the teaching opportunity ― to be not only work but also worship. I feel fully engaged, fully alive in the stuff that I’m allowed to do.

That’s a great perspective, thanks.

Role of Technology

You mentioned earlier the role of technology in decision making. Could you develop a bit more what this means to the business leader of the 21st century?

Recently [in September 2012] a single person created an anti-Islamic video that rapidly circulated throughout the world and caused rioting and death in different parts of the world. That is an illustration of the powerful and viral nature of today’s technology!

For a business, technology has changed the paradigm of how you use information in carrying out your business. It used to be primarily on the ways to control your business, and control your production. But now your reputation is intimately involved in the social media world. The fact that you’re under constant customer feedback on YouTube, and social media requires you to really pay attention. Businesses are now in constant relationship with their customers, and with the communities where their products are placed. That is ever present.

“… technology has changed the paradigm of how you use information in carrying out your business. Businesses are now in constant relationship with their customers, and with the communities where their products are placed.”

Do you think technology is a factor in the short-term nature of business today, because of the rapid feedback that technology enables?

I think it is. Public markets have allowed businesses to flourish and add incredible value to society, so I don’t want to be perceived as downgrading the public market contribution to progress. But one of the consequences of the way it has evolved, in part enabled by technology, is a very short-term perspective. This is true in part also because investors are not owners so they have a “What have you done for me lately?” mentality. This makes leadership in this public sector world very, very hard.

I have not served in a public company, so I’m speaking of something I don’t know firsthand. But I would imagine it is very difficult to take a long-term stand when you have to go to that quarterly investors’ call and talk about your earnings for the last 90 days. You have big institutional investors who have an agenda, and hedge funds that have an agenda, and most of those agendas are short term. Today there is a lot of equity-based compensation, where your whole employee base is watching the market and watching their option values go up and down, and this adds to the short-term pressure for the leader.

Embedding Ethics

Back to your own company, how do you get employee engagement in ethical issues in the business?

I am very deeply and personally involved with this as the chief ethics officer at Marvin. We have increased the number of surveys we do. We have a lot of training sessions. We have established an ethics hotline enabling people to report things of concern.

What do you do to make it safe for a whistle-blower?

Probably not enough, because ethics is continuous — a process. It’s a sensibility not an event. But we publish our values, as well as our principles of ethical behavior. We train to them, we ask our supervisors to talk about that with their employees, in lunchbox sessions. We have an anonymous hottip line where employees, customers, suppliers can call into a third party and report unethical behavior or concerns that they have, which we then investigate. We communicate the results of our investigation, consistent with notions of privacy, to the reporter anonymously. I know I try to make it very clear to everyone I talk to, there will be no retaliation for anyone who comes forward with a concern or complaint.

In spite of these statements, people can read the papers and realize that whistle-blowers still lose their jobs. What do you do to make it safe for them?

Not having layoffs has helped people see that they are valued. I believe that the context of a workplace matters a great deal and we have worked hard on this at Marvin. Another factor is that we respond to every valid complaint. When something is checked out, people can see that action follows. So I think that people see that they’re helping the company live up to its values, which is what we want.

“Not having layoffs has helped people see that they are valued.”

Sometimes, of course, people have suspicions that are not valid. And because of those principles of greatness and wretchedness, sometimes people use the hot line to get at somebody they’re having personal conflict with, not necessarily because of unethical behavior. Ordinary conflict is not an ethical violation by itself. But we try to take all complaints at face value, we investigate every one of them to the end. And we assume that people are bringing them forward because they genuinely care.

“Ordinary conflict is not an ethical violation by itself.”

But can you ever do enough? I don’t know. And I’m sure that there’s more that we could be doing.

You just need a few more regulations in this area? (Laughter)

(Laughter) I don’t think so. Our chairman often says, “Do the right thing.” I’ve read plenty of pundits who say that that’s so general as to be unhelpful. But if the values that your culture espouses, and lives, are strong, “Do the right thing” works.

The reality test is critical, isn’t it. Nordstrom has done very well with the simple statement, “Do the right thing.”

On the other hand, if the company is not living up to its stated values, this can be very difficult. I remember reading the Enron Code of Ethics, which was a beautiful document almost totally ignored.

One of the rewarding things for me, as general counsel, is when I get called by managers and other executives with questions of an ethical nature. It shows they have the sensitivity, and the ability to discern that there is something ethical about this decision. I always tell people that we rarely get those ethical challenges that are just clearly right or clearly wrong. We always get the shades of grey.

“We rarely get those ethical challenges that are just clearly right or clearly wrong.”

Those are only in the classroom.

