Las Vegas 2022

Ethics in Digital Transformation

One reason that digital transformation is difficult for large enterprises is that it requires a fundamental shift in values. This is often mis-identified as a simple "cultural change." But we've inherited a set of ethical assumptions from the beginnings of industrial capitalism that are called into question by the digital way of working. I will discuss the deep changes below the surface - as well as the potential pitfalls when changing the underlying value structure of an organization.


Mark Schwartz

Enterprise Strategist, AWS



My name is Mark Schwartz. I am, uh, first thing I'm gonna do is I'm gonna get the clicker. All right. So, uh, I'm gonna talk a little bit about ethics in digital transformation. This is a, a new topic for me. Um, so, uh, I think we're gonna, we're gonna think it through together a little bit in this session. So, I am an enterprise strategist with Amazon Web Services. And what that means is that I'm part of a small team. There were about 15 of us. All of us were CIOs, or CTOs, or CFOs, actually, of large enterprises before we joined a w Ss. And our role at a w s is to work with senior executives of our large enterprise customers on the things that get in the way of their digital transformations. So typically it's things like cultural change, organizational structure, getting people with the right skills, governance models, investment strategies.


You'll, you'll notice that none of these are technical subjects. So when we meet with a, a senior executive of a company, often they are telling us what is in their way as they try to transform their organizations. And invariably, there are things that are in their way, and they're of this nature. They're, they're the non-technical things, the things that, um, turn out to be surprisingly hard for them. And we're trying to help them think it through, bring them ideas from other organizations or from our own experiences. Um, one thing that, that we've noticed is that transformation is really unexpectedly hard for them. And often they're blaming it. Uh, blaming isn't really the right word. They're, they're, um, centering the difficulty on something they call cultural change. Now, cultural changes, it, it's hard, we all know, but it doesn't quite explain why it's so difficult for them.


Um, so thinking it through a little bit and, and listening to the concerns, it occurred to me that maybe what they're calling cultural change is not really cultural change. There's something else under it. And what I think it is, is that there's a, a big shift in values and ethical principles between the world that they're coming from and what they're trying to transform to. And so, I'm gonna, I'm gonna call the, the old world, the old way of doing things, the old way of organizing companies. I'm gonna refer to that as, as the bureaucratic enterprise for reasons that, that I'll explain in a couple of minutes. Uh, and let's say the new thing, whatever it is, it's, let's call it the digital enterprise. And so in moving from the bureaucratic enterprise to the digital enterprise, it's not a matter of technology change. It's not even just a matter of cultural change, but it's a matter of very different ethical principles underlying the two.


So that was what set me off on a course about a year ago of thinking about what, like, how, how can we, um, how can we understand this transition and how can we help people see what kind of a change is really involved in moving to the digital world? So, uh, I wanna walk you through a little bit of my train of thought. Um, this is going to be the subject of a book that is almost finished now. It'll, it'll be published next spring. So this is maybe a little bit of an advance, uh, view of, of what's gonna be in that book. First thought, uh, first thing I, I went through in my thought process was, what, from my own experience, what were the main ethical decisions that I had to make in the course of my career? I've been, I've been a manager for a while, and, uh, I tried to think of when, when did ethical issues come up?


And I want to tell you two quick stories of ethical issues that I faced, and there's a reason why I'm taking these two stories in particular. But, uh, let me just describe a situation to you. So, um, I, uh, I was working in an organization, the c i o before me had, um, um, there was a trust problem. Uh, the organization didn't trust him much. And so there was a big project, a big transformational project, and they decided that the IT organization wouldn't be running this, this initiative that there would be a separate office, uh, and somebody leading that office. And her name was Mary, and she was running this big IT project. And of course, we, we had to work together. We developed a, a very close trusting relationship between the two of us. And it was an organization that was, it, it was sort of toxic in a lot of ways.


