Project Management Institute

Ethics in project management

issues, practice, and motive

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A survey of project managers in New Zealand reveals that leadership, values, and openness are more critical to the ethical work environment than codes or frameworks.

David J. Robb

A sense of unease often confronts those broaching the subject of ethics. They may recall Sir Adrian Cadbury's admonition: “It is … foolhardy to write about ethics at all, because you lay yourself open to the charge of taking up the position of moral superiority, of failing to practice what you preach, or both.” Nevertheless, the principles that govern our lives (in public and private) should be the subject of discussion and debate.

The concerns of general business ethics are often magnified when it comes to the management of projects. “One-off” ventures involving deadlines, budget pressures, considerable uncertainty (in time and cost), and temporary assignments of personnel and resources are prime territory for ethical issues to emerge. It is not surprising then that PMI requires certified PMPs to subscribe to a code of ethics and vow to uphold it in all professional project management dealings.

While the Code itself is not a formal component of A Guide to the Project Management Body of Knowledge, or of certification examination requirements, working it out in practice is a vital aspect of the project management profession. For instance, how should a project manager resolve situations where the Code needs interpretation, is silent, or where articles of the Code appear to conflict?

This article addresses some of the issues that arise during the project life cycle and presents the results of a small survey investigating how project managers deal with ethical issues in practice.

The Minefield

Are ethical challenges unusual or ubiquitous? Although numerous cases of “dubious” business practices have been recently highlighted in the media, this increased attention may be due to a greater level of awareness, and/or enforcement of ethics policies, rather than to a decaying ethical climate in business.

A small survey of project managers, conducted by the author, supports the view that the general state of affairs may be bad but is not necessarily deteriorating. This survey consisted of a one-page confidential survey form handed out to 25 attendees at an October 1995 meeting of the PMI New Zealand Chapter. Eight mailed responses were received. Of course, in such a small sample, there is a likely bias towards individuals who are interested in project management ethics. Still, their responses reveal some interesting points about the ethical concerns of project managers.

Table 1. Examples of Ethical Concerns Raised During the Project Life Cycle

Initiation and Feasibility (Technical, Economic, Environmental)

Issuing a Request For Proposal with the sole purpose of gathering ideas

Falsifying estimates (e.g., cost, time, return on investment) to secure a project

Responsibilities of external consultants (to owner/client or employer?)

Planning and Organization

Bid rigging (divulging confidential information to some bidders)

“Wired” projects (predetermined winner)

Contractor “buy-in”/“low-balling” (bidding low, with the expectation that costs will be recovered by subsequent change orders, cutting corners, or renegotiation)

Bribery (“kickbacks,” “facilitating payments,” “grease”)

Falsely declaring one's capability to perform

Accepting a job/project outside one's level of competence

Discrimination in hiring (disabilities, sex, age, race)

Falsifying estimates of time and cost (e.g., deliberate underestimation to secure financing or deliberate overestimation to generate slack)

Implementation/Execution

Covering for team members to preserve “harmony”

Withholding information from owner, client, or superiors

Trading off company interest vs. client interests

Adjustments to contract value caused by contract variations

“Padding” expense accounts

Falsifying costs to gain tax advantages

Taking shortcuts (e.g., to meet a deadline or budget)

Safety/health compromises (or standards violation) in workplace environment and/or practices

Substandard or shoddy materials

Unequal treatment of project team members

Closing

Sloughing off to protect one's position (work “extension”)

Reluctance to admit project failure

Disclosure of information if project collapse in eminent

Failing to honor commitments to project personnel on completion (reassignment)

Although the eight respondents (each with an average of 17 years experience in project management) reported facing challenging decisions with varying frequency—from “very rarely” to “approximately 14 times per year,” only one agreed that such issues were becoming more common—attributing this to “downsizing” and an increased pressure to perform. Another admitted that one's exposure to, and perception of, ethical issues may change with one's position—even though the environment may be static. The majority, who felt that ethical challenges were constant or declining in frequency, attributed this to the following factors:

  • Better trained/educated managers
  • A greater emphasis on individual responsibility and accountability
  • Flattened organizational structures with more customer focus and team decisions
  • A buoyant job market where jeopardizing one's current position was not as risky
  • People becoming “tired of our ‘unethical’ standards and corrupt world”
  • Clients learning of one's (ethical) stance and reacting positively.

One can trace some of the ethical issues that surface as the project life cycle progresses from initiation through to closure. Table 1 summarizes some of the issues identified by the project managers in the survey, supplemented with the author's own experience and ideas from a 1987 Project Management Journal Legal Lights article on the issue by M.A. Nixon. (See sidebar for this and other readings on project management ethics.)

