Joshua Margolis, Associate Professor of business administraion, Harvard University,  opened his discussion of the responsibility gap with a series of five vignettes he considers emblematic of the challenges faced by business leaders in a world of shifting expectations and uncertain conditions.

He set the scene for his first portrayal by describing the 4 a.m. call that roused Michael Edwards from his sleep on Dec. 26, 2004, informing Edwards that cars were floating in the pool at a hotel where his company had booked customers for the holidays.

As operations manager for Fritidsresor, a Swedish charter tour company, Edwards had the task of handling the night emergency calls -- emergencies which typically took the form of customers with food poisoning or buses with flat tires. But on this particular night, the night after Christmas, the company was confronted with something much more devastating: the effects of a massive tsunami that slammed India, Sri Lanka, Indonesia and Thailand.

In the hours that followed, said Margolis, Fritidsresor representatives had a difficult time reaching anyone in government. After finally tracking down an official at a foreign ministry office, they were met with the question, "How did you get this number?"  With contact to the region severed and virtually no information to go on, company leadership had to determine what to tell customers, what to tell the public, what to tell insurance companies, and whether to send additional vacationers abroad -- all while somehow keeping the business operating for the firm's 4500 customers and employees.  As the executive team would eventually learn, some 350 of the tsunami's 250,000 fatalities were customers or otherwise connected to Fritidsresor.

Margolis went on to examine the case of Lawrence Trinh [a pseudonym], an MBA student weighing multiple job offers with private equity firms.  Born in Vietnam to Vietnamese parents, Trinh aspired to return to his homeland as an economic investor, and had applied to business school with the express intent of helping to facilitate the country's economic development.

But as Trinh considered job offers, said Margolis, he wrestled with two dilemmas: whether he should even pursue a job in Vietnam; and if he took such a job, how to conduct himself in a country that is extremely corrupt.  Not only is the Vietnamese government not democratically elected, but it has been criticized for human rights abuses. Could he contribute to growth in such a country, when almost any job would require compliance with an illicit regime?

In Margolis' third example of ethical dilemmas, he portrayed Martha McCaskey, a project leader and rising star at a consulting firm. At a critical point in her career, McCaskey is asked to complete a project that requires paying the ex-employee of a semiconductor manufacturer to supply her with cost structure data about its new microchip.  Her company has been hired by the microchip firm's competitor, and McCaskey is uneasy about the possibility that illegal or unethical means may be used to gather proprietary data.  Does she overlook her reservations, compromise her values, play the game and pay the ex-employee what is essentially a bribe?  Or does she pass the project along to someone else?  To complicate matters, said Margolis, McCaskey's boss had indicated that success on the project will lead to a promotion and raise.

In additional illustrations, Margolis profiled CEOs Indra Nooyi of Pepsi and Rick Wagoner of General Motors.  Nooyi, who views the role of CEO as a calling, is consumed with concerns about Pepsi and its impact on society and the environment.  Among the company's recently implemented initiatives is a commitment to derive 50 percent of sales from its healthier products.

While Nooyi believes whole-heartedly in social responsibility and Pepsi's tagline, "Performance with a purpose," she admits that Pepsi responded slowly to concerns about pesticides and water purity, and she wrestles with additional dilemmas from promoting sustainability and an inclusive corporate culture to combatting child obesity -- all while keeping an eye on the bottom line.

"Whether one feels Pepsi is doing enough," said Margolis, "the reality is Nooyi must attend to responsibilities that were not even on the radar for earlier generations of CEOs."

Wagoner's dilemma centers around the legacy burden of approximately $1500 per vehicle that is eroding GM profits and hindering the company's ability to compete with Japanese car manufacturers.  In Wagoner's situation, said Margolis, we see how responsibilities can collide and conflict: the legacy cost covers commitments to pensions and health care for retirees. But, as the auto industry undergoes a radical transformation and GM stock prices plummet, the company's very viability is in question. Somehow, Wagoner must craft a turn-around plan that balances the needs of retirees with those of current employees who depend on the company's existence.