Um, you know, there were a lot of, uh, closed door meetings and things going on, and complicated dynamics and politics. So, uh, part of the relationship we developed was that we would, we would fill each other in, on all the things that were going on. If I learned about something political that was happening in the organization, I would tell her. If she found out something, she would tell me, we would discuss the implications. And that was kind of how we survived this, this toxic culture. One day, uh, the head of the organization called me into her office, and she said that she wasn't happy with the way that Mary was running this big project, and she wanted me to take it over. And, um, uh, she wasn't ready to tell Mary this yet. Uh, she was just telling me so that I could prepare for it.


And, uh, so of course I shouldn't tell Mary until she was ready to tell her. So now I was in this position where I knew a secret that was gonna be very important to Mary, and I was not allowed to tell her about it. Uh, and I, this, uh, I was a little conflicted about this, uh, as you can guess, when finally, uh, the senior executive told Mary what the plan was, um, Mary blamed it all on me. It destroyed our relationship. You know, as far as she was concerned, I had been maneuvering behind her back to be given control of this project. Now, just out of curiosity, um, do all of you think that I did the right thing in not telling Mary about it? Or should I have told her who, who thinks that, uh, that basically what I did was the right thing?


If I can actually see you out there and, and who thinks that I had an obligation to, to Mary to let her know that something was going on that affected her Uhhuh? <affirmative>? Interesting. Yeah. Um, lemme give you another one. So, uh, I had, uh, this was, I was with a small organization and I had a small team. It was actually a help desk team. It was three people. And one day, two of them came into my office and said they, the third, the third one on the team was, was, uh, scaring them. He was, he was aggressive and, and they felt like he was violent, and he was kicking the walls of his cubicle, and he was staring at them in the face, and they were, they were scared of him. Um, his name was Eduardo. Um, so I called Eduardo Eduardo into my office, and I asked him what was going on, and he said, everything's fine, no problem.


Um, I asked him a bunch of questions. I did the obvious thing. I documented the conversation. Um, it turned out Eduardo, I knew this already. Eduardo was a good friend of the CEO's. And, um, c e o was a bit of a character. And, uh, c e o called me into his office the next day and said, um, he was really angry. <laugh>, Eduardo had gone to him after our conversation, and he said, are you planning to fire Eduardo? Is that why you, you had this conversation and, and you documented it and everything. Well, I, I think the problem is, you, it's not Eduardo, uh, ed, I talked to Eduardo and he said the way managing him is terrible, and he's really angry about it, and so on, I forbid you to fire him, um, or to take any action, which, uh, okay, there's a, there's a problem with a C E O who says something like that, right?


But, um, here I was in this situation where maybe there was a danger to my other employees. I wasn't allowed to do anything about it. Uh, I had to think about the fact that maybe there was something wrong with the way I was managing. Um, I also thought, Eduardo, he's, he's pretty much the only Latinx employee here. Maybe there's like a stereotype thing going on. Um, so it, it didn't go anywhere. Two weeks later, the head of HR came and found me in a meeting, and she said, you're gonna come with me and fire Eduardo right now, <laugh>. And, and I said, you know, what happened? Uh, she said, he got up in, in one of the other guy's faces, and he, he threw him across the room over a bunch of desks, and there were Abu a lot of witnesses. Everybody saw it. Um, and you, you're gonna fire him now.


Um, so I did, uh, again, um, found myself in this position where I knew there was an ethical choice to be made. This time, I didn't really make any decision, which was a decision in itself, right? Um, but, uh, there are a couple of things that these cases have in common that I think is, is worth thinking about. The first is, um, there was no rule book, you know, to say, this is, this is what you gotta do. Um, these were ethical decisions, but it wasn't good versus evil here. Um, I think even when I reflect on it now, the, the challenge here is competing imperatives. You know, uh, there's one ethical rule that says, you, you have to maintain a con. If somebody tells you something in confidence, you can't go and tell it to somebody else. That, that's kind of an ethical rule, right?