In the early stages of a (potential project's life, various players may be tempted to “rig” statistics to increase the likelihood of a project passing a corporate hurdle rate. For example, Badaracco and Webb tell this story:

A young financial analyst had calculated that the return on a significant investment at a refinery was approximately 12 percent. His boss explained to him that no project could be approved without a 25 percent return and told him to redo his numbers and get them right.

Given the one-off nature of each project, there is considerable scope for those involved in estimation to engage in self-serving behavior. Even using the services of external consultants can give rise to conflicts of interest, as the consultant addresses the issues of responsibilities to client versus their employer, and where the price of giving an honest estimate (of project time or cost) may be to lose current or future work. Distinguishing deliberate falsification from genuine mistakes/ignorance/bias is highly problematic, especially as it has been established that even quantitatively skilled individuals have a propensity to understate uncertainty (Capen, 1976).

As the project team grows, ethical issues continue to abound. For instance, one respondent highlighted the issue faced in recruitment of “deciding between people I like versus those who really have the skills.” In this regard, Baker, Slonaker and Wendt wrote in 1994 that:

Strong evidence exists that bias and discrimination exist in the project environment… Project managers are in a unique position: they must go beyond simply behaving in a fair and unbiased way, to act as champion for their team members and oppose unfair or discriminatory treatment by others within the organization.

Project management inevitably entails a strong degree of trust, both within and between organizations, and as such, any violation of the principles of equity is serious.

The project environment, with its extensive use of contracts, can provide an ideal arena for bribery to flourish. One survey respondent described an international project where “backhanders” to client's representatives typically amounted to 1 percent of project value. Drohan gives the real case of the construction of a large housing project in Africa in which progress payments inextricably dried up and the contractor was informed by a government official that funds would flow again if a “commission” was paid. In this case, the organization refused and took the matter to the World Court. Twelve years later the case was settled in the organization's favor.

Human behavior and psychology continued to breed ethical problems even in the last phases of a project. One obvious phenomenon is the fear of admitting failure, as Devaney noted:

… the decision rule for the abandonment of a project is a straightforward present value problem which requires that we ignore all sunk costs. The difficulty arises in the very human problem of self-control and recognition. In many cases there is a psychological temptation to try and recoup what has already been expended. … “doubling up,” “averaging down”… When it comes to project termination people also lie, even to themselves.

Yet, even when the project is on track (perhaps due to some generous over-estimation!), ethical issues abound. Few of us would maintain that we had never deliberately reduced our effort to “extend” the duration of a project—especially if we're having fun. While some would claim to be “victims” of Parkinson's Law (which states that work expands to fill the time available to accomplish it), some other wag (quoted in Schonberger) cynically commented that Float = Slack = Parkinson's Gap!

Responding to Ethical Challenges

One would expect that project managers have the capability of handling many of the ethical issues confronting them without having to call up the legal department or bring in a consultant. Yet how do project managers make such decisions? And whom do they consult?

Of the eight respondents to our survey, five gave descriptions that could be categorized as “self-referential”:

  • “I have an inner sense of right and wrong and this is very important to me.”
  • “I consult my own self. I don't apply fixed rules. Keep the issues open.”
  • “I don't have an external reference. I rely on my gut—I consider I have a strong sense of right from my upbringing.”
  • “I consult with few at this time—decisions are and have been mine.”
  • “I will bend rules when I think it is ‘right’. I would consult with a mentor and confidants.”

Perhaps these processes are embodied by the following ethical “tests” identified by Badaracco and Webb:

  • The “sleep test”: “Can you sleep easily at night?”
  • “If you wouldn't share it with a 60 Minutes news camera, don't do it.”
  • “Imagine that whatever you did was going to be reported on the front page of the New York Times. How would you like that? Would you be comfortable?”

And the Jack Sammons “beer test,” described in Vesilind: “You can tell if you make the right decision by going home and having a beer; if the beer tastes good, then you have done the right thing.”

The three other respondents described a more consultative and/or external view:

Figure 1. Feasibility Space for Classifying Ethical Theories (from Vesilind, 1991)

Feasibility Space for Classifying Ethical Theories (from Vesilind, 1991)
  • “I would consult friends who are completely disconnected from the job and environment, as well as ‘elders’ who have been in business for some time.”
  • “Sometimes I discuss issues with a colleague. Mostly decisions are made by trying to be ‘reasonable’ and then examining the decision as if it was being examined by someone outside the business environment.”
  • “‘Who’ has always been my policy: Determine who is affected, then discuss it with them (e.g., business sponsors, resource managers/supervisors. [Then] play the devil's advocate and define the pros and cons. [Finally], make the decision and be ready to stand by it/back it up with information gathered in [the first two steps].”

