Impact Podcast | What it takes to build an ethical business

KANINA BLANCHARD: Exclusive insights, actionable strategies, and ideas that ignite change. You're listening to the Ivey Impact Podcast from Ivey Business School.

JULIAN BIRKINSHAW: Hello and welcome to season two of Dialogue with the Dean, the flagship series on the Ivey Impact Podcast. I'm Julian Birkinshaw, Dean of the Ivey Business School. In this series, I speak with Ivey's leading faculty to explore the research shaping business and society today.

On this episode, we're diving into a topic that arguably matters now more than ever: organizational ethics. We know we need more of it. But in a world filled with headlines about corporate misconduct, what does ethicality in business actually look like? And more importantly, how do we develop it?

Joining me to explore this is Hayden Woodley, associate professor of organizational behavior at Ivey. His latest research challenges long held assumptions about ethical leadership, revealing that emotional intelligence, not just intellect or vision, impact our business ethics. But that's only the beginning. There's another piece of the puzzle, and we'll get to that later in the episode.

Hayden, welcome to Dialogue with the Dean.

HAYDEN WOODLEY: Thank you for having me here. And I'm truly honored to be here.

JULIAN BIRKINSHAW: We'll just start a little bit with your background. What brought you to Ivey in the first place?

HAYDEN WOODLEY: I guess the short answer is opportunity. And to do things like this. Like this research. This was actually coming together for a long time for me, and something I've been interested in.

My background is as an industrial organizational psychologist, which is a mouthful. It's really just a work psychologist. I study human behavior within the organizational context. But through that, I kind of got more passionate for the practicality of it.

So, instead of moving to a psychology department, I actually went to the University of Prince Edward Island in the Faculty of Business and teaching business students about the aspects of human behavior. I always find that there tends to be this disconnect that can take place where someone needs a task done, and we focus on the task, not the human. We need to do that task. So even with AI, right, someone builds the algorithm and designs the AI. So why are we focusing so much on the AI and what it's doing and not on the person who's building it?

So yeah, it's a real good passion for me.

JULIAN BIRKINSHAW: Yeah. And I was looking through your CV and you've done a bunch of things and we will get to the emotional intelligence stuff. But yeah, a lot of your earlier work was around team dynamics. Just tell us what some of the kind of key findings or insights that came out of that research.

HAYDEN WOODLEY: Well, there’s a lot. And I really enjoy doing that work because mainly I find that's where, from a leadership perspective, we get a lot of laissez faire leadership as people say. Where we often take people and put them in a room together and say, you as a team, figure it out. This forming, storming, norming. One of my early research is really starting to show that's actually a mistake.

If you let teams come up with their own rules and requirements, it actually sets them on potentially an incorrect path because they get to set their own agenda. As a leader, you should be in there and getting really involved early on.

And my research showed that things like confidence in teams starts off being really, really high and that can be falsely, fabricated, let's say. So, I've said it'll go down over time, and the more it decreases, the worse they're going to perform. So as a leader, it's important to get in there and help them maintain that confidence over time to make sure that they perform at their best.

So, I've been really interested in understanding that. For example, we talk about we've all been in a team that has cohesion, right? If I ask that to people, they'll raise their hand. Oh yes, I was on this cohesive team. But the challenge with cohesion is it only exists when you're working interdependent with somebody else. You don't have that when you're working by yourself.

So how do I take into consideration that I have two people that need to work independently – to have their own skills, their own abilities, and be successful – but I also need them to develop cohesion and collective confidence and share information? This is the added layer of responsibility that we can take advantage of with teams to improve our organization success. But it also makes being a leader more complicated and challenging, and that really fascinated me.

JULIAN BIRKINSHAW: And so I think your advice, as it were, is around, of course, managing the process and being conscious of the fact that just because a team says that it's doing a good job, that doesn't necessarily make it so.

I read that in one of your papers, you have this notion of constructive controversy. Or controversy? And what do you mean by that? Does that mean that somehow controversy or disagreement is a is a good thing?