And at the same time, there's another rule that says if you got a close re relationship with somebody, and there are expectations because of that relationship, you can't violate the terms of that understanding with them. So there were competing ethical imperatives. And, uh, it was up to me to sort out between those two what I was going to do. Uh, there was no, you know, absolute rule that said, yes, you should tell her about this. No, you shouldn't tell her about this. And the same thing in the case with Eduardo. You know, on the one hand, I had employees who could be in danger. On the other hand, I had a C E O tell me, don't, don't do this. Don't fire him. And I also, uh, out of let's say humility, I was willing to accept that maybe there was something I was doing wrong.


And so there were these imperatives that were pulling me in two different directions. And I think this is, um, what really goes on with ethical decisions in organizations. It's not a question of good versus evil in general. Um, it's not, um, as, as the media would like us to think decisions about, are you going to snoop on people's private lives and have a bunch of biased ais or whatever. That's not the everyday kind of ethical decision making that you have to make when you're in the leadership position in an organization. And it's harder to put into those terms of, this is good, this is bad, this is good, this is evil. It's conflicting objectives, let's say. Um, so that was, that was my first realization. And second realization is that we're moving from this bureaucratic type of organization to this, uh, digital type of organization, if you want to call it that.


And what's coming out of that is exactly this kind of conflicting, uh, imperatives. So the bureaucratic way of thinking has, uh, a number of characteristics, ethical characteristics, that are pulling us in one direction. And new digital values are pulling us in a different direction. So, uh, let me try to explain that and explain why I say it's bureaucratic enterprises, what we're coming from. Uh, my last book, of course, was about bureaucracy. And, um, this, this guy is, is the big name in bureaucracy. That's Max Weber. Uh, he's the guy who formulated the sociological view of what bureaucracy is, and he defined bureaucracy as a, a system of social organization that has these characteristics. Uh, first of all, a division of labor, a hierarchy. Rules. Rules are very big in a bureaucracy. Um, people in this hierarchy, uh, have the competency that they need to carry out their roles that in personality, I'll come back to in a second.


Uh, and then everything is documented by paper. Uh, but as things flow through the system, there's documentation. Uh, IM personality is, um, the characteristic that I think tells you the most about the ethical values of a bureaucracy. Um, so I'm gonna, I'm gonna dive into that in a little more depth in a second. But if you think about those characteristics, a typical organization, the kind of company that we're used to is exactly a bureaucracy. Uh, it fits all those characteristics. There's a division of labor, there's a hierarchy. There are rules that define the interactions between the different parts of the organization. Um, uh, there's, there's a flow of, maybe it's not paper anymore, it's bits now, but there's some sort of trigger that triggers interactions between different parts of the company. So I'm gonna refer to the traditional style of company as a bureaucracy. And bureaucracies have values, uh, and it's a, a very distinctive set of values.


I'm gonna, uh, just a, as a matter of terminology here, when I say ethics or morality, I mean more or less the same thing. And I'm also talking about values. The difference is the values are what you consider to be good. Uh, what's a good state of things and ethics are the principles that you're going to use to try to achieve that good state of things. So, uh, when I, when I talk about values, it's kind of a, an additional layer of abstraction. You'll see what I mean in a second. Um, so these are the values of bureaucracy, uh, imm personality. I said, I was gonna come back to, this is the key one. A bureaucracy, uh, is trying to be fair. It's trying to be fair by having rules that apply equally to everyone. It's trying to be fair by making sure that the people who are in the bureaucracy only apply the rules.


They don't bring their own personal feelings into things. They don't bring their own biases. They don't, um, they don't, uh, make arbitrary decisions or anything like that. So there's this underlying value in bureaucracy of fairness, and it's fairness through imm personality. When you come to work, you don't bring yourself, you have no business being there. Basically, your job is to execute whatever your role says you're supposed to do. Um, and that's, that's core to the, the very idea of bureaucracy that, um, we're gonna get fairness by asking people to leave themselves at home. In fact, we, we used to be told, don't, don't bring your problems to work. You know, don't bring your personal life to work. They're separate things. Um, I wanna point out, uh, two of, two of the other characteristics here. Two of the other values, um, that I think are especially important to think about.