Yes. And it’s rare that anyone has all the answers, or can see the issue from all of the relevant perspectives. That’s one of the great strengths of diversity, whether it’s ethical decision making or any other kind of decision making. The difference of perspective enriches the discussion.

Sustainable Practices

Another dimension of ethics we often talk about is sustainable development. You are involved in something called the Tropical Forest Foundation. Tell us a little bit about that, and why Marvin is involved?

It began when we ventured into tropical hardwoods for use in our production. We bought a business in Honduras, and then we built a related business in Nicaragua. It was way outside my comfort zone, perhaps much like your involvement in Central Africa. We are no longer there now, but we went there with the best of intentions. We saw a business opportunity, and went there also to provide employment and to improve the community in which we operated. We wanted to do it in a way to make sure that we were environmentally responsible and practicing sustainability.

I reached out to some forestry experts at the University of Minnesota, who suggested that I should check out the Tropical Forest Foundation (TFF). I went to a board meeting and was extremely impressed. I gave a little impromptu speech at a dinner as a guest, and they invited me to come on their board. The company fully supported me in doing that, because TFF espoused principles that we could fully support. Many people think that not touching trees and not realizing the economic value in the forest, is the most sustainable strategy, but it is not. There is high government corruption, or weak governments, in areas where there are tropical forests. This can lead to exploitation of the resources with no benefit to the people who live there. People generally don’t realize that 25 million people live in the Amazon rainforest.

What really works, and the case has been developed by the Tropical Forrest Foundation, is quite different. It involves realizing the economic value of the timber in that forest, but partnering with industry to educate and follow sustainable forestry practices that would minimize the disruption to wildlife, the disruption to the water tables, to the canopy, etc. This group has developed a series of protocols, an approach to training the people who actually go in the forest, how to harvest trees sensibly according to the long-term plan that takes only mature trees. That maximizes the yield on the trees. In a typical approach, half the trees harvested are left on the floor of the forest and are burned, which produces waste and releases carbon into the environment.

“By cutting responsibly and sustainably, more trees are growing today than 100 years ago, because of replanting and reforestation.”

It’s a bit counterintuitive. There’s a lot of simplistic rhetoric suggesting not to touch the trees. By cutting responsibly and sustainably, more trees are growing today than 100 years ago, because of replanting and reforestation. This is the message this organization is trying to convey. By working with governments, by working with industry, to take an enlightened view of how do we do forestry responsibly and well, we can also benefit the people who live in the community in that forest.

Lawmakers are making public emails that show Wal-Mart Stores Inc.’s CEO found out in 2005 that the retailer was handing out bribes in Mexico. Congressmen Elijah Cummings and Henry Waxman who are investigation bribery charges at Wal-Mart’s Mexico division, released emails that indicate that Mike Duke and other senior Wal-Mart officials were informed multiple times starting in 2005 about bribes being made in Mexico. United States law forbids American companies from bribing foreign officials.

The emails contradict claims by Wal-Mart senior executives that they had no knowledge of bribes being made by the company in Mexico. The lawmakers shared the documents with Wal-Mart and sent a letter to Duke asking for a meeting to discuss them. “It would be a serious matter if the CEO of one of the nation’s largest companies failed to address allegations of a bribery scheme,” according to the letter by Cummings and Waxman to Duke.

Allegations first surfaced in April when Wal-Mart failed to notify law enforcement that company officials authorized millions of dollars in bribes in Mexico to speed up getting building permits and gain other favors. Wal-Mart has been working with government officials in the United States and Mexico on the investigation.

Comment: Once again, old emails have played a big part in substantiating whether people had knowledge of particular situations in which they were involved. As a very smart attorney once told me, “Always tell the truth and you won’t have to change your story or remember what you told to whom.” The investigation is ongoing and Wal-Mart has been very cooperative with the investigators so we’ll wait until the investigation is complete to draw final conclusions.

By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics

Wal-Mart disclosed that it has expanded an internal investigation into bribery in Mexico to Brazil, China and India. The company acknowledged the expanded inquiry in an SEC filing that accompanied its third quarter financial results. Wal-Mart had previously reported that the audit committee of its board was examining possible violations of the Foreign Corrupt Practices Act (FCPA) in Mexico.

In the filing with the SEC, the company said, “Inquiries or investigations of potential FCPA violations have been commenced in a number of foreign markets where we operate, including but not limited to Brazil, China and India.” Wal-Mart has had teams of lawyers looking into the Mexico issue and potential violations of the law elsewhere. In the filing, the company said it had “identified or been made aware of” other potential violations. Wal-Mart said, “When such violations are reported or identified, the Audit Committee and the company, together with their third party advisors, conduct inquiries and when warranted based on those inquiries, open investigations.”

