What is Utilitarianism in the Business World

Intense pressure from within the business world usually forces owners to make extreme decisions (or decisions in the face of extreme circumstances). When faced with tight budgets, overwhelming workloads, and incoming deadlines, they must make decisions that may result in ethical dilemmas. Of course, business owners or employees may opt for a different course of action. They may opt for an action that could be considered most beneficial for everyone. This ideology is called Utilitarianism. But, what is Utilitarianism in the business world? We seek to answer this question in today’s post.

When time becomes a problem and stakes are high, business owners must make quick decisions on an approach that will benefit their company (and its workers) the most. A few examples of feasible approaches include universalism, moral rights, cost-benefit and utilitarianism. We will take a closer look at utilitarianism and its benefits in the modern business world.

So, What is Utilitarianism in the Business World?

The term utilitarianism has been around for several hundred years. Stripped down to its essentials, utilitarianism supports the theory that the proper course of action inevitably leads to the best results through maximization of utility and minimization of negatives (or suffering). In business, the utilitarian approach describes actions and decisions which result in the greatest results for the greatest number of people.

What is Utilitarianism in the Business WorldHere’s a wonderful example that could apply to most companies in the United States. Let’s say that a company runs low on its funds but must continue on with its dead-lines in order to continue operating. Two options exist here. The first option requires that the employers start laying-off a number of employees in order to reduce costs (which still won’t fulfill the dead-line requirements). With the second option, the company employs low-wage foreign workers in order to maintain productivity levels.

Ultimately, the second option enables the company to retain its market share, avoid layoffs and even increase the payroll of U.S. workers (by supplementing and outsourcing work). If the company turns a profit, it can focus on higher payrolls for its employees or hiring more skilled U.S. labor. The utilitarian approach results in the greater good for the greatest number of people.

Types of Utilitarianism

The theory of utility evolved and adapted to suit the needs of today’s modern business world. That’s because Utilitarianism offers a straightforward method to decide the best course of action despite any complications. Determining this course of action involves understanding all the other options, weighing the pros (and cons) of these options, and then deciding which results will prove to be best after having taken into account all of the costs (both morally and monetarily speaking).

Many companies apply the basic principles of utilitarianism in order to maximize positive effects of this philosophy. However, many variations of this theory exist. Let’s examine some of them:

  • Negative Utilitarianism: this is probably the rarest form of utilitarianism. Unlike other forms which promote the greatest good, this form focuses on promoting the least amount of harm to the largest amount of people. In the business world, this variation centers on the idea that even a small harm can hold severe consequences for employees, bystanders, or the company as a whole.
  • Act Utilitarianism: this is the simplest, most straightforward variation of the utility theory. Business owners who employ this principle tend to judge the outcome of each action individually. The fatal flaw of act utilitarianism is a failure to comprehend the bigger picture which serves as a vital aspect for any business.
  • Rule Utilitarianism: none of the aforementioned variations manage to resolve the moral loop-hole. Rule utilitarianism attempts to assess the utility of a course of action without taking into consideration individual acts. In other words, if the end result lies beyond expectations (examples: great profitability, employee satisfaction, increased productivity), everyone should respect the rule set in place. Rule utilitarianism is without a doubt the most criticized variation of the theory. This form employs methods that affect the happiness of those involved.
  • Preference Utilitarianism is the variation which considers that the greater good should also satisfy personal preferences. Simply put, a business that uses the principles of preference utilitarianism will not strive to achieve the greatest good if it affects others in the process.

So, What is Utilitarianism Ethics?

Because the core nature of Utilitarianism (or the aim to achieve ultimate happiness within a group, society or business), gray lines cannot exist. According to the term’s definition, morally correct decisions lead to positive results. This creates a black and white of what is acceptable within a business. We refer to this as the utilitarianism ethics of business.

Let’s examine an example of utilitarian ethics: a pharmacy decides to sell a new drug which alleviates severe heart conditions. The prescription mentions all of the side-effects which are minor in comparison to the benefits (or compared to the dire nature of not taking the medication and suffering from the heart disease). In business, Utilitarian Ethics are difficult to uphold because many people typically just focus on themselves. Through perseverance, sustained work and morally correct decisions, a business can come to respect utilitarianism ethics.

Case Study: Use of Utilitarianism in the Ford Pinto Case

You probably heard that the Ford Pinto went on sale despite having serious design flaws in its key components which included the fuel tank. Despite these problems, the manufacturer still sold this vehicle (and it sold very well). Engineers knew that the car had problems. They did not make any safety modifications.

“They weighed the risk of harm and the overall cost of avoiding it.” – Leggett, 1999

Ford estimated how many deaths would result from these problems and concluded that it would be more profitable for them to not do anything about it. In other words, the value of human life was taken into account as an economic commodity. The Ford Pinto case represents a perfect example of misguided business ethics and an incorrect use of utilitarianism (where profits outweigh moral values or human life). Not only was the company unable to measure and quantify any harms, but it also failed to draw the line at the end of the day. Ford failed to say that the end could justify the means.

The use of Utilitarianism can have a positive influence for many businesses; however, the company must accurately calculate factors which will decide the end results. In addition, Utilitarian ethics should never be superseded by a lust for profit.

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