One of them is ownership of time. So when you work in a bureaucracy, um, the company owns your time, nine to five, or, you know, whatever hours you work. This is a little bit strange when you think about it. Um, throughout history, people worked when it made sense to work. You know, if you were a farmer, you do a lot of work around harvesting and planting, the rest of the time, you're not doing very much at all. Um, it's a little weird to think that somebody actually owns your time. But the important consequence of this is that if you are not being productive during that time, you're stealing from your employer, it's theft, uh, because they own your time, right? Um, this is, this idea is, is deeply baked into, I think, uh, the idea of a bureaucratic organization. Uh, and then deference to superiors.


Uh, if you go back to the two examples that I gave you before, one of the characteristics in both cases was somebody high in the organization who issued an edict. And, you know, the c e o said, do not fire this person. And one value in bureaucracy is you listen to what the c e O says. I mean, you know, that's, that's the way it works. They're higher than you in the org chart. Uh, in the other case, it was Don't tell, don't tell Mary, uh, that we're gonna make this change. Uh, and there's, there's a certain, uh, ethical imperative when you're in a bureaucracy that you have to obey. That's part of it. So you've probably already jumped ahead of me and realized that, uh, things have changed a lot. That in our current digital environment, those are not the values anymore. So the idea of imm personality, leave yourself at home.


Don't bring yourself to work. What's taken over for that very much now is the idea of inclusiveness. Please do bring yourself to work. We want diversity. We want a diversity of ideas. Um, in fact, uh, it's very hard not to bring yourself to work when your pets are sitting on your shoulder as you're on a, you know, a video call or something. Um, personal life and work life have have merged pretty thoroughly. And that's, that's not just accidental. It's actually a value that we want diversity and different, uh, different, uh, types of input as we're making decisions in innovating. So that value of bureaucracy has, has changed a lot. Um, the idea of a company owning your time, that's changed a lot, right? Um, you can't really have ownership of time because maybe you're working with people in different time zones. Uh, if you're working at home, the plumber's gonna come or something like that.


Um, really what the company owns now is your efforts, your best efforts to, to do right by the company to accomplish the goals of the company. Um, so this, this idea that you're stealing from your employer if you're not working when the plumber comes, doesn't make all that much sense anymore. And of course, the idea of deference to superiors, superiors, 'cause that's just the way it is. Um, a little bit harder to justify now, right? Uh, partly, uh, not only because of this, this breakdown in, uh, h hierarchical authority, but also because you're supposed to own results and own outcomes. Um, and, and if you're going to step up and take ownership of things, then you, you can't say, well, the c e O told me, you know, or if c e o said this, or somebody above me in the hierarchy said this, it's inconsistent with the idea of, of ownership of outcomes.


Um, so I'm just pointing to three of the things. There are a lot of basic changes and values, and those change, I think, the ethical imperatives. And so here we are sort of stuck with one foot in each of these worlds. Uh, so to come back to these competing ethical imperatives, um, I think that's what's happening in a lot of cases, is we've got these bureaucratic assumptions about what, uh, how we should behave and how people should behave. And we've also got this new world where things are changing on us and changing around us, that requires, uh, an entirely different set of ethical principles. And the result is, you can see, you can see companies struggling a lot with some of these things. So if you believe in the bureaucratic idea that, um, uh, your time is owned, and so it's theft. If you're not performing and you believe in the bureaucratic value that, um, that what you're trying to do is as efficiently as possible, accomplish whatever the goals of the organization are, then it makes sense that you've gotta measure productivity.


And that's the way it's always been done. Uh, managers are responsible for making sure that their employees produce the primary measure of success is productivity or lack of productivity. Um, and, and, uh, the ethical imperative is be productive. You must be productive because you have an obligation to your employer. So now you see companies struggling to measure productivity of people who are working from home. Uh, now this is, this is weird because productivity is no longer the objective. Uh, but it's the way we know to make sure that we are fulfilling our obligations to the company. Um, uh, I was reading an article recently about all the new tools that are available for measuring whether your employee is actually looking at the screen or looking away, or something like that, right? Um, the question that you keep hearing is, if we let people work from home, how do we know that they're being productive?