All five portraits, said Margolis, are instructive for examining various dimensions of the responsibility gap, which he defines as the discrepancy between escalating responsibilities and the limitations of human functioning.  The challenges that faced the CEO and senior team of Fritidsresor, for instance, "captured in distilled fashion" the gap's three primary components:  intensifying responsibilities, limits in human capacity, and inhospitable conditions.  While the massive tsunami was an unparalled event -- literally a 100-year flood --  Margolis noted that the dilemmas it posed suggest the new and ill-fitting roles that leaders are asked to shoulder in today's uncertain and evolving conditions. Although leaders may be well-trained from a business standpoint, they are unlikely to have acquired the tools to pass judgment on complex ethical and moral dilemmas.

Margolis cited a rising tide of legal, economic and ethical pressures, from Sarbanes-Oxley and other regulatory expectations to evolving ethical norms about outsourcing.  In today's business climate, it's not enough for executives to supervise their own employees and discharge fiduciary duties to investors; they must monitor conduct throughout the entire supply chain, despite having little control or information about suppliers.  What's more, said Margolis, business leaders are increasingly asked to help to solve major societal ills -- such as the HIV/AIDS epidemic highlighted by Kofi Annan.

Meanwhile, globalization and the relentless march of technology have accelerated the pace of change and unleashed new pressures in product markets. As one executive pointed out, missing even a single generation of product advances can forever put a company out of business.  And in a world where individuals can instantaneously track their stock portfolios, a single misstep anywhere on the globe can have grim consequences.

At the same time, said Margolis, research continues to bear out the degree to which human beings are ill-equipped to meet the challenges that accompany such rapid change.  In the grip of intense negative emotions such as fear and doubt, a crack athlete or a soldier under fire may perform heroically; in business, outside threats tend to elicit the exact opposite behavior.  Emotional arousal seems to accentuate human imperfections and flaws and bring out an overwhelming impulse not to step up, but to neglect responsibilities.

"Human beings are less deliberative and rational than we like to believe," said Margolis.  Faced with moral dilemmas, individuals rely primarily on intuition and reflex, then rationalize the decision -- "with reason trailing to tell the just-so story."  Ideally, humans would have access to rationality and cool cognition when appropriate, and have the ability to draw from intuitive or emotional responses when those traits are called for.  "But it's not how we human beings are wired," said Margolis. "Human psychology is not a vending machine."  As sub-prime excesses and the parade of Enron and Worldcom scandals confirm, he said, humans are only "intermittently ethical" and find it all too easy to slide into wrongdoing.

Paradoxically, the organizational mechanisms designed to ensure accountability, provide checks and balances and curtail misconduct are often inadequate -- or may even provoke more irresponsible conduct. Research has shown that many safety systems and accountability programs only make individuals complacent, anesthetize them to errors, and prompt defensive actions or avoidance of decision-making altogether.

In other words, said Margolis, even with the best intentions and under the best conditions, human beings seem almost wired to do wrong.

Inhospitable conditions, the third dimension of the responsibility gap, only amplify the problems and deepen the chasm.  Whether a leader is at the McCaskey or Wagoner level, the same external context that triggers intensifying responsibilities also makes it more difficult to meet those responsibilities.  McCaskey faces her predicament because the firm may have been mismanaged and because a client deadline looms; Wagoner's health care crisis strikes at a time of seismic shifts in both health care and the auto industry.

In attempting to draw implications for a program of leadership studies, Margolis suggested that the audience imagine choreographers approaching the dance profession in the same way that observers view the responsibility gap.  Such a scenario, he said, would have the choreographers starting with dance injuries and "tsk-tsking the terrible fact of gravity."

A more practical approach to the gap, he said, would be to view the inhospitable conditions that accentuate the responsibility gap the way that choreographers view gravitational forces, and to view human psychology the way choreographers view human biometrics.  Like a choreographer whose challenge is to defy gravity, those who seek to develop leaders should ask the question, "How do we craft moves within these constraints? How do we equip those who are sitting in classrooms . . . who will enter that daunting reality?"

Since research does not typically address or explore such questions, a school of leadership studies is an apt starting point, said Margolis. Calling the responsibility gap the "signature ethical challenge of contemporary leadership," he concluded, "Our challenge as academics may be to emulate the choreographers . . . to aspire at the very least to be moral choreographers."

March 5, 2008 The Jepson School of Leadership Studies