HAYDEN WOODLEY: Well, there are different types of conflict that can take place in a team. If you and I aren't getting along with each other and we're having personality clashes, well, yeah, that's bad.

If we can't figure out how to go about doing something with the process. Is that form of process conflict? Yeah, that's also not good.  But then you can have discussions and debates about what's the task asking us to do? How are we trying to achieve this? And if you go into any high functioning IT or engineering team, you're going to hear that dialogue. And, you're going to say the team that's having that dialogue is probably doing better than the team that's not having that dialogue.

So what my colleagues and I were able to find was that the teams that had really high task conflict, but low presence of relationship and process conflict, were the teams that were the most innovative and the most effective engineering project teams. And that this was really core to the success of their team, because the challenges, these types of conflict, you can have it go backwards. Like, I don't like you. So, I'm going to fight with you about the process, and now I'm going to fight with you about the task. So, we were the first to really differentiate between positive task conflict and negative task conflict, using a really advanced statistical procedure called profile analysis.

JULIAN BIRKINSHAW: So disagreeing with somebody around tasks, as long as you don't kind of make it personal somehow, if you separate out, we can disagree about what the right thing to do is here, as long as there's still some level of respect or mutual understanding amongst the people and you disassociate the two, then that can that can be a healthy dynamic.

So that's probably overly simplified. But is that roughly correct?

HAYDEN WOODLEY: No, that's great, actually. Segue a little bit to something that I've been continuously working on that came out of some of that earlier work on how like teams confidence or self-efficacy evolves over time. What we found is that, and more recently with more substantial evidence, that you actually want disagreement, right?

So you don't want them to all just saying we're awesome and we're great or we all suck. You want them to have an understanding of, you know what, some things are going well, some things are not. And if you have everyone contributing to the success of the team, they're going to have divergent perspectives. And that's why when we say we want cross-cultural teams, because we want these different perspectives, these are all the advantages.

But it's hard. It's hard as a leader to manage that complexity. But if you gain experience in experiential learning, doing it, which is something I think we do really well here at Ivey, we can use that to help educate future leaders in how to make these teams and be present from the beginning, all through the process to the outcome, and to be able to continue that cycle to the teams or succeed. I think disagreements shouldn't be scary. It should be something that you lean on.

JULIAN BIRKINSHAW: Yes. Let’s just to go a little bit deeper into it before we get to the other topic, I mean, as a leader, you're a bit sort of reluctant to encourage conflict. I mean, I've sat around many, many teams meeting, sometimes as a leader, sometimes as a participant. And we often kind of tiptoe around disagreeing with people. And your advice is you own it. I mean, in other words, if there is disagreement, you've got to almost lean into it and try to get to the bottom of why and try to understand that this can help you get to a better outcomes. Is that right?

HAYDEN WOODLEY: Yeah. I think when we talking about psychological safety, I think we use it a little bit colloquially now and we don't get to the true origin of what Amy Edmondson meant by it. And it's feeling safe taking interpersonal risks. Right? So that is an internal conflict that's going to take place by being able to say, hey, look, I think the team's going in this direction and I disagree with that.

JULIAN BIRKINSHAW: You're referring to Harvard professor Amy Edmondson. And she kind of coined the term “psychological safety,” which I think is, as you say, we use it in everyday language. Now, roughly speaking correctly, which is I feel comfortable to actually kind of share ideas, perhaps, that make me vulnerable within a group because I trust the people around me.

Is that right?

HAYDEN WOODLEY: Yeah. To a certain degree. It's something that we differentiate from voice on teams, where people feel like I have a voice and I get to say and speak up and that people will listen to me, but it's going beyond that to say, well, I'm in an uncomfortable situation. Guess what? I made this mistake and this derail the team. Are you going to bring that to people's attention? Because the longer you take to bring it up, the worse it is for your team. And that discomfort that we can put in is really a form of conflict. But that form of conflict – if we can process it and feel supported by others and trust that if we bring this up, I will be treated fairly – that is really core to feeling like a successful team.