One question that must be raised when evaluating systems of ethics—particularly the self-referential—is whether or not they are purely self-serving. My observation is that with the current breakdown of authority in various institutions (public and private), adopting relativistic systems is a perilous route. Consider the candid but chilling admission of one Harvard MBA graduate, quoted in Badaracco and Webb:

One of the sad things that I've observed, and I hope I don't fall prey to this, is that experience jades you. Good people see things … and each time they become less sensitive. There are lots of things that go on that to me aren't illegal, immoral, but they make me and the people who do them uncomfortable. Experience really hardens your heart.

Frameworks for Ethics. Definitions of ethics are typically couched in terms of “a set of moral values/principles advocated and/or practiced by an individual or group.” Cullen, Victor and Stephens cite three major classes of ethical theory:

  • Egoism, or optimizing one's own interest: “the highest good is the pursuit of one's own welfare”
  • Utilitarianism, or optimizing the interests of oneself and significant others: “the criterion of virtue is its utility”
  • Deontology, or desiring to do what is “right,” regardless of the action's specific outcome and whose interests are affected by it.

How do these theories work in practice?

A contracts manager has been offered a $1,000 kickback from S.L. Easy, Inc. if he grants them a subcontract worth $50,000. The egoist might take the money (or negotiate a higher fee!). The utilitarian might refuse, and advise the subcontractor to clean up his act, whereas the deontologist may feel obliged to report this breach of law to the appropriate authorities.

Or a software engineer discovers that her firm will not be able to deliver a software development project as specified without considerable cost and schedule overruns—which will be borne by the client. The egoist might leave her organization (after selling the stock short!). The (benevolent) utilitarian might begin an exhaustive search (on her own time) for a solution to deliver on time, on budget. If this fails, she might counsel her employer to renegotiate the contract with the client. The deontologist may consider blowing the whistle on her employer, even if it means losing her job.

Vesilind provides a more comprehensive framework (see Figure 1) of philosophies by classifying them according to whether they are based on cost/benefit judgments, or a contractual obligation (duty, commitment) to others; the degree to which they are directed towards means (act) or end (result); and the degree to which they are directed towards serving self or others.

While the typologies described here are helpful in describing motives and engendering debate about the theories themselves (and the validity/overlap of the distinctions), they provide little prescriptive value. They do not give guidance on how a project manager should act (in a given situation, or universally).

Ethics Education. One might ask whether one can (or even should) teach ethics. Certainly, one can provide instruction (using the aforementioned frameworks, for example) on the various approaches to decision-making and thus provide a “valuable counterbalance to the highly individualistic and potentially solipsistic views that lie behind the ‘sleep test’ and the preference for doing things that ‘I can live with,’” in the words of Badaracco and Webb.

A more pertinent question may be whether we can or should teach morality. In this regard, Vesilind observes that in free societies ethics is taught, whereas morals are considered “personal questions of what is right and wrong” (the opposite being true in totalitarian societies).

The state of affairs is, no doubt, linked to the rise of “situational” approaches to ethics, and the demise of absolutes. While I continue to wonder how consistent it is to hold absolutely that there are no absolutes, it is also a concern that some approaches may leave current and future project managers with the view that they can choose any system they please.

One would hope that business and project management ethics are examined (even implicitly) throughout the formal education process. Although few project management texts even mention ethics (notable exceptions are Obradovitch and Stephanou, 1990; and Meredith and Mantel, 1995), there are numerous published cases and articles that can be employed to illustrate ethical issues faced in project management (see sidebar).

Interestingly, while the majority of the project managers in our survey responded that they had received no education in ethics, several spoke of the influence of their upbringing and family/church and two mentioned the importance of exemplary leadership, e.g., “[I have received] no formal training, but company project management training addressed ethics frequently and ethical behavior was strongly advocated (and practiced) by some senior executives (and not by others).” This point cannot be stressed enough. Professionals and leaders (be they project managers, executives, or educators) should be held accountable for their role as exemplars.

Readings and Resources on Project Management Ethics

Badaracco Jr., J.L., and A.P. Webb. 1995. Business Ethics: A View from the Trenches. California Management Review 37 (Winter), 8–28.

Baker, B., W.M. Slonaker, and A.C. Wendt. 1994. Employment Discrimination: Another Challenge for the Project Manager. Project Management Journal 25 (December), 22–25.

