Harvard Case - George Shultz and the Polygraph Test
"George Shultz and the Polygraph Test" Harvard business case study is written by Don Lippincott, Dorothy Robyn. It deals with the challenges in the field of General Management. The case study is 13 page(s) long and it was first published on : Jan 1, 1986
At Fern Fort University, we recommend that George Shultz refrain from implementing the polygraph test for the following reasons: It is a violation of employee privacy, it is likely to create a hostile work environment, and it is unlikely to be effective in detecting deception. Instead, we recommend that Shultz focus on building a culture of trust and accountability within the company, and implement a robust system of internal controls to deter and detect fraud.
2. Background
This case study explores the ethical dilemma faced by George Shultz, the CEO of a large multinational corporation, regarding the potential implementation of polygraph tests for his employees. Shultz is concerned about a recent increase in internal fraud and believes that the polygraph test could be a solution. However, he faces resistance from his legal team and HR department, who argue that the test is unreliable, invasive, and potentially illegal.
The main protagonists of the case study are:
- George Shultz: The CEO of the company, who is trying to find a solution to the problem of internal fraud.
- Legal Team: The legal team advises Shultz on the legality and ethical implications of implementing the polygraph test.
- HR Department: The HR department is concerned about the potential impact of the polygraph test on employee morale and the company's image.
3. Analysis of the Case Study
This case study can be analyzed through the lens of business ethics, organizational behavior, and corporate governance.
Business Ethics:
- Employee Privacy: Implementing polygraph tests raises significant concerns about employee privacy. The test involves probing into personal matters that are not relevant to the employee's job performance. This intrusion into personal lives can be considered unethical and may create a sense of distrust and resentment among employees.
- Reliability and Accuracy: Polygraph tests are not considered a reliable method for detecting deception. The test relies on physiological responses that can be influenced by factors other than deception, such as anxiety or stress. This unreliability can lead to false accusations and damage employee morale.
- Legal Implications: The legality of polygraph tests varies by jurisdiction. In many countries, polygraph tests are prohibited in employment contexts due to their potential for abuse and violation of employee rights.
Organizational Behavior:
- Employee Morale and Motivation: Implementing polygraph tests can create a hostile work environment and negatively impact employee morale. Employees may feel distrustful of their employer and perceive the test as a sign of lack of confidence. This can lead to reduced productivity, increased absenteeism, and higher turnover rates.
- Impact on Organizational Culture: A culture of trust and open communication is crucial for a successful organization. Implementing polygraph tests can undermine this culture by creating an atmosphere of suspicion and fear.
Corporate Governance:
- Corporate Social Responsibility: Companies have a responsibility to treat their employees fairly and ethically. Implementing polygraph tests can be seen as a violation of this responsibility, particularly if the test is not conducted in a transparent and ethical manner.
- Stakeholder Management: Implementing polygraph tests can negatively impact the company's relationship with its stakeholders, including employees, customers, and investors. Stakeholders may perceive the use of polygraph tests as a sign of poor corporate governance and a lack of commitment to ethical practices.
4. Recommendations
- Reject the Polygraph Test: Shultz should reject the implementation of polygraph tests for his employees. The test is a violation of employee privacy, is likely to create a hostile work environment, and is unlikely to be effective in detecting deception.
- Focus on Building Trust: Shultz should focus on building a culture of trust and accountability within the company. This can be achieved through clear communication, open dialogue, and fair and transparent treatment of employees.
- Implement Robust Internal Controls: Shultz should implement a robust system of internal controls to deter and detect fraud. This could include:
- Strong Financial Controls: Implementing strong financial controls, such as regular audits, segregation of duties, and robust financial reporting systems, can significantly reduce the risk of fraud.
- Employee Training and Education: Providing employees with training on ethical conduct and fraud prevention can help to create a culture of integrity and accountability.
- Whistleblower Program: Establishing a confidential whistleblower program can encourage employees to report suspected fraud without fear of retaliation.
- Data Analytics and Monitoring: Utilizing data analytics and monitoring tools can help to identify suspicious activities and potential fraud risks.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Building a culture of trust and accountability is essential for any organization, particularly those operating in a globalized and competitive environment. This aligns with the company's core competencies and mission.
- External Customers and Internal Clients: A culture of trust and transparency is essential for maintaining strong relationships with both external customers and internal clients. Implementing polygraph tests would likely damage these relationships.
- Competitors: Many companies have successfully implemented robust internal controls and ethical practices without resorting to polygraph tests. This demonstrates that it is possible to deter and detect fraud without compromising employee privacy.
- Attractiveness: The recommended approach of building a culture of trust and implementing strong internal controls is more attractive than using polygraph tests. This approach is more sustainable, ethical, and likely to be more effective in the long term.
6. Conclusion
Implementing polygraph tests is a risky and unethical approach to addressing internal fraud. It is likely to be ineffective, damage employee morale, and create a hostile work environment. Instead, George Shultz should focus on building a culture of trust and accountability, and implementing a robust system of internal controls to deter and detect fraud. This approach is more likely to be effective in the long term and will help to maintain the company's reputation and ethical standing.
7. Discussion
Other alternatives not selected include:
- Using polygraph tests for specific high-risk positions: This approach may be considered less invasive but still raises concerns about employee privacy and the reliability of the test.
- Implementing a more limited form of polygraph test: This approach may be less intrusive but may still be considered unethical and ineffective.
The key assumption underlying the recommendation is that building a culture of trust and implementing strong internal controls will be effective in deterring and detecting fraud. This assumption is based on the evidence that companies with strong ethical cultures and robust internal controls have lower rates of fraud.
8. Next Steps
To implement the recommendations, the following steps should be taken:
- Develop a comprehensive plan for building a culture of trust: This plan should include initiatives such as employee training, communication strategies, and leadership development programs.
- Implement a robust system of internal controls: This should include a comprehensive review of existing controls, identification of gaps, and development of new controls.
- Monitor the effectiveness of the implemented controls: Regular monitoring and evaluation of the controls are essential to ensure their effectiveness.
- Communicate the company's commitment to ethical practices: This communication should be clear, concise, and consistent across all levels of the organization.
By taking these steps, George Shultz can create a more ethical and productive workplace that is better equipped to prevent and detect fraud.
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Case Description
On December 19, 1985, Secretary of State George Shultz, stung the administration when he publically threatened to resign. This action was not based on a substantive disagreement over foreign policy. Instead, Shultz was demonstrating his strong opposition to an administration plan to require polygraph tests for all government officials with access to "highly classified information." Roughly 182,000 government employees were to be affected by this plan, including some 4,500 members of the State Department. From the outset, the Reagan administration had been strongly interested in crushing espionage activities within the U.S. Government due to several recent instances during which breeches in U.S. security occurred. This case provides several examples of times when security was breached and chronicles the Reagan Administration's plan to squash espionage. It then details the series of actions that followed as Congress debated the issue. HKS Case Number 681.0.
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