JULIAN BIRKINSHAW: I’ve occasionally tried to, and it's difficult to do, but I’ve tried to get teams to share that their failures, their, you know, well-intentioned failures. I have to start by kind of going first, but as a means of kind of reminding everybody that it's actually okay to have, you know, things which didn't go perfectly.

HAYDEN WOODLEY: And yeah, I find that's a bit of a challenge that we're dealing with nowadays. And, I have a Caribbean background and a mom who has all these sayings and one of mine that I'm quite proud of that I say now is that we talk about trial and error, right? And we think that's a good thing, trial and error. That's a great thing. And I would say that, well, an error only becomes a mistake if we don't learn from it. I think that becomes really important to differentiate because we feel like, oh, I made a mistake, no you made an error.

JULIAN BIRKINSHAW: Right. That's, I mean, we don't have great language for this, but you're right. The error is something which didn't go quite right. Then if you don't learn from it, then it becomes a mistake and that's bad. Thank you.

*MUSICAL BREAK*

JULIAN BIRKINSHAW: We could say a lot about that. But I want to get on to the kind of main event here, which is the research you've just done, which has just been published in on emotional intelligence and ethical decision making.

Now you're going to have to help us, our audience here. So first of all, what do we mean by emotional intelligence?

HAYDEN WOODLEY: Yeah. So emotional intelligence maybe has a bit of a misnomer to it. A lot of people think it means it's an ability. And initially it was measured as that. It was described as something that you had, you were either capable of, or not able to.

But now we've learned that when we measure it more from a personality skill perspective, we're much more successful at developing it and actually at predicting outcomes with it. So emotional intelligence really comes into four main dimensions. Can you recognize your emotions? Can you regulate your own emotions? Can you recognize emotions in others? And can you regulate the emotions in others too?

JULIAN BIRKINSHAW: Okay, and obviously some people have more emotional intelligence than others.

HAYDEN WOODLEY: I mean, that goes without saying. Yeah, you know, with any personality like conscientiousness, agreeableness, openness, experience, extroversion. That's one of the things I have a bit of a pet peeve with is everyone's like, I'm introverted or I'm extroverted, I'm like, actually, that's a normally distributed thing. There are very few people who are like one or the other. Most of us are in the middle and have different things that we're one or the other on that.

JULIAN BIRKINSHAW: So that's emotional intelligence. And your research looks at the link between emotional intelligence and ethicality or ethical decision making. And again what does that look like? Because again, it sounds like surely everybody's making ethical decisions and you're going to say they're not doing that, right?

HAYDEN WOODLEY: Well yeah. I think what we know through case studies that we publish and stories that get really catchy in the news, is we hear about these big unethical things that take place almost too late. But they often happen in business, and it can happen just on the day to day operating of how someone functions.

Right? We hear, you know, documentaries on Netflix. They do a very good job producing documentaries. I mean, like, look at this unethical decision. And we like to look at that and go, well, I would have never done that. And I think that's the mistake. You should say, like, well, why would somebody do that? And, accept that?

JULIAN BIRKINSHAW: I mean, and I guess we've talked about many of these cases at business school like Dieselgate, Volkswagen's famous example there was the start up in Silicon Valley. I mean, there's many, many such cases. But yeah, those are the extreme cases. But I'm guessing we've got many, much smaller examples of people ultimately making, you know, decisions which are less than ethical?

HAYDEN WOODLEY: Yeah. And so a lot of the research on emotional intelligence and ethical decision making focuses on the one on one interpersonal behaviors. Am I willing to help somebody in my supportive way versus like, am I counterproductive? Am I coming in late to undermine other people's projects so I can get the customer and so forth?

But really, what we added to the literature was: we had business decisions where it's like, here's a company and they have done this unethical thing. Will you invest in them? Would you partner with them? Those kind of scenarios based off real events that have come out of the media. And people who had higher emotional intelligence were less likely to make the unethical choice when presented with these dilemmas.

