Question

Is it important that leaders be truthful and transparent with their employees and firm stakeholders? On the one hand, ethical leaders are supposed to show openness and candor with others, and to not deceive investors, partners, and employees. On the other hand, deception and even lying may be important to motivate employees and curry favor with outside stakeholders.

Focusing on employees, research going as far back as the mid-20th century shows that positive feedback, even bogus positive feedback, motivates people to strive to live up with that prior feedback. This has been labeled the Pygmalion Effect. When leaders provide guidance that they believe followers have the potential to be high performers, people strive to meet those expectations. This has been found with students who receive fake test results, sales people who receive strong goals, and military personnel who are given demanding expectations. Additionally, if leaders speak highly about employees to other supervisors, those supervisors treat these employees better. But to do this, leaders must deliver inflated or bogus information to or about their followers. Thus, if leaders want followers to excel beyond their basic capabilities, these leaders will have to say things they may not believe. This may trigger employee growth, but it can also leave employees feeling that leaders are not authentic.

Turning to other firm stakeholders, investors and potential business partners want firms to be open and honest with them. But investors want to invest in and partner firms want to work with firms that are seen as strong and healthy. This creates a tension for corporate managers. If they are truthful, they increase the likelihood that others will trust them, but if leaders successfully convey optimism and confidence, even when it isn't truthful, they can attract support from investors and cooperation from business partners. This support, in turn, can help lead to the success that the leaders try to project. However, if leaders project unwarranted confidence and underdeliver on outcomes, they can erode their legitimacy as leaders.

Discussion Questions  

1. Is employing deception with employees or firm stakeholders unethical?

2. In what ways can deception pay off for executives? In what ways is it dangerous?

3. Jeffrey Pfeffer, a management scholar, has argued that leaders should be trained to be deceptive. Do you agree or disagree?

Answer 1

1. To answer this we should understand that business ethics and moral ethics are different. Business ethics is constantly evolving as per the currnent trends and accepted norms in business. Hence employing deception with employees or stakeholders is definitely unethical in the moral sense but it may or may not be in the contours of business ethics. For example, every product sold in the market only highlights its positives and tends to create a facde over its negative sides. This is an accepted level of deception but blatant lying by businesses can create a spiral of devastation which is definitely not ethical in any sense. Therefore it is hard to draw a line on deception within business ethics and it is more of a case of individual assesment according to the scenario.

2. Deception can pay off in a multitude of ways for executives. It can help motivate employees, boost production levels and improve efficiency. It can also create an atmosphere conducive for work and hence attract investment and quality recruits.

However, a tapestry of lies can create havoc. If the company gets exposed at any point it will face severe consequences and lose trust among the public and with its peers. This may result in boycott of its services, lack of investments and other unfavourable consequences.

3. Jeffrey Pfeffer in his in his books states that employees do not have enough confidence in their employer which may lead to career derailment and damaged aspirations. He also advises executives to be “usefully inauthentic” instead of stressing too muchon authenticity which may exhaust the passion of the employees without any proportionate gains. This is an argument one can support based on observations in the market and hence the statement that "leaders should be trained to be deceptive" can be agrreed upon from a purely business and entrepreneurial point of view. One should keep in mind that business does on work on moral ethics and principles and so such decisions  are bound to be the norm in the business world.

Kindly thumbs up if answer was helful!