The New York Times reported that seven years ago, Wal-Mart had found credible evidence that its Mexican subsidiary had paid bribes, a violation of FPCA. The Times stated that, “an internal investigation into the matter had been suppressed by executives at the company’s Bentonville, Ark., headquarters.”

Wal-Mart spent $99 million in the first nine months of 2012 in expenses related to the matter, including complying with subpoenas, defending itself against shareholder lawsuits and conducting a review.

Comment: This is a difficult issue when you operate in many foreign countries around the world where bribery is accepted as a way of doing business. For huge companies like Wal-Mart with multi-foreign operations, it is expensive to monitor and investigate after the fact. I applaud the SEC for bringing the bribery issue to the table where companies can spend more time up front making sure there are no bribery issues. You can never sit back on your heals after an initial examination but must continue to monitor. This is very expensive but it must be done.

By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics

In the high-stakes world of international business, sometimes a cup of coffee is just a cup of coffee. This and other bits of wisdom were revealed in long anticipated guidance from the U.S. government about which practices might put corporations in violation of a far-reaching antibribery law. The 130-page document is the most comprehensive effort by the U.S. Justice Department and the Securities and Exchange Commission to respond to complaints from companies that ambiguity in the Foreign Corrupt Practices Act has forced them to abandon business in high-risk countries and spend millions of dollars investigating themselves.

In the last decade, authorities have used the statute to extract billions of dollars in penalties from dozens of major corporations. The U.S. Chamber of Commerce and others have campaigned to amend the FCPA with more protections for companies. The document released in mid November offers pragmatic advice, particularly in one area of major concern for corporate compliance departments, such as gifts, travel and entertainment.

The document states, “It is difficult to envision any scenario in which the provision of cups of coffee, taxi fare, or company promotional items of nominal value would ever evidence corrupt intend. The same goes for “a small gift or token of esteem or gratitude.” On the other hand bankrolling a $12,000 birthday trip for a government official that includes visits to wineries is ill advised. The document recites positions long held by the government and avoids rigid policy pronouncements.

The document says what to do if a company uncovers evidence of potential bribes while conducting due diligence on a company it recently acquired. The short answer is to stop the bribe, report it to the government and institute reforms at the acquired company. The agencies say that an acquiring company that follows such steps is unlikely to face prosecution.

In response to complaints about the murkier parts of the laws, prosecutors and regulators have said the vast majority of cases they have brought included staggering evidence of bribery. Since 2009, prosecutors and regulators have entered into more than 50 settlements and plea deals with companies, yielding more than $2 billion in penalties.

Comment: You can’t satisfy everyone or give examples of every situation but this document is a step forward in clarifying what is considered bribery. Some will say it goes too far, others will say it does go far enough and yet others will say it hits the sweet spot. See the following article as an example of what companies such as Wal-Mart are doing concerning international business.

By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics

Dancing With Digital Natives: Staying in Step With the Generation That’s Transforming the Way Business Is Done

Michelle Manafy is director of content for FreePint Ltd., and was previously editorial director of the Enterprise Group for Information Today Inc. Heidi Gautschi grew up in France and the United States, and she continues to divide her time between these two countries. She recently finished a PhD in information and communication sciences from the University of Paris X. Their book was a USA Awards Best Books finalist for best business books in 2011.

There is a gap between those who grew up before the digital age, “digital immigrants,” and had to later acquire digital skills, and those who grew up as “digital natives,” generally those born in the 1980s and later. Digital natives look at life and work through a different lens than those born earlier, and the book takes a number of angles to explore how these communities can work together as natives come to the forefront of many businesses.

The editors brought in 20 writers [Full disclosure: I wrote one of the articles], in addition to their own contributions, to compile this book in four parts:

The Digital Native Goes to Work
Selling to the Digital Native
Entertaining the Digital Native
Educating the Digital Native

The writers move beyond stereotypes, e.g., digital natives know all there is to know about technology. Rather, while natives tend to be more comfortable in approaching new technology, they also have gaps in their knowledge of how to effectively use this technology. Sometimes immigrants are intimidated by natives around technology issues, but Mary Ann Bell (p. 351) challenges this notion and urges collaboration instead. So do Jami Carlacio and Lance Heidig (p. 315). Susan Evans (p. 19) moves beyond just discussing technology to examining work patterns of natives (mobile, virtual, migrant). Heidi Gautschi takes the reader away from the U.S. model, to look at digital natives in France. Christa Miller and David Hubbard (p. 61) look at the issues of managing a native workforce in the law enforcement field.