Cadbury, G.A.H. 1987. Ethical Managers Make Their Own Rules. Harvard Business Review 65 (September-October), 69–73.

Capen, E.C. 1976. The Difficulty of Assessing Uncertainty. Journal of Petroleum Technology 28, 843–850.

Cullen, J.B., B. Victor, and C. Stephens. 1989. An Ethical Weather Report: Assessing the Organization's Ethical Climate. Organizational Dynamics 18 (Autumn), 50–62.

Devaney, M. 1991. Risk, Commitment and Project Abandonment. Journal of Business Ethics 10, 157–159.

Drohan, M. 1994. To Bribe or Not to Bribe. Globe and Mail (February).

Duncan, W.R., J.D. Frame, and E. Jenett. 1994. The PMP and the PMBOK: Common Perception vs. PMI Position. Project Management Journal 25 (December), 19–21.

Fadiman, J.A. 1986. A Traveler's Guide to Gifts and Bribes. Harvard Business Review 64 (July-August), 122–136.

Goodpaster, K.E., and D.L. Davidson. 1984. Ethical Quagmire. Harvard Business School Case Study 9-384-036. Harvard Business School, Boston, Mass.

Grayson, L.E. 1989a. Negotiable Bidding Process. Darden Case Study G-0382. Darden Graduate School of Business Administration, University of Virgina, Va.

Grayson, L.E. 1989b. Purchase Quantity Change. Darden Case Study G-0392. Darden Graduate School of Business Administration, University of Virginia, Va.

Hart, C.W.L. Galleon. 1984. HBS Case Study 9-688-006. Harvard Business School, Boston, Mass.

Meredith, J.R., and S.J. Mantel Jr. 1995. Project Management: A Managerial Approach. 3rd ed. New York: John Wiley & Sons.

Nixon, M.A. 1987. Legal Lights: Business Ethics. Project Management Journal 18 (September), 23–25.

Obradovitch, M.M., and S.E. Stephanou. 1990. Project Management: Risks and Productivity. 1st ed. Bend, Ore.: Daniel Spencer Publisher.

Schonberger, R.J. 1981. Why Projects Are “Always” Late: A Rationale Based on Manual Simulation of a PERT/CPM Network. Interfaces 11, 66–70.

Shrivastava, P., I.I. Mitroff, D. Miller, and A. Miglani. 1988. Understanding Industrial Crises. Journal of Management Studies, 25 (July), 285–303.

Vesilind, P.A. 1991. Views on Teaching Ethics and Morals. Journal of Professional Issues in Engineering Education and Practice 117 (April), 88–95.

The PMI Code of Ethics and A Guide to the Project Management Body of Knowledge are available on PMI's World Wide Web site: http://www.pmi.org.

Case scenarios in ethical behavior available in the foregoing readings include:

Bidding and bribery (Fadiman, Grayson)

Government contract performance (Goodpaster and Davidson)

Real estate projects (Hart)

Crisis management (Shrivastava et al).

Exemplary Leadership. Of course, widespread knowledge and healthy discussion of ethics, the PMI Code, and legal issues may go some way toward raising the level of ethical practice in a project management organization. However, nothing can substitute for leadership by example—the kind of leadership that sets a clear agenda and tone for the organization, and follows through with practice. Tom Philips (the past-CEO of Raytheon who went so far as to establish an ethics office to review company policies) went on record: “Even if you think you are serving your company by bending the rules, let me be absolutely clear: Don't do it. Don't even think about it.”

Fadiman and others suggest creative strategies to divert requests for bribes into well-publicized, carefully tailored “donations.” Cadbury would also advocate a policy of openness as a means to reduce the incidence of bribery—insisting that all payments be recorded on the face of invoices, and testing whether it would “embarrass the recipient to have the gift mentioned in the company newspaper.”

The seemingly innocuous concept of openness (or transparency) has major ramifications for the way in which project managers conduct their business. It impacts the degree to which managers let team members know what is going on. It necessitates a willingness to be a “bearer of bad news”—along with collaborative searching for creative solutions to problems.

Encouraging ethical practice in the project environment requires more than developing codes and frameworks. It demands principled leadership, openness, and a commitment to developing innovative “win-win” solutions. Ultimately, however, the buck stops with each of us—in our approach to the welfare of others, the principles of our profession, and above all, our commitment to integrity. ■

David J. Robb, a senior lecturer at the University of Auckland, teaches, conducts research, and consults in operations and project management. He is a member of PMI and is a registered professional engineer.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM Network • December 1996

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