JULIAN BIRKINSHAW: So, I've got more emotional intelligence. I'm more aware of myself, my emotions, my relationship with others. I'm more likely to make ethical decisions. I mean, it kind of sounds straightforward, but what is the mechanism? Why does that work? Because ultimately, showing that there's a relationship is one thing, but helping all of us to do it better is, is another thing. So, talk about how this works in terms of cognition?

HAYDEN WOODLEY: Well, I love this question. Mainly because a lot of my stuff I do focuses on these linking mechanisms. So why is that connected to that? And, the paper is about, you know, feeling confident and doing the right thing. We find that people with higher emotional intelligence have skills where they feel like I can read somebody, I can understand that person. I can understand when I'm getting overly emotional in the moment, and I can regulate that. And those skills make you feel like not only you can connect with yourself, but with others. So that creates a self-efficacy or self-confidence in your ability to act. And especially what's really important about ethical decisions, whether it's one on one behaviors or decisions, strategic decisions made within a business is the impact. Who is this going to hurt? Who is this going to harm? Oh, this might be financially rewarding for me, but this might also result in the poisoning of water for a community. So they tend to have more awareness of their surroundings and a broader understanding of the stakeholders involved in that decision. And so, they're more inclined to make these ethical decisions because they feel confident that they can go through this challenging process.

Because ethical decisions aren't easy. There's a lot of evidence to show that it's stressful. It can be challenging, requires higher levels of cognitive load. And what is that burden that comes with those decisions? People with emotional intelligence are like, I can do this.

JULIAN BIRKINSHAW: So, you hypothetically put someone in a position where they're being asked to make an unethical decision, sign off on a dodgy loan or something, and you're saying that the people who have built self-efficacy, sort of a belief in their ability to do the right thing, they're the ones who actually then bring that to bear and say, actually, no, I'm not prepared to sign that document or whatever.

HAYDEN WOODLEY: Yeah. And it's not even just decisions that are like within an organization sometimes, like, here's an organization that's done unethical things that don't align with values of our society. Would you work with that company? Would you want to work there? And people are like, no, I have emotional intelligence. I understand that's something that we should fight against. And that's not as good for the whole, or what's the Gestalt principle? The whole is greater than the sum of the parts? It's that these emotionally intelligent individuals seem to understand that a more holistic perspective of the ethical dilemma.

*MUSICAL BREAK*

JULIAN BIRKINSHAW: Got it. So, let's kind of bring this into the present day, as it were, because obviously we've got a lot of examples of leadership in the world, which are not necessarily the types of leaders that we teach about in business schools.

What sort of advice do you give them in terms of becoming better leaders, becoming more effective at making the right ethical judgments?

HAYDEN WOODLEY: I think there's a lot that can be done. But insights building from this paper and even recently I had an up very great opportunity to speak with Sarah Dobson, with the HR Reporter who wrote an article about the strongman tactics, where leaders are just being like, go do this or judge people. And they're like really being forceful and telling people what to do instead of understanding them, which to me is very counterproductive.

So, one of the things that I often say is with emotional intelligence often you find people who have higher emotional intelligence are really good listeners. And when they have a conversation, they're not just trying to get the opportunity to say what they want to say. They listen to what you have to say. They might probe a question, say, oh, why do you feel that way? And get you an understanding, get them a richer understanding of recognizing your emotions so they can more appropriately connect with you and build this empathy.

And that sense of awareness leads to making it almost easier and less complex, because someone comes in to work one day, they're being short with people and being stern, and we're like, that's different. Well, instead of being like, I'm going to leave that person alone. The emotionally intelligent person will then go and engage with that person and ask them questions.

JULIAN BIRKINSHAW:  So, is there a sort of trainings and sort of exercises you can do, I mean, sort of self-reflection exercises to help you build this sort of emotional intelligence, to help you just become better at doing this?