This book is well edited (I know that from personal experience as my article went through many iterations). It is a vital resource for those with digital natives in their employ. The only topic that might use a bit more attention is a challenge to natives in places where their approach might need adaptation to fit into a more traditional workplace. But that is just an immigrant speaking.

Business leaders and educators will ignore this book to their peril. This is a must-read.
Reviewed by Al Erisman

Einstein: His Life and Universe by Walter Isaacson. New York: Simon & Schuster, 2007. xxii, 675 pp.

Walter Isaacson is president and CEO of the Aspen Institute. Earlier he was president and CEO of CNN and managing editor of Time. He is the author of numerous books including biographies of Benjamin Franklin, Henry Kissinger, and Steve Jobs.

Albert Einstein was selected as person of the century by Time magazine on December 31, 1999. His scientific research has had a profound effect on many of our lives, particularly his theory of relativity. Isaacson sought to gain insight into Einstein’s work, motivations, and creativity. In the opening chapter, Isaacson writes,

“Einstein, however, was not truly a relativist, even though that is how he is interpreted by many … Beneath all of his theories, including relativity, was a quest for invariants, certainties, and absolutes. There was a harmonious reality underlying the laws of the universe, Einstein felt, and the goal of science was to discover it,” p. 3.

Yet the nature of his work is extremely complex, and attempting the task of explaining it in lay language is daunting indeed. Einstein himself had to deal with this all of his life. He had quickly became a cultlike figure and would frequently encounter the press who came to his lectures. Einstein had a goal of establishing the Hebrew University in Jerusalem, but reporters wanted a simple understanding of his theories.

“… the reporters were more interested in relativity, and the first questioner requested a one-sentence description of the theory, a request that Einstein would face at almost every stop on his trip. ‘All my life I have been trying to get it into one book,’ he replied, ‘and he wants me to get it into one sentence!’ Pressed to try, he provided a simple overview: ‘It is a theory of space and time as far as physics is concerned, which leads to a theory of gravitation.’” p. 293.

Einstein had difficulty with rote memorization, he thrived on areas of study that enabled him to use his imagination, and he worked primarily alone in areas where he could exert his nonconformist tendencies. Isaacson does a remarkable job in weaving together the personal, the technical, and the cultural influences that affected this remarkable man. The book offers fascinating insight into his life, and into the life of the scientific community. I was directed to this book after reading Isaacson’s biography on Steve Jobs, which I reviewed earlier. I was not disappointed.

There are technical parts of this book that are tough sledding. I am trained in mathematics, but not in physics, and found some of the technical material very challenging. Even with a high-level understanding, readers may find it difficult from this writing to link the basic scientific work that he did to the modern work on photo cells, lasers, semi-conductors, fiber optics, and space travel. But in spite of this gap, it is possible to grasp the broad contours of the subject from this well-written book, and to gain insight on one of the profound figures of our time.

I highly recommend this book.

Reviewed by Al Erisman

I work at the front desk of a hotel, and in this position I am often responsible for scheduling taxi rides for our guests. I have been approached by a number of drivers with an offer: If I call the driver directly for a long cab ride, he will give me a certain amount of cash, depending on the distance. Initially I considered this to be unethical, as the driver is probably not putting the job through dispatch, and could therefore be receiving a larger share of the lucrative pick-ups at the expense of the drivers who play by the rules.

I recently learned, however, that the dispatchers do not distribute the good calls equitably, as they have their “favorite” drivers and presumably are receiving a cut of the proceeds. Does this change the game? Also, I would be calling a driver whom I know has good service, punctuality, a clean car, etc., as opposed to playing the lottery through dispatch.

Thanks for your help,

Undecided Guest Services Representative

Response

Dear Undecided,

The ethical issues are primarily about honesty and fairness. One can imagine lots of different systems and traditions for calling taxis for customers (and for remunerating agents who arrange the rides), and if everyone knows and accepts the working “rules of the game” I’m not sure there is a problem.

I would first of all clarify those rules of the game. Ask around: what are the protocols? Are any of these actually written into law? (Violating a law raises the stakes). Perhaps customers, as well as competitors, should publish those working rules to be sure everyone understands. If there are rules but they are frequently flouted, it teaches contempt for a rule-ordered way of life. Better then to get rid of them and be transparent about the Darwinian way things are done.

Maybe this current way of operating invites abuse and even harm to some parties. Maybe it discriminates unfairly against some group. Maybe it could cause jealousy and conflict that could escalate to violence. Maybe, then, we should work together to devise a new set of rules (“regulations,” if need be). Could you take the lead in this effort or gather a small group of the stakeholders to invent and promote a new and better system?

David W. Gill, PhD
Mockler-Phillips Professor of Workplace Theology and Business Ethics
Gordon-Conwell Theological Seminary