Well, isn't that, it's the wrong question, right? Um, productivity is a value of the old bureaucratic organization, not of the new style of organization. And I think you'll, you'll find that there are a whole bunch of questions that become very difficult to answer. If you've still got that, you know, one foot in the bureau bureaucratic world, and one foot in the digital world, uh, where can you find skilled employees? How can you implement, um, diversity and inclusion, and especially equity? That's especially hard for a bureaucratic organization to wrap its head around. Um, because the idea of the bureaucratic organization is fairness by having exactly the same rules applied to everybody and everything. How do you measure performance? Um, I think one thing that's happening, um, is that we're, um, replacing bureaucracy, which gives us this structure in which we're going to, um, imagine everything, gauge everything.


Um, we're replacing it with something else because we're not quite comfortable, um, getting completely getting rid of the bureaucratic ideas. And I'm afraid that one of the things that's replacing bureaucracy is, uh, what people are calling being a, a data data-driven organization, or OKRs, sometimes, uh, where the bureaucratic productivity measures and other measures have really just sort of been replaced by this other thing. You know, here's your, here's your O K R and you have to produce this amount of this, and that's how we're gonna know whether you're a good person or not, or, you know, doing your job or not. And what, what can come from that, uh, is an overfocus on the number and an, um, putting aside any ethical concerns that might impact that number. So, uh, let's see if I've got enough time to go through some examples. Um, yeah, let me give you one.


Um, so I went to rent a car, and, uh, the car rental agent walked me through all the usual and said, uh, how about the insurance coverage? Are you willing to take the insurance coverage? And I said, no, my credit card covers it. And she said, you know that your credit card doesn't, um, it doesn't cover acts of God like hailstorms. And by the way, uh, they're predicting a big hailstorm tomorrow. Hail the size of golf balls. Are you sure you don't want this coverage? Um, I'm gonna guess just because I've been in the business world for a long time, that she had some sort of incentive, uh, that she was supposed to try to sell as much of this insurance as she could. Um, I'm gonna guess that when I try to unsubscribe from a service, I tried this one. I don't, I think it was SiriusXM or one of those things.


Uh, when you call the phone number, you're gonna be waiting for a really long time on hold to cancel your service, and then they're going to, uh, lose track of what it takes to cancel your service, and they're gonna give you all sorts of other offers. Why is that happening? Somebody has a metric to try to reduce churn and attrition, right? Uh, we know that's what's happening. Wells Fargo, here's the objective. We're gonna deepen our customer relationships. What's the key result we're looking for? What are we gonna measure? How many people, what's our cross selling rate? How many people are opening new accounts? And then you have employees going out and opening a bunch of fake accounts, you know, for people who don't really want them. Um, what's happening there is we're keeping that bureaucratic focus where what's ethical is, you know, it's not your business.


You're, you're in the hierarchy. You have a function, you do what your function is. That's that. We're replacing it with a numeric target that overrides everything else, and that focuses people just on that one target. And the other considerations go to the side. Um, so, uh, I don't, uh, I don't really have time to go into anything else. This is, uh, sort of train of thought from writing this book and where it's going. Um, and thank you for coming along with me for the ride. Um, to recap, I think a lot of the ethical decisions that we make are not these big questions of good versus evil. They're questions of conflicting, uh, imperatives that we've got. We're getting those conflicting imperatives a lot because we've got one foot in the bureaucratic organization and another foot in the digital organization, and it's probably causing some weird misbehavior <laugh>, um, you know, where we're not quite willing to give up on the things that we knew we were responsible for in the bureaucratic organization, and yet we're in a very different world.


And so we're substituting, um, in a sort of hidden way, new ways of acting like a bureaucrat, essentially. Um, so, uh, those are some of the topics that I'm going to cover in this book. And, um, I hope at least I've made you think a little bit about some of these things. And so the help that I'm looking for is, I would love to hear if this is triggering anything for you, and if there are examples that you have for me of trying to hold on to old value systems that maybe are causing ethical misbehavior or awkwardness or something in the new world. So thank you for listening.