HAYDEN WOODLEY: Yeah. This research came from an activity I did in my classroom at my previous institution, which I now have carried over to Ivey. And we use an emotional intelligence assessment with our students, actually the same one that's in that paper. And we work with a local organization to have students get a full report that they would get as if they were working in an organization.

And then we talk about it. We say, here's a development plan. What's really important to you? What resonates with you? What's something that you want to see yourself get better at? Where do you see that helping you in Ivey and in your career after Ivey? And then try to embed references and callbacks to that throughout the semester. And I find students who really engage in it, really resonate.

And then they demonstrate that, in all fairness, coming to Ivey is a stressful opportunity. And the ones who really invest, I find that they show more signs of development, in the aspect of feeling comfortable, feeling like they can fit in here and feeling like they can do the right thing while they are here as well.

JULIAN BIRKINSHAW: Let's just stick with the HBA students, because you teach the very, first year students. In fact, I sat in one of your classes when I first arrived, probably some 6 or 8 months ago.

HAYDEN WOODLEY: No pressure.

JULIAN BIRKINSHAW: And you were teaching, of course, these students are typically, what, 20 years old or something? I mean, they're young, right? And you're teaching them about difficult organizational situations and how you would behave. I mean, how kind of, amenable are they to this type of learning? Because, as you touched earlier, you come to do an HBA, you know, a bright 20 year old, you think it's all about finance and task and concepts, and you're suddenly throwing them a whole bunch of new stuff around. It's actually about people and, you know, they are typically relatively inexperienced of kind of what the business world is like. I mean, they've obviously learned how to cope as teenagers, but it's a very, very different life. How easy is it to get them to realize kind of how important it is to build on emotional intelligence and to build high quality relationships within teams?

HAYDEN WOODLEY: All this stuff that we've been talking about, well, it's not easy. I think it's a very challenging thing to do often because they come in with their own expectations and these are all high performers, and they have to learn that the average has now shifted. Right? So now the mean, like the average, who where you were above average before the average students can now be average, which is already emotionally taxing on themselves.

And I think it's really about creating awareness and using storytelling, which is why I really love cases. In using situations where, well, why did this person do that? What's a situation like that that you've been through? I'd like to start the semester by having them tell stories about a good leader versus a bad leader that they've had, or a good follower versus a bad follower, and the emotions come out in those stories.

So, when we get to the emotional intelligence activity in the subsequent class, I can say, well, how were you feeling? Remember when you had that good leader and it made you feel motivated and driven? And would you do anything for that person that's a high performer? Yeah. That leader who made you feel like you were downtrodden or weren't worth anything to them, or they were critical of you, and you felt like you're walking on eggshells all the time. Yeah, that's not you at your best performance as well. How are you feeling? And let's learn about how you were feeling and how to influence and find that good feeling and people you work with, whether you're a leader or follower.

JULIAN BIRKINSHAW: And I guess a lot of them have never talked about feelings in that way before. And it's real.

I mean, this is, as you say, you're inducing from them. You know what you want and you're going and giving them a license to talk about feelings as an important part of workplace effectiveness.

HAYDEN WOODLEY: Yeah. Going back to the disagreement aspect of the conflict in the classroom, I want to create an environment that's inclusive. But inclusive means everybody's entitled to their own feelings and emotions in that moment.

And how can we get insights from those differences so we can better understand each other and work with each other? So that's the one. I don't need everyone to be happy at the same moment. That's not necessarily an inclusive environment, especially if I'm trying to force happiness on you to be like everybody else.

*MUSICAL BREAK*

JULIAN BIRKINSHAW: So, let's now go from you teaching all youngest students to you working with executive education clients. And of course, Ivey’s got a thriving executive education business, of which you are part. How do you help those clients? Because obviously we talked a little bit about how you, as an individual, might build greater emotional intelligence to make, among other things, better ethical decisions. But, as a leader of others, how do you start at your organization so that collectively you're making better decisions?

HAYDEN WOODLEY: Well, I think it really comes from, and there's a lot of examples of this, but it's the leader who, you know, people say walks the walk and talks the talk. But you have to start establishing the normative behaviors that are acceptable and things like Dieselgate. If I understand and recall it correctly, the CEO wasn't at the level where the decision was made to cause this problem, but they stepped down because it happened under my watch.

So something I was doing wasn't carrying down to make people realize that that was not an ethical thing or how we wanted to operate as an organization. So, we took responsibility for it. But at some point, there's someone at a lower level who could make a decision and do something unethical. If the norm in the institution is that's okay, someone should be at that level shutting that down.

JULIAN BIRKINSHAW: Yeah, I mean, it's a fascinating digression, but and I guess we may never get to the bottom of exactly who knew what exactly happened with Dieselgate. My memory is that the head of the Americas went to jail, but the Germans did not. But let's not get stuck. Let's go to the point. Which is sometimes people make bad, unethical decisions. And somebody above them has condoned it. I mean, perhaps tacitly condoned it, but has not, perhaps put the spotlight on it in the right way. Your point, of course, is that as a leader, we have to stamp out those types of unethical behaviors, because it's only when we do that that we make it clear that that is not that is not possible. That is not acceptable.

The good leader also calls out the bad behaviors, and does not turn a blind eye when something is being done, which we could agree is unacceptable.

And that's, you know, that's difficult because in the moment, the polite thing to do is… I'm from England, you know, we're all very polite and, I mean, Canadians are quite polite as well. But it is very easy just to let something slide, and perhaps pick it up later. But what we should be trying to do is actually catch it in the moment. So that's, you know, I need to call that out. That was not an appropriate thing to say. Is that right?

HAYDEN WOODLEY: Yeah. And so sometimes the you have to assess the frequency and the intensity of the moment to say, is this something I need to address later on separately with this person? Because if it was just like maybe a little passive aggressive and they don't understand how it was understood. So, it's a learning or teachable moment. Versus is a moment where I'm in front of other people. There's a collective situation that was clearly relationship conflict, and I can say, oh, that's not how we function here, that's not how we operate. And realizing that the person who's going to get called out, that's going to spike emotions there. So, I have to deal with that. But I'm really more focused on the person who's feeling that harmed emotion. And then I can help recognize and regulate that and say, if I cut this down now, that person will feel that I'm there to protect them, and I can dress with the person who is causing the problem more clearly after the fact that it.

*MUSICAL BREAK*

JULIAN BIRKINSHAW: If there's one takeaway, one thing our listeners should take away that just to reinforce or reaffirm the last half an hour of conversation, what would it be?

HAYDEN WOODLEY: I’m going to be really cheesy and quote The Matrix. And there's a line in that from the Oracle where she says, “know thyself.” And really, I think a lot of times we focus on it from a perspective of like, what am I good at? What am I not good at? But not about how am I feeling while I'm doing that right? And I find one of the things that our students struggle with is they come out of our program, go into a job, and they go, oh, I'm not enjoying doing this thing. Being able to recognize and regulate your own emotions and using that to build connections with others will help build a more ethical environment, whether it's within business or within just our society,

JULIAN BIRKINSHAW: Which of course, we could all agree is a worthy outcome. Thank you very much.

HAYDEN WOODLEY: No worries. Thank you very much for having me and this has been a pleasure being here.

JULIAN BIRKINSHAW: Thanks.

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JULIAN BIRKINSHAW: You've been listening to Dialogue with the Dean from Ivey Business School. My thanks to Hayden Woodley for sharing his compelling research on the link between emotional intelligence and ethical decision making. And thank you for joining us. If you enjoyed today's episode, be sure to subscribe, share, and stay tuned for more conversations with Ivey faculty on the ideas shaping business and society.

Until next time, goodbye.

KANINA BLANCHARD: This was Dialogue with the Dean, an Ivey Impact Podcast series. For more insights from Ivey, including thought leadership on critical issues and additional podcast episodes, visit IveyImpact.ca or subscribe on your preferred podcast platform. Thanks for tuning in!